Pot stocks sell off in wake of release of federal legislation

Shares of marijuana-related companies sold off Thursday amid industry uncertainty in the wake of the release of the federal government's legislation aimed at legalizing recreational marijuana.

Ottawa aims to legalize recreational pot by July 2018, but uncertainty remains for producers

The federal government has unveiled its legislation to legalize recreational marijuana by July 2018, but businesses say many details about marketing and branding remain to be worked out. (Sean Kilpatrick/Canadian Press)

Shares of marijuana-related companies sold off Thursday amid industry uncertainty in the wake of the release of the federal government's legislation aimed at legalizing recreational marijuana.

On the Toronto Stock Exchange, shares in Canopy Growth Corp., Canada's largest publicly traded marijuana producer, closed down 3.7 per cent at $9.93. Shares of Aphria Inc., another large player, fell more than eight per cent to finish at $7.21.

Aphria CEO Vic Neufeld said he was hoping for greater clarity with the introduction of the highly anticipated Cannabis Act.

"I think it's a very good first beginning — little high level at this point in time and a lot of blanks to be filled in," Neufeld said.

"I think that there are a lot of exciting details in terms of what the government is announcing for legalization today," said Lisa Campbell, a spokesperson for the Cannabis Friendly Business Association.

"But for a lot of cannabis companies, especially companies that fall outside of the licensed producer system, including dispensaries and craft producers, there's a little bit of nervousness in the air, in that people are unsure if they'll be included in legalization."

In legislation tabled Thursday, Ottawa said it will: 

  • Bring in a federal licensing regime for cannabis production.
  • Establish industry rules on the types of products that will be allowed for sale and on standardized serving sizes and potency.
  • Set minimum federal conditions that provincial and territorial legislation for the distribution and retail sale of pot would be required to meet.

While many details remain to be seen, the legislation will block sellers from marketing cannabis products that appeal to youth or are packaged or labelled in a way to appeal to them. The selling of cannabis through self-service displays or vending machines will also be banned.

"Professional companies must be allowed to explain to consumers why our products are superior to those offered by their illegal competitors," said Brendan Kennedy, CEO of Privateer Holdings, which says it is the first private equity firm to invest exclusively in legal cannabis. "To that end, we look forward to working with the government to ensure that branding allowances properly balance informing consumers while not appealing to those under the age of 18."

In a release, Kennedy also said that unfairly restricting product formats and branding would give an unfair advantage to black market operators and other producers selling low-quality products at low prices.

Federal ministers said Thursday that the pricing and taxation of recreational pot remain to be worked out with the provinces and producers.

With files from The Canadian Press