It is estimated that around one million out of Canada's 35 million people regularly smoke marijuana. With the promise to legalize recreational cannabis, Justin Trudeau's election win gave Canadian pot stocks a boost. Share prices for cannabis producers jumped an average of 5-10% in relatively high volume trading early in the day.
The companies already produce marijuana for medical use in Canada. Investors are betting that they could quickly scale up to serve recreational pot users too, once Trudeau makes good on his promise. Canopy Growth rose 11% to Can$2.43, while Aphria Inc. rose 5.3% to Can$1 and Mettrum Health Corp. gained 6% to Can$1.95.
AdvertisementDundee Capital Markets analyst Aaron Salz said, "Trudeau's vow to legalize and regulate marijuana has set in motion the single most important catalyst for the marijuana space."
Bruce Linton, who co-founded the firm Tweed, said, "I was betting on significant growth in the sector, as legitimate firms move into a space now dominated by black market growers and sellers, and offer buyers a large variety of pesticide-free strains."
Linton's company opened in a former chocolate factory an hour's drive from Ottawa in 2014 under a new government scheme that banned home cultivation in favor of large commercial greenhouses. It merged with Canopy and Bedrocan in the spring to form the largest commercial pot grower in Canada, and changed its name to Canopy in September.
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