Shares of cannabis companies rose on Monday after US President Donald Trump advocated the potential benefits from the use of cannabidiol in senior healthcare in a social media post.
Trump had said last month his administration was looking to reclassify cannabis, which could also result in potentially easing criminal penalties around its use.
Hemp-derived cannabidiol (CBD) could "revolutionise senior healthcare" by helping reduce disease progression and was shown as an alternative to prescription drugs, he said in a post on Truth Social on Sunday.
US-listed shares of Canopy Growth gained 18.3% and Tilray Brands jumped 42%, while Cronos Group added 15.5% and Aurora Cannabis gained 25.4%.
Exchange-traded funds by AdvisorShares surged 21.8% and Roundhill gained 21.6% and are both on track for their biggest quarterly gains on record of more than 70% each.
"MSOS, the largest US marijuana-focused ETF, is ... benefiting from Trump’s surprise Sunday support for the potential benefits of CBD, with any support going a long way for this beleaguered listed sector," said Ben Laidler, head of equity strategy at Bradesco BBI.
Legal hurdles remain despite past reforms
Regulations around the commercial use of hemp and CBD were eased through the enactment of the Agriculture Improvement Act during Trump’s first term.
We’re encouraged by the US administration’s recognition of cannabis and its potential role in supporting health and wellness for seniors,
— Canopy Growth spokesperson
However, cannabis remains listed as a Schedule I substance under the Controlled Substances Act, meaning it has a high potential for abuse and no accepted medical use.
Former president Joe Biden had directed the department of health & human services to review cannabis’s status, leading the agency to recommend moving it to Schedule III, a category for drugs with moderate to low potential for dependence.
Trump “already hinted that they were planning to reclassify it. This doesn’t mean it’s legalising the drug, but it does reduce some of the burden on the companies,” said Daniela Hathorn, senior market analyst at Capital.com.
"I do think there is further room for these stocks to move higher if it is confirmed that the reclassification is happening."
Companies ready to capitalise on momentum
Cannabis stocks have reflected the ebb and flow of the prolonged process taken by each US administration towards wider legalisation of cannabis and are often volatile.
Some stocks, such as Canopy Growth have lost nearly half their value this year, while Cronos and SNDL have both gained more than 50% each, considering Monday’s gains.
"We’re encouraged by the US administration’s recognition of cannabis and its potential role in supporting health and wellness for seniors," a spokesperson for Ontario-based Canopy Growth said.
"Canopy Growth is excited about this momentum, and through our US holdings in Canopy USA, we’re ready to participate meaningfully as the path forward becomes clear."
Reclassification would remove the tax burden under Section 280E, which denies standard business deductions to cannabis companies. If the tax barrier is resolved, it could pave the way for more cannabis companies to list on US stock exchanges and attract interest from institutional investors.
Reclassifying cannabis also represents a first step toward narrowing the chasm between state and federal cannabis laws. The drug is legal in some form in nearly 40 states.
Reuters
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