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Why Marijuana Stocks Glowed Green on Tuesday

By Rich Smith – Dec 21, 2021 at 6:35AM

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AOC wants PB to legalize MJ.

What happened

Cannabis stocks that wilted on Monday are glowing a healthy shade of green Tuesday morning, with Sundial Growers (SNDL -0.32%) rising 5.2%, Canopy Growth (CGC -3.72%) up 6.3%, and Hexo (HEXO -3.76%) leading the pack higher with a 7% gain.

And you can thank Rep. Alexandria Ocasio-Cortez -- the notorious "AOC" -- for that.

Marijuana plants.

Image source: Getty Images.

So what

By now you're all familiar with the basic story here. All year long, marijuana investors hoped that the Biden administration would push marijuana legalization through Congress in 2021, consistent with campaign promises made by then vice presidential candidate Kamala Harris to "decriminalize marijuana, and ... expunge the records of those who have been convicted of marijuana."

That didn't happen. 2021 is drawing to a close, and Congressional Democrats have basically given up the idea of getting legalization passed this year, so they're focusing on 2022 instead.

And yet, not all Democrats have given up on legalization in the near term. As reports today, Rep. Ocasio-Cortez is urging President Joe Biden to bypass Congressional inaction and with the wave of an executive pen write legalization into de facto law through executive orders.

Dismissing objections to legalization as "Reagan-era talking points," AOC warns that so long as marijuana remains illegal it will remain "a gateway to ... our mass incarceration system." For this reason, AOC wants the president to at the very least pardon persons convicted of non-violent marijuana offenses, and later perhaps look into how executive action might be used to deschedule (i.e., legalize) marijuana at the federal level.  

Now what

Will the president heed the call? That's no mere rhetorical question, because up till now, the president (in contrast to the vice president) has actually been pretty adamant about opposing marijuana legalization at the federal level. For this reason, I have to wonder if the investors, bidding up shares of Sundial, Canopy Growth, and Hexo today on hopes of executive action, aren't perhaps getting a bit ahead of themselves.

Moreover, I'm not even certain that pardoning drug offenses would do what investors are hoping it will do for marijuana stocks. On the one hand, yes, pardoning past drug convictions would have a chilling effect on prosecutors -- it's unlikely they'd waste time, effort, and manpower prosecuting drug offenses in the future if there's a chance that any convictions they secure will simply get pardoned away.

On the other hand, though, marijuana would still remain technically illegal. That's going to mean there's still going to be a chilling effect on big business -- the publicly traded Canadian marijuana companies hoping to enter the U.S. market, and the big banks who might lend capital to grow the industry. For this reason, I fear mere executive orders won't be the magic bullet that saves these stocks.

Until actual legalization by Congress arrives, Sundial, Canopy Growth, and Hexo are just going to have to figure out how to earn a profit from marijuana without it.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends HEXO Corp. The Motley Fool has a disclosure policy.

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