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Why Cannabis Stocks Aphria, Aurora Cannabis, Charlotte's Web, and Tilray Slid Today

By Keith Speights - Apr 7, 2021 at 3:37PM

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Investors appear to be jittery about the prospects for U.S. cannabis reform.

What happened

Several cannabis stocks slid lower on Wednesday. Shares of Aphria (APHA) were down 6.4% as of 3:19 p.m. Tilray (TLRY) stock was falling 6.7%. Charlotte's Web Holdings (CWBHF -3.54%) shares were tumbling 6.4%. Aurora Cannabis (ACB -9.09%) stock was slipping 5.7%. Other top pot stocks were posting smaller declines.

When so many stocks in the same industry sink, there's usually a common denominator. In this case, one potential culprit is Vice President Kamala Harris' comments in an interview with the San Francisco Chronicle published yesterday. The vice president stated that the Biden administration has been too busy with other priorities to address marijuana decriminalization or other major cannabis reforms. This relegation of cannabis-related efforts to the back burner could be increasing investors' doubts that any action will be forthcoming in the near future.

However, marijuana stocks really began to slide on Wednesday after Natalie Fertig with Politico tweeted that the Treasury Department's Alcohol and Tobacco Tax and Trade Bureau has been meeting with various cannabis advocacy groups to discuss cannabis regulations. Investors could be more worried about the possibility that cannabis reform measures won't meet expectations than they are that no reform will happen at all.

Cannabis leaf on top of $100 bills

Image source: Getty Images.

So what

What does all of this really mean? Nothing.

Concerns that the Biden administration won't fulfill its campaign pledge to decriminalize marijuana are premature. After all, President Biden has been in office less than three months. Worries about what final regulations might look like if significant cannabis reform moves forward are also a waste of time. It's better to wait to see what changes are ultimately proposed.

More than anything, what we're seeing with cannabis stocks today reflects their inherent volatility. These stocks tend to swing either higher or lower on mere speculation. 

You probably noticed that most of the stocks falling the hardest are Canadian cannabis producers -- Aphria, Aurora Cannabis, and Tilray. These companies are especially anxious about the opportunity to enter the lucrative U.S. cannabis market. 

Charlotte's Web, on the other hand, is already a leader in the U.S. hemp CBD market. However, the company hopes to expand into the marijuana market once cannabis is legalized at the federal level. 

Now what

The best thing that investors can do right now is to wait and see what happens with regard to U.S. cannabis reform. In the meantime, the U.S. cannabis market continues to expand even without changes at the federal level. Several U.S. multistate cannabis operators are already benefiting from this growth.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Charlotte's Web Holdings. The Motley Fool recommends Charlotte's Web. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Aurora Cannabis Stock Quote
Aurora Cannabis
$1.50 (-9.09%) $0.15
Tilray Stock Quote
Charlotte's Web Holdings, Inc. Stock Quote
Charlotte's Web Holdings, Inc.
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Aphria Stock Quote

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