Cannabis stocks took a trip south in January

Amid the realization that hopes are fading for federal cannabis legalization, market traders have acknowledged a loss in the value of U.S. cannabis stocks.

Attracting awareness to the issue was AdvisorShares Pure U.S. Cannabis ETF, which fell almost 20 percent in January. 

This exchange-traded fund monitors cannabis multistate operators (MSOs) across the U.S. Comparatively, the much larger S&P 500 dropped by just over five percent. 

AdvisorShares Pure US Cannabis ETF which can be found trading on the New York Stock Exchange (NYSE) under the ticker “MSOS” declined from approximately $40 per share at the beginning of last year to a high that exceeded $55 per share. 

It closed at $21.05 on Monday, January 31, demonstrating a noticeable reduction from this year’s opening price of $25.93. 

Poor outlook for cannabis reform likely triggered the recent slide

Cannabis stock market slumps could be attributed to the fact that the outlook for federal cannabis reform is bleak this year. 

This opinion is backed up by the director of data analytics for New York-headquartered Viridian Capital Advisors, Frank Colombo.

“Most of the downturn, in my view, is a cumulative slow-motion capitulation to the idea that there won’t be any federal legalization [of cannabis] anytime soon,” Colombo told reporters.

During the initial few weeks of 2021, when traders were speculating excitedly over the new Democratic-steered administration and its potentially positive impact on federal legislation, pot stocks elevated.

“The few blips up last year all corresponded to times that there was a little bit of optimism about reform,” added Colombo.

A change of direction occurred in late January 2021, when Senate Majority Leader Chuck Schumer announced that he would be introducing an extensive cannabis reform bill.

“All of the other positive news like states going rec didn’t really do much. The market is fixated on this whole legalization stuff,” Colombo continued.

Analysts believe that the recent dip in cannabis stock values could worsen current issues that are plaguing cannabis companies, including high tax rates and lack of access to banking services. 

Revival of SAFE Banking Act briefly spurred growth of cannabis stocks

On Friday, January 28, House lawmakers breathed new life into the repeatedly-rejected SAFE Banking Act.  Investors responded soon after, with MSOS surging on Monday, January 31 by 5.36 percent to $21.05.

Based on an official news release from U.S. Rep. Ed Perlmutter’s office, the measure has been added to the America COMPETES (Creating Opportunities to Meaningfully Promote Excellence in Technology) Act of 2022.

The SAFE Banking Act of 2021 would help to establish balance between federal and state law by forbidding federal regulators from penalizing financial institutions that provide banking services to ancillary businesses and cannabis-focused companies.

A vote on the SAFE Banking Act recently being added to the House’s America COMPETES Act is expected imminently.