Cannabis Companies to Watch as US Regulatory Changes Take Place


The cannabis industry is quickly emerging. Driven by regulatory changes around the world, the industry is expected to grow to be worth tens of billions of dollars annually over the next few years. The biggest of these opportunities lies in the United States. In fact, by 2025, experts expect that the legal cannabis market in the United States will grow to be worth $26 billion annually.

In the United States, more than 12 states have legalized cannabis completely. 35 states in the union have legalized the medicinal use of cannabis. All in all, there are more states that have legalized cannabis in one form or another than there are that have decided to keep it completely illegal.

Moreover, there’s a strong debate going on surrounding the idea that the Federal Government in the United States may completely legalize cannabis nationwide. In fact, Kevin Murphy, the CEO of one of the largest cannabis producers in the United States, Acreage Holdings (OTCQX:ACRGF), has openly stated that he expects cannabis to become federally legal.

Pointing to the idea of economic benefit and reduced scrutiny of the cannabis plant, Murphy said that legalization is “not a matter of if, it’s a matter of when.”

As regulations continue to change in the United States, new markets are opening, creating compelling opportunities for early cannabis companies to carve out a leadership brand. Of course, this means strong opportunities for investors involved in these companies. With that said, here are some of the cannabis companies that will likely see a strong benefit as regulatory reform takes place across the United States.

Canopy Growth Corporation: A Sure Win in the Legal US Market

Should the United States legalize cannabis nationwide, there is one company that stands to immediately become a leader in the space. That company is Canopy Growth Corporation (TSX:WEED) (NYSE:CGC).

Canopy Growth Corporation is a Canadian cannabis producer, and if you’ve followed the industry, this isn’t the first time that you’ve heard the name. One of the largest companies in the industry by market cap, Canopy has grabbed the attention of investors for some time.

However, about 90% of the company’s revenue comes from sales in Canada. Compared to others in the space like Cronos (NASDAQ:CRON) or Tilray (NASDAQ:TLRY), the company’s international footprint is relatively small. However, should the United States fully legalize adult-use cannabis, this will change in a big way.

Canopy Growth recently signed a deal with Acreage Holdings, one of the largest producers in the United States. Under the terms of the agreement, once cannabis becomes legal for adult use in the United States, Canopy has the option to buy Acreage in a cash and stock transaction valued at about $3.4 billion.

Should this acquisition take place, Canopy Growth Corporation would become the world’s largest producer of cannabis, combining its capacity with that of Acreage Holdings. Moreover, because Acreage is a United States-based company, it would give Canopy access to the highly valuable United States market.

All in all, if there’s one company that stands to gain the most from the legalization of cannabis in the United States, it’s Canopy Growth, making this a compelling stock to pay close attention to.

Vapen MJ: If You Want to Be a Leader in Cannabis Culture, Get Cardi B and Wiz Khalida on the Team

Vapen MJ (CSE:VAPN) (OTCQX:VAPNF) is a relatively small cannabis company. Nonetheless, dynamite is pretty small too, and like dynamite, Vapen MJ has the potential to produce a serious bang!

Vapen MJ is a full-service cannabis company, offering products that range from flower to pre-filled vape pen cartridges, cannabis extracts like dabs and waxes, edibles, and much more. The company is involved in every step of the process, from the time the seed is planted to the time its products hit the shelves, giving it complete control over quality!

Perhaps that’s why leaders in the hip-hop industry seem to be latching on to this company’s products. In fact, the company’s vape pen products and logo are prominently featured in the official music videos for Wiz Khalifa’s Chico (video available here) and Pardison Fontain’s Backin’ it Up featuring Cardi B (video available here).

Let’s face it—if you want your brand to get picked up in cannabis culture, get hip-hop thought leaders talking about it. After all, the two cultures are known to cross paths.

Interestingly, the company boasts more than 65,000 followers on Instagram, more than 50 of whom are considered to be hip-hop stars and other thought leaders in the space.

