Cannabis stocks were higher Tuesday, as investors digested the latest M&A deal in the sector and monitored efforts to legalize the substance in New York and New Jersey.
New York state Gov. Andrew Cuomo told reporters on Monday that cannabis legalization may not be included in his budget for the coming fiscal year, after pushback from lawmakers who are seeking to ensure people of color are guaranteed a share of the legal market, which is expected to be worth billions of dollars in sales.
Assemblywoman Crystal Peoples-Stokes, the first black woman to serve as Assembly majority leader, told the New York Times that legalization must include provisions to ensure that a community that was disproportionately affected by cannabis arrests and convictions can fully participate.
The U.S. legal market for cannabis is people mostly by white entrepreneurs with black investors in some cases prohibited by previous convictions or more often, by lack of access to capital.
“I haven’t seen anyone do it correctly,” Peoples-Stoke told the paper.
Cuomo has pushed for a speedy path to legalization, urging lawmakers to include legalization in the state budget in April and touting the expected boost to the state’s tax coffers.
In neighboring New Jersey, top lawmakers announced early Tuesday that they have reached a deal on legalization after months of talks and negotiations. The details are expected to be released in the coming days, according to media reports. Gov. Phil Murphy said a vote will be held on March 25 for both houses to approve the bill, paving the way for him to sign it into law.
“Legalizing adult-use marijuana is a monumental step to reducing disparities in our criminal justice system,” Murphy said in a statement.
The deal is expected to include a $42 tax on each ounce of cannabis grown, to be paid be growers, according to local news provider NJ Advance Media. Towns with dispensaries will be allowed to impose a 3% tax on products.
Harvest Health & Recreation Inc. HRVSF, +1.22% rose another 6%, a day after it unveiled plans to buy rival cannabis company Verano Holdings LLC for $850 million in stock. The lofty price is based on Harvest’s C$8.79 ($6.55) price.
Harvest trades on the Canadian Securities Exchange and over the counter in the U.S. and went public in November on the CSE. Like many cannabis stocks, it has benefited from the mania in the sector that has seen many companies attain lofty valuations in a short time frame. The stock has gained 32% in 2019 so far, compared with a 0.3% gain for the S&P 500.
The deal will boost its network to 30 retail stores, eight grow sites and seven manufacturing facilities. Harvest Health has aggressive growth plans and said in the release by the end of 2019, it will have 70 shops, 13 pot farms and 13 manufacturing facilities.
Sol Global Investments Corp. SOLCF, +0.77% has a 15% stake in Verano, which Sol says is worth $127.5 million. Sol Global’s chief investment officer and chairman of the board is Andy DeFrancesco, who short sellers Hindenburg Research and Quintessential Capital Management allege was involved with a pump and dump scheme related to Canada-based Aphria Inc. DeFrancesco has denied the allegations. Sol’s OTC shares were up 1.2%.
Aphria shares APHA, -1.74% APHA, -1.77% were up 05%.
Elsewhere in the sector, Tilray TLRY, +3.07% was 2.4%, Hexo Corp. HEXO, +0.54% HEXO, -0.13% was up 1.4%. Aurora Cannabis Inc. ACB, +0.13% ACB, +0.19% was up 2.1%, Canopy Growth Corp. CGC, +1.63% WEED, +1.43% was up 3.4% and Cronos Group Inc. CRON, +2.15% was up 3.3%.
The Horizons Marijuana Life Sciences ETF HMMJ, +0.68% was up 1.3% and the ETFMG Alternative Harvest ETF MJ, +0.69% was up 1.4%.
The S&P 500 SPX, +0.30% was up 0.4% and the Dow Jones Industrial Average DJIA, -0.38% was down 0.4%.