Shares of cannabis companies tumbled Wednesday, as investor disappointment that a Democratic sweep failed to materialize offset a boost from referendum wins in a number states.
The ETFMG Alternative Harvest exchange-traded fund MJ,
Among the more active U.S.-listed shares, Tilray Inc. TLRY,
Arizona, New Jersey, Montana and South Dakota voted to approve recreational marijuana sales to adults, and Mississippi voted to legalize medical marijuana.
Don’t miss: With Election Day sweep across four states, recreational pot sales will soon reach one-third of Americans.
Meanwhile, hopes that Democrats would take over majority control of the Senate are fading, as preliminary results as of early Wednesday are showing that Democrats have not gained much ground.
Also read: Biden leads Trump as control of presidency and U.S. Senate are still in doubt.
“While the outcome is still unknown…a Democratic sweep, while preferred by many cannabis investors, seems very unlikely,” analyst Bill Kirk at MKM Partners wrote in a note to clients.
The marijuana ETF had run up 12.5% over the past month through Tuesday, compared with a 0.6% gain for the S&P 500 index SPX,
On the bright side for pot investors, a Democratic sweep may not have been needed to brighten the outlook for pot investors. Kirk said it was worth noting that cannabis being on the Arizona ballot appeared to be a “meaningful contributing factor” in Joe Biden’s chances of winning the state. (Biden held a lead in the state as of this writing but it was still too close to call the winner.)
“We believe politicians of both parties will notice its impact on voters and be more likely to voice support for future cannabis initiatives,” Kirk wrote.
Alliance Global Partners analyst Aaron Grey said Curaleaf Holdings Inc. is a “stand out winner” from the election results, as the company held a “top-two share” in both New Jersey and Arizona.
Grey said Green Thumb Industries Inc. GTBIF,
And in Arizona, Grey believes Harvest Health & Recreation Inc. HRVSF,
“While the presidency and senate races remain unknown at this time, we continue to see the wave of state cannabis legalization leading to change at the federal level over time,” Grey wrote in a research note. “Looking back to our conversation with Former Speaker of the House John Boehner, Speaker Boehner believed that whether Democrat or Republican, it is a matter of when, not if, cannabis is legalized and laws are changed.”
