Cannabis stocks spiked immediately after President Joe Biden announced the reclassification of cannabis from a Schedule I to a Schedule III drug, endorsing the Justice Department’s recommendation. 

Biden posted a video on X at 1 p.m. May 16, declaring that the U.S. Department of Justice would indeed reclassify cannabis, and within hours, cannabis-related stocks began rising amid the growing excitement.

“Today’s step is another historic step moving forward,” Poseidon Investment Management co-founder Emily Paxhia told Yahoo! Finance on an episode of Market Domination. “I think anything around cannabis reform has been very difficult for the past 10 years plus, obviously, and so anything that’s working through an ordinary process and following the steps as it should is very confirmatory.” 

Familiar names of bigger players in the industry are popping up. “We’ve seen increasing volumes in the top names in the industry,” Paxhia added.

Multi-state operators (MSOs) would benefit the most from the Schedule III classification, like Canopy Growth, Curaleaf Holdings, Green Thumb Industries, and Trulieve Cannabis, with operations in about three dozen states that allow cannabis sales. Shares of Canopy Growth, an enormous Canadian cannabis producer that trades on the New York Stock Exchange, rose 15%, to $11.95, after the tweet, Barron’s reports.

The reclassification of cannabis doesn’t fix the gap between federal and state law, and it sparked some negative feedback of a potential pharmaceutical takeover.

“On behalf of thousands of legal businesses operating across the country, we commend President Biden for taking this important first step toward a more rational marijuana policy,” said Aaron Smith, who heads the National Cannabis Industry Association. “Now it’s time for Congress to enact legislation that would protect our industry.”

Forbes reports that shares of Canopy Growth Corp. ended up closing at roughly $11, an increase of over 11% on the day to a one-month high. Canadian cannabis producer Aurora Cannabis’ stock rose nearly 7%, closing Thursday at nearly $8 per share. Cannabis product manufacturer Green Thumb Industries’ stock rose nearly 3%, climbing to a high of just over $13.

Shares of Trulieve Cannabis Corp rose as well to nearly 6% to just under $13 per share, while Tilray Brands’ shares increased by roughly 2.5% to just over $2 per share. Shares of Cronos Group also jumped over 4% on Thursday, closing at over $3 per share.

It’s important to keep in perspective the overall picture. Despite the recent gains seen by cannabis MSOs, several cannabis-related stocks are far below their 5-year highs. Curaleaf is down nearly 66% from its February 2021 high, while Tilray is down nearly 97% from its high from the same month, Reuters reports.

A 60-day commitment period will take place for a space for public input.

The Justice Department will take comments on the proposal after it appears in the Federal Register. A final rule would have to be issued before the reclassification would take effect. The process can be lengthy,  and it must undergo a public comment period before it can be implemented, which can take up to a year.

Tax Implications of a Schedule III Classification

Part of the excitement surrounding the reclassification move could be centered on the probate changes in tax policy that is near. Legal advisors are expecting the limitations of tax code Section 280E will change significantly now that cannabis is moving to Schedule III of the Controlled Substances Act

Duane Morris LLP & Affiliates, for instance, provided an explainer that indicates Section 280E provides that:

“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”

Once cannabis is rescheduled as a Schedule III substance, Section 280E will not apply to that company’s tax return and additionally, the company would no longer be banned from deducting expenses on tax returns like any other type of legal business.

Kilpatrick Townsend & Stockton LLP provided a Truth vs. Fiction article that explains  reclassification, in reality, it will probably take over a year for major changes to roll out. But one of the biggest lies or rumors, they explained, is that Schedule III will wipe out existing state cannabis markets. No one knows that at this point, and state cannabis markets have always operated in the gray market.

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Nearly four years after legalization, Canadian cannabis companies are still struggling. What exactly is the problem?

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Today, Martha Stewart CBD unveiled Martha Stewart CBD Wellness Topicals—the company’s first venture into the topical market. In 2020, Stewart launched the company under the Canopy Growth umbrella, with high expectations.

