Pot stocks surge for a second day after a marijuana legalization act passes a key vote

California company, Flow Kana, is trying to help small farmers by not growing any of its own weed. Meranda Yslas

  • On Wednesday, the Marijuana Opportunity Reinvestment and Expungement (MORE) Act passed a key vote by the House Judiciary Committee.
  • Cannabis company stocks surged Wednesday and extended gains into Thursday on the news.
  • Although the MORE Act’s fate is uncertain, “companies that support the industry are thrilled to see it advance,” said Ben Curren of Green Bits, which makes compliance software for cannabis companies.
  • Read more on Business Insider.

Cannabis company stocks extended soaring gains into a second day Thursday after a key marijuana legalization bill was passed by the House Judiciary Committee a day earlier.

The committee approved the Marijuana Opportunity Reinvestment and Expungement (MORE) Act Wednesday morning in Washington, D.C., voting 24-10 in favour of the bill. Cannabis stocks surged on the news.

The vote is important for the cannabis industry because the MORE Act would decriminalize and deschedule marijuana. That means marijuana would be removed from the schedule 1 drug list of controlled substances in the US, and that some cannabis offences would be expunged.

The act would “allow the sector to take a giant leap forward,” said Ben Curren, founder of Green Bits, which provides compliance software to cannabis companies, in an email to Markets Insider. Although its fate going forward is uncertain, “companies that support the industry are thrilled to see it advance,” he said.

Here’s how much six popular cannabis companies gained Thursday, from highest to lowest jump in share price:

  • Hexo: +41%
  • Aurora Cannabis: +22.7%
  • Canopy Growth Corp: +21.6%
  • Cronos: +16.4%
  • Curaleaf: +14%
  • Tilray: +13.5%

Next, the bill will go to the House for a vote, where it’s widely expected to be supported by the Democratic majority. It faces tougher scrutiny in the Republican-controlled Senate, especially as Majority Leader Mitch McConnell is firmly against legalizing marijuana, though he’s supported legalizing hemp.

While the MORE Act passing the key vote is a good thing for the cannabis industry, the road ahead to legalization in the US is far from certain, according to W. Andrew Carter of Stifel.

“We believe this has a very low probability of success,” Carter wrote, even though the “legislation’s momentum underscores our robust long-term outlook for the global cannabis industry.”

The multiple-day gains come after a rough week for cannabis companies, where disappointing earnings sent shares tumbling.

While many pot stocks are still a far cry from an all-time high, the rebound is positive. For example, Canopy Growth is still down roughly 66% from its year-to-date high in April through Wednesday’s close, but there’s evidence that the “worst is over,” according to a Wednesday note from Bank of America Merrill Lynch.