Shares of Cannabis Companies Rise more than 50% Due to Removal from the Drug list

Last week, the Drug Enforcement Administration (DEA), which is in charge of monitoring the entry and exit of narcotics in the United States, said it will move the cannabis plant from Schedule 1 to Schedule 3 of its current list, which determines “less dangerous.”

This means that the medical uses of cannabis will be recognized when deciding that this substance would present less risk of abuse than some of the most dangerous drugs in the country.

The Department of Justice, DOJ, which audits DEA decisions, wants cannabis to be classified as a so-called Schedule 3 drug (moderate to low physical and psychological dependence potential). Cannabis, located in schedule 1, is found with drugs such as LSD or heroin with high potential for abuse and which do not have widespread medical use in the United States.

The event is presented as a ‘halfway’ step for the commercial cannabis industry, since, less than two months ago, it was leaked that the German government had approved a bill that would make marijuana laws more flexible, which that would make it possible for people to possess cannabis for personal use.

According to XTB, any news related to marijuana legislation is usually enough to drive up the price of cannabis companies, with Germany being one of the largest and most promising marijuana markets in the world.

Cannabis companies shares rebound

After the news from Germany, along with the DEA decision, which many already anticipated, Canopy Growth shares have risen 230% since March 15, Aurora Cannabis 70%, and Tilray 55%. Cronos Group shares, for their part, rose between 14.9% and 67.7% on the New York stock exchanges.

ETFs also on the rise

Among the big growers are the Roundhill Cannabis ETF, the AdvisorShares Pure Cannabis ETF and the Amplify US Alternative Harvest ETF, which have accumulated gains of 29.6% to 36.6% so far this year, which places them among the Best performing ETFs of 2024.

However, the gains have not yet translated into asset growth for many of the funds, suggesting that ETF investors are cautious about making any major new bets on the sector.

Of the nine cannabis-focused ETFs in the US market, only two – the AdvisorShares MSOS 2x Daily ETF and the AdvisorShares Pure US Cannabis ETF – have seen inflows since the Justice Department’s announcement, according to data from LSEG Group.

“The rallies we’ve seen have been driven by cannabis-focused investors who have been waiting for this news but already have money in a handful of their favorite stocks,” said Steve Sosnick, market strategist at Interactive Brokers.

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(Featured image by Liza Summer via Pexels)

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