Of the nine states where voters were considering legalizing marijuana for either recreational or medical use, eight approved the statewide measures. California, Massachusetts, Maine and Nevada approved initiatives allowing the recreational use of cannabis, while Arkansas, Florida and North Dakota approved medical marijuana. Montana, where pot was already legal, passed a measure that allows commercial growing and distribution. Only in Arizona, where voters also considered an initiative to permit recreational use, did a marijuana measure fail to pass.
On the surface this landslide victory for marijuana legalization could result in an additional $7 billion to $8 billion annual retail market for cannabis, according to Marijuana Business Daily, once the states get their rules set and their businesses up and running. That could take the entire first term of President-Elect Donald Trump.
Or it could take longer. The Republican party maintained control of both houses of Congress, and if the party lives up to its platform statement, the marijuana industry could face some headwinds. Here’s the Republican platform statement on marijuana:
The progress made over the last three decades against drug abuse is eroding, whether for cultural reasons or for lack of national leadership. In many jurisdictions, marijuana is virtually legalized despite its illegality under federal law. At the other end of the drug spectrum, heroin use nearly doubled from 2003 to 2013, while deaths from heroin have quadrupled. All this highlights the continuing conflicts and contradictions in public attitudes and public policy toward illegal substances. Congress and a new administration should consider the long-range implications of these trends for public health and safety and prepare to deal with the problematic consequences.
The U.S. Department of Justice under the Obama administration acknowledged marijuana’s status as a Schedule I drug but chose to turn a blind eye to enforcing anti-cannabis laws. This may not be the attitude adopted by a Trump administration.
In California, Prop 64 passed with 56% of the vote, while in Massachusetts 53% supported Question 4 and in Maine just over 50% supported Question 1 (only 89% of precincts have been tallied as of early Wednesday morning). Almost 55% supported Question 2 in Nevada. All four of these states were won by Democratic candidate Hillary Clinton.
The California vote could, on its own, double the retail market for marijuana, and that is why cannabis activists focused so much attention on the state.
But the largest potential impact on publicly traded companies may come in Nevada, where recreational marijuana could lead to developing a cannabis tourist destination in Las Vegas. It is hard to imagine that casino and resort owners in the state will let this opportunity pass them by.
GW Pharmaceuticals PLC (NASDAQ: GWPH), the largest publicly traded company working on cannabinoid prescription medicines, is getting a share price boost this morning. The stock traded up about 3.4%, at $124.32 in a 52-week range of $35.83 to $137.88.
Another company that could see a boost is Scotts Miracle-Gro Co. (NYSE: SMG), a fertilizer maker that got a lift from analysts at JPMorgan in August when they reiterated an Overweight rating on the stock and hiked their price target from $70 to $85 a share. In July the company paid $40 million to acquire a marijuana nutrient and hydroponics products maker based in Arizona. The company’s CEO, Jim Hagedorn, has said he wants to invest up to $500 million in the marijuana industry. Scotts also bought Gavita earlier this year, which is a European company that specializes in grow lighting and hardware.
Shares of Scott’s traded up about 1% Wednesday morning to $90.00, above the 52-week range of $62.20 to $89.98. The consensus 12-month price target is $89.00.