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This Do-Or-Die Vote Could Kill Canadian Marijuana Stocks

This Do-Or-Die Vote Could Kill Canadian Marijuana Stocks

The Canadian marijuana legalization bill is in jeopardy and depends on a crucial vote this week. If the bill fails this vote, it will be very bad news for Canadian pot companies.

Ever since the Canadian government announced last year that it intended to legalize recreational cannabis for adults beginning in July 2018, the country has become a global hotbed for the burgeoning industry.

But now Canada’s cannabis legalization faces outright defeat in the Senate Thursday if it can’t secure enough support.

The country’s marijuana legalization bill is set to go into effect as soon as this summer provided it isn’t killed on the Senate floor.

According to an agreed timetable, senators will hold a vote at the second reading of the bill. If there are enough votes to defeat the bill, it would effectively be dead and the Canadian government would have to start the process of legalization all over again.

If that happens, legalization by the summer becomes far less likely – and Canadian marijuana companies will be in for a rough ride.

Leading up to the vote, the North American Marijuana Index—which measures all publicly-listed marijuana stocks in the U.S. and Canada—was down nearly 4% over fears that Prime Minister Justin Trudeau’s Liberal Party wouldn’t have the votes to overcome the Conservative Party’s opposition to the bill.

If passed, the bill would legalize the consumption and sale of marijuana across Canada.

Marijuana industry analysts aren’t too concerned that the bill will fail, despite investor jitters.

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“Frankly, I think this is too important a file for the government to ‘allow it’ to fail,” said Vahan Ajamian, an analyst with Toronto-based Beacon Securities, in a note. “If it were to get shot down, it would be embarrassing for the government.”

According to the CBC, most Independent and Liberal senators are in favor of the bill, however it does face some serious opposition on the Conservative side. The bill will need a majority of votes to pass and move on to a third and final vote in June.

One big issue is that two Senate committees are on the road. That means as many as 20 senators—the majority of them Independent—won’t be in the mix for the vote. And there are other supporters who won’t be in attendance due to illness.

Government sources believe they have enough support to win the vote, but the margin will be slim and any more absentees could derail this major legislation.

If the bill passes and legalization becomes a reality this summer, it could create “a ‘gold rush’ of access to capital and financing for cannabis enterprises, including ‘government partnership with private enterprise and banking,’” according to Nathaniel Gurien, CEO of FINCANN.

Gurien also believes there will be a “fever of M&A activity” as cannabis businesses seek to consolidate their position in anticipation of eventual federal legalization in the U.S.

“Canadian licensed producers have a chance to grab first-mover advantage in a worldwide market that U.S. agricultural and pharmaceutical companies could otherwise have been expected to dominate,” Tom Adams, Arcview’s Managing Director, wrote in a report. But that’s dependent on if the country is able to pass a legalization bill.

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