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Why Canopy Growth, Sundial Growers, and Curaleaf Stocks Just Dropped

By Rich Smith – Sep 24, 2021 at 12:28PM

Key Points

  • The U.S. House of Representatives passed a defense spending bill -- with a marijuana banking bill attached -- Thursday.
  • The U.S. Senate likes the defense bill, but not the marijuana banking bill.
  • The end result of all this is that neither bill may become law as currently written.

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What went up just came back down -- as reality sets in.

What happened

Marijuana stocks had a great run this week, no doubt about it -- but all good things must come to an end.

After running up nearly 8% over two trading days as the U.S. House of Representatives contemplated attaching marijuana legalization legislation to a defense spending bill, shares of Canopy Growth (CGC 0.70%) are relapsing 4% in 11:40 a.m. EDT trading Friday.

Nor is Canopy Growth alone. At last report, Curaleaf Holdings (CURLF 4.41%) has lost 1.7% today, Sundial Growers (SNDL -0.32%) is off 2.9%, and cannabidiol purveyor Charlotte's Web (CWBHF 1.47%) is down 3.1%.

Marijuana plants

Image source: Getty Images.

So what

The crazy thing, though, is that cannabis investors got what they wanted! On Thursday, the House of Representatives voted to approve a 2022 National Defense Authorization Act (NDAA) with the SAFE Banking Act (a law legalizing banks doing business with cannabis companies) attached to it.

Problem is, in a real-life example of "buy the rumor, sell the news," investors are now abandoning marijuana stocks on fears that what passed in the House may still fail in the Senate, reports

The Senate version of the NDAA, you see, doesn't have a SAFE Act attached to it, which means the two versions of the defense spending bill are now at loggerheads and must be reconciled -- potentially reversing what the House just accomplished. Meanwhile, Majority Leader Chuck Schumer and his right-hand man Sen. Cory Booker are dead set on passing "comprehensive marijuana legalization" all in one go, rather than first legalizing banks providing banking services to the industry and then moving on to legalizing weed.

Now what

And here's the strangest thing: According to MarijuanaMoment, the SAFE Act isn't even "partisan or especially controversial." Turns out, almost everyone wants to pass it. But because the House took the roundabout route of attaching the SAFE Act to the NDAA, it may end up scuttling the bill.

Investors in marijuana stocks now just have to hope that when the House and Senate sit down to hammer out their differences, they'll be able to extricate the SAFE Act from the NDAA intact and pass both bills separately -- then legalize marijuana in its own right later.

Because haste makes waste -- and, more pertinently today, it's costing marijuana investors money.

Rich Smith 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.

Stocks Mentioned

Canopy Growth Stock Quote
Canopy Growth
$4.32 (0.70%) $0.03
Charlotte's Web Stock Quote
Charlotte's Web
$0.67 (1.47%) $0.01
Curaleaf Stock Quote
$7.57 (4.41%) $0.32
Sndl  Stock Quote
$3.12 (-0.32%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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