Why pot stocks in Canada are suddenly hot again – The Globe and Mail

Investors are once again bullish on cannabis stocks as governments unveil measures that move Canada closer to legalizing recreational marijuana.

Prime Minister Justin Trudeau is proposing a 10-per-cent federal tax on recreational cannabis and says Ottawa will split the expected new revenue 50-50 with the provinces. Alberta announced a draft framework for how it would handle legalized marijuana in the province on Wednesday, which comes weeks after Ontario unveiled its own plans. New Brunswick recently set up a Crown corporation to oversee the sale of recreational marijuana and signed deals with two suppliers.

Ottawa’s 10-per-cent tax proposal came in lower than some analysts expected, and is well less than what’s levied in most U.S. states where pot is legal for recreational use.

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While a lower tax is beneficial for licensed Canadian producers because it’s competitive with the black market Ottawa is trying to stamp out, analysts say it’s the certainty the tax proposal suggests that has investors snapping up more shares of marijuana companies.

“Stocks are responding to the bigger picture – a bit more certainty as to how the market will look once it is legalized,” Echelon Wealth Partners analyst Russell Stanley said.

“Now investors can focus on what individual companies can produce in a legal market, rather than wondering what the market is going to look like,” Mr. Stanley said. “It’s that reduction of uncertainty that the market likes.”

Shares of Canopy Growth Corp., Canada’s largest marijuana producer, closed up 4 per cent on Wednesday. Other large producers also saw increases including Aphria Inc. and Aurora Cannabis Inc., which saw their shares rise 2.5 per cent and 2.1 per cent, respectively. The Horizons Marijuana Life Sciences Index ETF, Canada’s first cannabis ETF, was up 2.6 per cent.


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