Why Hexo, Canopy Growth, and Aurora Cannabis stocks are falling today

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What happened

On a bright day for the stock market in general – the S&P 500 is up a solid 1.5% – marijuana stocks are wilting today. Starting at 2:35 p.m. EDT, three of the industry’s best-known names, Hexo (NYSE: HEXO), Canopy growth (NASDAQ: CGC), and Aurora cannabis (NYSE: ACB)fell by 3.1%, 3.6% and 5.3%, respectively.

so what

Scan the news feeds today and you won’t find any bad news. No negative press releases from any of the companies themselves. No downgrades from stock market analysts – less a lowered price target.

Image source: Getty Images.

In fact, the opposite is true. If there is any relevant news to report today, it is that two Republican lawmakers in the halls of Congress have just tabled a bill to legalize federal marijuana and “protect the banks that operate the state-legal cannabis business and safeguard the military.” Veterans are specifically allowed to use marijuana in accordance with state laws, “reports MarijuanaMoment.net.

Coupled with last month’s news that Senate Majority (and Democrat) leader Chuck Schumer called for “an end to the federal marijuana ban in this country,” it certainly seems to suggest that there is now bipartisan support and support on both bodies of there Congress, for the legalization of marijuana at the federal level.

What now

Why should this move lead to falling share prices for cannabis stocks like Hexo, Canopy, and Aurora? It honestly doesn’t make sense to me – except for one thing.

Hopes for a national law to legalize marijuana has since led to the surge in marijuana stock prices. Democratic presidential and vice-presidential candidates Joe Biden and Kamala Harris endorsed their support in last year’s campaign. It’s the catalyst that investors have been hoping would propel their stocks higher. But if and when legalization takes place, what then?

Then the responsibility could lie with Hexo, Canopy, and Aurora, who legally sell cannabis in Canada today but couldn’t make a profit from it to explain why they can’t make a profit from legal marijuana in the United States too.

In the end, the most important factor in moving marijuana stocks may not be legalization, but profit.

This article represents the opinion of the author who may disagree with the “official” referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.