Nasdaq Unintentionally Paves Way for Canadian Cannabis Stocks

06/06/2016 9:08 am EST

Focus: CANNABIS INVESTMENTS

Michael Berger

President & Founder, Technical420.com

Michael Berger, Associate Editor of MoneyShow.com, a leading expert on the cannabis sector, discusses how the Nasdaq’s recent decision to decline MassRoots’ listing application actually opened the door for Canadian cannabis stocks.

After the Nasdaq (NDAQ) declined MassRoots’ (MSRT) listing application, the shares fell from $0.90 to as low as $0.52 within two days. As many investors ran for the hills, some saw this sell-off as an opportunity and capitalized on this price movement as the Nasdaq’s rationale was not based on merit.

In its notice, the Nasdaq said MassRoots may be deemed to be “aiding and abetting the distribution of an illegal substance, according to the MassRoots news release.  The Nasdaq declined to comment on the rejection.

MassRoots is considered to be the Facebook of the Cannabis sector and the company doesn't deal directly with the growing or sale of cannabis.

Waiting on the Government…Again

Although there are already three companies listed on the Nasdaq exchange that are levered to the cannabis industry, the companies seem to fall under a different category since they are biotech companies that are undergoing testing with the FDA.

Until the FDA or DEA decides to move forward with its decision on rescheduling or de-scheduling cannabis, US companies levered to the cannabis industry will not be able to up-list onto the Nasdaq or New York Stock Exchange.

Canada a New Frontier

In less than 18 months, Canada became a world leader in medical cannabis.

Medical cannabis became legal in Canada in 2014 and the Liberal Party has announced plans to legalize recreational marijuana in the spring of 2017.

Since cannabis is legal in Canada, the publicly traded Licensed Producers of medical cannabis can technically list on the Nasdaq or New York Stock Exchange (as long as they meet the exchange’s standards).

When it comes to Canadian Licensed Producers, our favorite investments are Aurora Cannabis Inc. (ACB.CN) (ACBFF), Canopy Growth Corporation (CGC.V) (TWMJF), and OrganiGram Holdings (OGI.V) (OGRMF).

Cannot Prevent Social Change

The cannabis sector is not even in the first inning of what will be a multi-decade growth cycle ending with the creation of one of the largest and most disruptive industries.

In 2015, Bloomberg presented the results of a study which suggests that marijuana will become legal sooner than most people think. Bloomberg looked at six significant issues to show how this has happened before and may happen again soon. The issues they looked into were interracial marriage, prohibition, women’s suffrage, abortion, same-sex marriage, and recreational marijuana.

Bloomberg found that social change tends to follow a pattern: A few states enact change and then a key event, typically through a legal verdict or a campaign reaching maturity, leads to a spike in the number of states that follow the precedent set by the first few states. This ultimately leads to a change in federal law.

Recreational marijuana looks like it is going to be the next big social issue to head down a similar path and it is already starting to happen.

Currently, 24 states and Washington D.C., have legalized medical marijuana and 4 states have legalized recreational marijuana.

Catalysts Ahead for the Cannabis Industry

The cannabis sector has a lot of potential catalysts ahead and this has created an unprecedented opportunity for investors. Although we acknowledge the risk of investing in the sector and recommend conducting thorough due diligence, we see a lot of upside investing in the cannabis industry.

We expect to see a favorable announcement made by either the FDA or DEA during the back half of 2016 and we believe this will serve as a major catalyst for the cannabis stocks that meet an exchange’s listing requirements.

For this reason, we remain favorable on MSRT, as well as Surna Inc. (SRNA), Aerogrow International (AERO), and CV Sciences (CANV).

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