What happened
"Buy the rumor, sell the news" goes the old stock market maxim. But what do you do when there's new news that just keeps coming -- as is the case with marijuana stocks this week?
Apparently, you buy, then sell, then buy again, then sell again -- over and over and over again, as each successive headline rolls out. Today appears to be one of the selling days, as shares of Aurora Cannabis (ACB -6.81%) slid 3.1%, Tilray (TLRY -4.89%) tanked 3.4%, and Canopy Growth (CGC -3.01%) led the sector lower with a 3.6% loss as of 12:20 p.m. ET.
Image source: Getty Images.
So what
News today on the marijuana legalization front is actually pretty positive, with the Rules Committee of the U.S. House of Representatives having just voted to allow the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act to proceed to the House floor for a full vote on Friday.
As MJBizDaily.com reports, the comprehensive marijuana legalization bill is expected to sail through its House vote tomorrow, with D.C.-based think tank The Liaison Group predicting a tally similar to the one that passed this same law two years ago -- about 228 for legalization, and 164 against. Indeed, given the popularity of the idea of legalizing cannabis, it's possible we'll see even more representatives vote in favor of legalization this time around, as it will play well among voters in an election year.
Now what
And granted, there's still a Senate vote to survive, and President Biden to convince after that. But the point about this being an election year (the last MORE Act vote took place right after an election) could be important.
As you may recall, it was the U.S. Senate that killed the MORE Act the last time around, but with one-third of Senate seats up for election this year, there's likely going to be more pressure for "yay" votes in the Senate this time. In 2020, only 11 states (and the District of Columbia) had legalized marijuana entirely, and legalization was supported by 65% of voters. Today, 18 states (and D.C. and Guam, too) have legalized weed -- and a recent Pew poll found an astonishing 91% of Americans think marijuana should be legal (at least for medicinal purposes).
Long story short, while many pundits still believe the MORE Act will fail in the Senate, strong support among voters could result in a surprise vote to legalize the drug in both houses of Congress this year. It's still anybody's guess, of course, how investors would respond to such a surprise (if there was no rumor, would you still "sell the news?").
One thing is certain, though: If legalization does happen, it will take away marijuana stocks' final excuse for failing to turn a profit from selling a finally legal drug. Neither Aurora nor Tilray has earned any profit from selling cannabis since 2018, after all, and Canopy Growth has been losing money even longer. Once marijuana finally does get legalized, they're going to want to fix that situation, and quick, or suffer the consequences when investors decide these companies simply aren't capable of earning a profit.