The publicity received from these celebrity endorsements is likely a big part of why the Vapen MJ brand has taken the Arizona market by storm. Now, with the company’s plans to expand into multiple new markets across the United States and continued support from thought leaders in hip-hop culture, this company has the potential to propel through the ranks in the cannabis sector.

Acreage Holdings: The Deal with Canopy Says it All

We can’t mention the benefit of the United States legalizing cannabis to Canopy Growth Corporation without mentioning the benefit that investors in Acreage Holdings will enjoy.

First and foremost, let’s not forget the deal between Canopy Growth and Acreage Holdings. Should the United States legalize cannabis for adult use, Canopy will purchase Acreage, shelling out $3.4 billion in cash and shares. That’s an incredible premium to Acreage investors, considering that the stock currently trades with a market cap around $1 billion.

So, should the United States decide to legalize adult-use cannabis, Acreage Holdings will immediately realize a 340% growth in value. Nonetheless, that’s not where it ends.

Due to the shares that will be issued as part of the transaction, investors in Acreage Holdings will have the ability to enjoy the fruits of Canopy Growth’s labor as the company enters into the United States market, likely quickly becoming the biggest player in the space.

So, at the end of the day, should the United States legalize cannabis, Acreage Holdings investors will be smiling from ear to ear.

GW Pharmaceuticals: A Cannabis Drug that will Likely Shape the CBD Market

GW Pharmaceuticals (NASDAQ:GWPH) hit it big in June of 2018 when the United States Food and Drug Administration handed down a regulatory approval for the company’s drug, Epidiolex. This is important, as this is the first-ever cannabis-derived drug that has been approved by the FDA.

The treatment, approved for severe forms of epilepsy, is expected to quickly become a blockbuster drug, generating incredible amounts of revenue for GW Pharmaceuticals. Interestingly, the drug will also likely shape how the FDA deals with the legalization of CBD.

With the passing of the 2018 Farm Bill in the United States, hemp and hemp derivatives were legalized. Now, it’s up to the FDA to decide how it is going to handle the legalities of CBD-related products.

One big topic in this discussion is the protection of investments made by biotechnology companies in the study of cannabis and hemp-derived treatments. In particular, the recent approval of Epidiolex sets the stage for the FDA to ban the sale of CBD-infused food and beverages and limit the sale of these compounds to topical uses.

This ultimately gives GW Pharmaceuticals the monopoly on edible CBD. While it is only indicated for severe forms of epilepsy at the moment, the potential future label expansions are endless, and the potential of Epidiolex is incredible. So, this is a stock that is well worth your attention.

Tilray: The Proud Owner of Manitoba Harvest

Finally, we have Tilray (NASDAQ:TLRY). Like Canopy Growth Corporation, the company is a leader in the Canadian cannabis space. Tilray has also aggressively expanded into multiple markets around the globe, one of which is the United States.

In February of 2019, Tilray made its largest acquisition to date, shelling out more than $300 million to acquire a United States company by the name of Manitoba Harvest. Manitoba Harvest is currently the world’s largest hemp food manufacturer.

In the short term, that may actually be bad news for Tilray. After all, should the final decision from the FDA banning the inclusion of CBD in food and beverages come down the line, well, Manitoba Harvest could take a hit. However, there’s a silver lining here and it all hinges on the potential legalization of cannabis.

While CBD edibles and beverages are not likely to be allowed to be sold in the United States, THC-infused food and beverages for adult recreational use would not likely be included in this ban. As such, if the United States were to legalize cannabis for adult use, the investment in Manitoba Harvest may become more fruitful than originally expected.

All in all, if the push for full legalization in the United States ends with the desired result, Tilray could see tremendous growth due to THC-infused edible sales throughout the region.

The Bottom Line

It’s important to keep in mind that cannabis is not legal in the United States yet, and there is no way to guarantee that it will be. Nonetheless, if the push to legalize cannabis does lead to the legalization of the plant for adult use, the companies listed above have the potential to see serious growth in value. It’s also worth mentioning that even if the United States does not legalize cannabis in the near future, each stock listed above represents the potential for compelling growth.

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