Why Tilray, Sundial Growers, and Other Cannabis Stocks Dropped Today

© Provided by The Motley Fool Why Tilray, Sundial Growers, and Other Cannabis Stocks Dropped Today

What happened

As talk of potential legislation to legalize cannabis in the U.S. continues, stocks of many Canadian growers have been volatile. In just the past month, shares of Tilray (NASDAQ: TLRY), Sundial Growers (NASDAQ: SNDL), and OrganiGram Holdings (NASDAQ: OGI) are down 30%, 20%, and 18%, respectively. That trend continued today, with shares of these cannabis stocks moving as follows as of 12:45 p.m. EDT:

• Tilray down 7.5%;
• Sundial down 3.9%; and
• OrganiGram down 5.2%.

So what

No real news came from the companies today. Tilray CEO Irwin Simon did give an interview yesterday in which he discussed the future of the company and explained its position in preparation for potential U.S. legalization. “In regards to legalization happening in the U.S., I think we will be ready to partner by when that does happen,” Simon told Yahoo! Finance. “But right now, there is very little I can do other than on an option or potentially partner with someone when that does happen.”

Now what

Earlier this month, U.S. Sen. Chuck Schumer and two other Democratic senators introduced a draft of the Cannabis Administration and Opportunity Act, but it didn’t invoke a positive response from the White House. Until progress is made toward federal legalization, it’s likely that Canadian marijuana stocks will remain volatile. 

Even with recent declines, shares of these companies are higher this year, as U.S. legislators have voted to legalize marijuana in more states and the draft legislation for legalization has been created at the federal level. The stocks have retreated from spikes created as the meme stock movement got underway early in 2021, but gains for the year are still notable. 

© YCharts TLRY

Even without cannabis business in the U.S., things are improving in the Canadian market. Earlier this month, OrganiGram reported that its fiscal third-quarter gross and net revenues jumped 51% and 39%, respectively, compared to the previous quarter. Paolo De Luca, OrganiGram’s chief strategy officer, said in a statement that the increase was a result of “a strong outlook for the industry as the number of cannabis retail stores continues to grow and existing stores are permitted to reopen their doors to customers.”

That should be good news for the other companies, including Sundial and Tilray. The latter provides its quarterly financial report tomorrow morning, and investors should look for similar optimism. But many cannabis investors continue to speculate on the potential for the U.S. market to open. Unless, or until, that happens, investors can expect significant swings in the company’s shares. 

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Howard Smith owns shares of Tilray, Inc. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.