Cannabis stocks dropped Friday after President Joe Biden on Thursday announced pardons for thousands of people convicted of marijuana possession under federal law. The president called on governors to take similar action for state offenses. Biden also said his administration will review whether cannabis should remain in its current federal category along with heroin and LSD — a move widely seen as marking possible momentum for federal decriminalization.
"Sending people to prison for possessing marijuana has upended too many lives and incarcerated people for conduct that many states no longer prohibit," Biden said in a statement.
The pardons will affect 6,500 people convicted of federal offenses for simple possession from 1992 to 2021, according to The Wall Street Journal.
The president's decision to pardon people for prior marijuana possession offenses could be a step toward federally decriminalizing marijuana. While cannabis is legal in 19 states and the District of Columbia, it remains illegal under federal law.
Cannabis stocks Innovative Industrial Properties, Tilray, Cronos Group, Canopy Growth, Akerna Corp and Aurora Cannabis all dripped Friday after exploding late Thursday.
Canopy Growth, whose Canadian ticker is WEED, closed up 22.2% while Tilray vaulted 30.9% and Cronos Group rose 13.5% Thursday. Marijuana-focused exchange-traded fund MG Alternative Harvest gained 19.6%. All of the stocks trade below 10.
However, cannabis stocks remain well down so far in 2022.
U.S. Marijuana Stocks Better Positioned
U.S.-based marijuana companies could have more eventual upside from the Biden news than Canada-based businesses.
If Biden's pardons lead to federal decriminalization, U.S.-based cannabis producers that operate in legal states — such as Curaleaf, Green Thumb Industries and Trulieve — could receive a boost. These cannabis stocks currently trade in Canada, and over the counter in the U.S.
However, with federal decriminalization, importing Canadian cannabis products would under current rules still be illegal, meaning there could be less opportunity for Canada's big cannabis stocks Cronos and Tilray.
Cannabis Stocks
Innovative Industrial Properties shares dropped 5.4% to 91.12 during Friday's market trading, after jumping 4.5% Thursday. The stock is 54% down from its Mar. 29 high.
The cannabis-focused real estate investment trust — which buys properties used as grow houses and dispensaries from marijuana companies and leases them back — has helped inject money into the U.S. cannabis industry. The company has a 7.5% dividend yield.
IIPR has a Composite Rating of 51. It has a 12 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The EPS rating is 97.
Cannabis producer Tilray shares dropped 18.7% trading Friday after it missed on revenue estimates with its Q1 2023 earnings.
The company reported $153.2 million in revenue vs. predictions of $155 million. Tilray's net loss was $66 million, with adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — of $13.5 million.
The cannabis stock has a 15 Composite Rating. Its Relative Strength Rating is 24. It has a 31 EPS rating.
Canadian cannabis producer Canopy Growth shares sank 25.5% Friday. The cannabis stock is 60% below its Feb. 11 high of 9.61 with a Composite Rating of 13. The stock has a Relative Strength Rating of 35 and an EPS Rating of 19.
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