What happened

It's been a rough year for investors in Canadian cannabis stocks. Shares of Sundial Growers (SNDL -7.58%), Organigram Holdings (OGI -2.66%), and Canopy Growth (CGC -3.13%) have all dropped significantly in 2022. Sundial stock is down 44%, Organigram 40%, and Canopy Growth a whopping 73%. 

Declines continued this morning with Sundial and Canopy Growth down as much as 3.2% and 4.9%, respectively. At its lows of the day, Organigram was down 12%. The stocks recovered, though, and as of 2:05 p.m. ET, they had moved as follows:

  • Sundial was up 5.7%
  • Organigram was down 3.2%
  • Canopy Growth was up 7.1%

So what

The big turnaround in Sundial and Canopy Growth came around noon, when Bloomberg reported that Senate Democrats will push a federal marijuana decriminalization bill to the senate floor as soon as next week. 

Organigram stood out with its big drop today after it reported its fiscal third-quarter earnings today. But even with today's gains in Sundial and Canopy Growth, these stocks have all entered penny stock territory. Sundial will soon ask shareholders to vote for a reverse stock split that will protect its listing status on the Nasdaq stock exchange. 

The company hopes shareholders will approve a consolidation plan for its shares at its shareholder meeting scheduled for July 21, 2022. The plan calls for a reverse stock split with a ratio of between 1-to-10 and 1-to-25 to push its share price above the threshold required to remain listed on the Nasdaq.

Sundial shares closed yesterday with a price of just $0.31 per share, and the exchange requires a $1 per share minimum price. Any split approval won't affect the value of existing shares. It will just lower the share count with a comparable change in the price per share. 

Now what

But the surprise news of potential new legislation in the U.S. is what cannabis investors are focusing on today. The Cannabis Administration and Opportunity Act would legalize marijuana at the federal level, but still allow states to restrict production and distribution. But it would still mark a major and beneficial step forward for Canadian cannabis companies that want to see the huge U.S. market open. 

Realistically, though, the bill has a small chance of passing the evenly divided Senate, since 60 favorable votes would normally be needed. That may be why the pop in some stocks that occurred from the news faded. Sundial and Canopy Growth were up nearly 10% on the initial jump. 

Organigram shares didn't turn positive, however, as its earnings news took priority. The company did report record revenue of 38.1 million Canadian dollars. That beat estimates, and was an 88% increase over the prior-year period. The company also expects to set a new quarterly revenue record in its next quarter. But it still reported a net loss of CA$2.8 million. 

The stock did recover somewhat from its early double-digit decline, but the loss overshadowed the potentially good news from U.S. legislators. That was the big focus for cannabis investors today, and will continue to be closely monitored if the bill goes for a Senate vote.