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Why Curaleaf, Hexo, and Green Thumb Stocks Popped

By Rich Smith – Nov 24, 2021 at 2:48PM

Key Points

  • Germany is getting a new marijuana-friendly government.
  • Full-scale marijuana legalization is on the agenda in Germany now.
  • With $1 billion euros in new tax revenue on the line, Germany's move could encourage other European governments to follow suit.

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Germany will legalize marijuana.

What happened

Here in the United States, marijuana stocks, and the Congressional effort to get marijuana legalized, are all the rage -- but as reminds us today, the marijuana market is bigger than just the United States.

Germany wants to legalize marijuana too, and that prospect is helping to lift marijuana stocks today. In noonday trading, ET, shares of Hexo (HEXO) stock are heading 6.6% higher, followed by Curaleaf Holdings (CURLF -0.55%) and Green Thumb Industries (GTBIF -4.22%) -- up 3.3% and 2.9%, respectively.

German flag emblazoned with a marijuana leaf, a green cross, and a checkmark

Image source: Getty Images.

So what

Over in Germany, conservative Christian Democratic Union Chancellor Angela Merkel is out of office, and the coalition of three German parties that will choose her replacement includes the liberal Free Democratic Party, the center-left Social Democrats, and the environmentalist Green party. As MarijuanaMoment reports, these three parties are in broad agreement that marijuana should become legal in Germany.  

In a policy statement, the parties say they are "introducing the controlled supply of cannabis to adults for consumption in licensed stores," alongside implementing "controls" over product "quality" and "protection of minors." All of this will expand access to the drug beyond existing permission for its use for medicinal purposes (although advertising of marijuana will be restricted).

Now what

What does legalization in Germany mean for American and Canadian cannabis companies? Honestly, not a whole lot. Of the three stocks moving today, only Curaleaf has any real exposure to the German marijuana market -- and even Curaleaf, like Green Thumb, is mostly an American operation. (According to S&P Global Market Intelligence, Hexo gets most of its revenue from Canada). 

Still, there's one more aspect of this news that bears mentioning: The new government coalition in Germany anticipates that legalizing marijuana will generate some 1 billion euros (about $1.2 billion) in annual tax revenue. 

That's a big draw for a German economy that has been battered by Covid-19. It's also an observation that pops up repeatedly in initiatives to legalize marijuana at both the state and federal levels here in the U.S. Pennsylvania alone, for example, thinks that legalizing marijuana within that state could generate $1 billion in annual tax revenue, and a planned federal marijuana tax levy of 3% could generate even more money at a national level.

The more governments realize that legalizing marijuana can be a big source of income, the greater the prospects for marijuana legalization will become -- at the state, the federal, and even the international levels.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Green Thumb Industries. The Motley Fool recommends HEXO Corp. The Motley Fool has a disclosure policy.

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