Stewart’s brand already sells gummies, oils and softgels infused with full-spectrum CBD, before launching the new CBD Wellness Topicals. The new topical products have specific applications for different results, including Super Strength CBD Cream designed for muscle recovery, Sleep Science CBD Cream designed for better sleep and Daily De-Stress CBD Cream designed for stress management. The CBD skin care market was projected to hit $1.7 billion by 2025, according to Million Insights.

The formulas were created by Stewart in partnership with Marquee Brands and Canopy Growth Corporation. The company doesn’t skimp on the active ingredients, providing “market-leading levels of CBD,” along with co-actives and proven-to-work aroma-technology formulated specifically for each need.

Vice President of Skincare & Topicals at Canopy Growth, Dr. Anna Persaud, says the topical line is great for the CBD-curious, especially if they have a specific goal. “We worked with Martha to create products that improve daily wellbeing in specific ways, addressing muscle recovery, sleep support and stress management, and with proven to work formulas featuring market leading levels of CBD, the line offers the perfect starting point for anyone new to CBD,” Persaud told High Times.

Stewart believes that most problems at home have simple, yet effective solutions—including when it comes to skincare.

“I believe that living well can be simplified by focusing on practical and effective solutions, which is why I created this line of CBD Wellness Topicals with the Canopy Growth team,” stated Stewart. “I am thrilled to help improve our customers’ daily lives through proven formulations that make wellness accessible and convenient, with offerings that address muscle discomfort, sleep deprivation, and stress.”

Using full-spectrum CBD, combined with other co-actives and aromas, you’re more likely to see results versus CBD-only products. Generally speaking, full-spectrum CBD products contain multiple cannabis plant extracts, including essential oils, terpenes and other compounds.

“I believe that living well can be simplified by focusing on practical and effective solutions, which is why I created this line of CBD Wellness Topicals with the Canopy Growth team.” – Martha Stewart

The 2018 Farm Bill changed the way CBD products are regulated, and it didn’t take long for the hemp-derived CBD industry to take off. Stewart’s team waited patiently for the laws to unfurl at the federal level.

Stewart solidified her audience long ago. For decades, young, crafty homemakers followed Stewart’s advice—almost religiously. “While the company she founded continues to thrive,” the Academy of Achievement writes, “Martha Stewart has had more influence on how Americans eat, entertain, and decorate their homes and gardens than any one person in our history.”

Martha Stewart CBD Wellness Topicals are formulated with US-derived broad-spectrum CBD, with competitive levels of CBD and competitive price-per-mg of CBD, versus competitors. The products will be available for purchase in 20mL, 50mL and 150mL sizes.

Below is a rundown of the new products that are available:

Martha Stewart CBD Wellness Topicals

Super Strength CBD Cream for muscle recovery, featuring powerful co-actives, including magnesium and ginger.

• 150 mL (7500 mg CBD) – $99.99
• 50 mL (2500 mg CBD) – $44.99
• 20 mL (1000 mg CBD) – $24.99

Sleep Science CBD Cream for better sleep, featuring aroma-technology essential oils, including lavender and vetiver.

• 150 mL (3000 mg CBD) – $89.99
• 50 mL (1000 mg CBD) – $39.99
•  20 mL (400 mg CBD) – $19.99

Daily De-Stress CBD Cream for stress management, featuring aroma-technology essential oils, including neroli and ho wood.

• 150 mL (4500 mg CBD) – $79.99
• 50 mL (1500 mg CBD) – $34.99
• 20 mL (600 mg CBD) – $19.99

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Cannabis industry powerhouse Canopy Growth Corporation announced that it has entered an agreement to acquire Wana Brands, the continent’s largest cannabis edibles brand by market share, in a deal worth nearly $300 million. Under the terms of the agreement, Canopy has secured options to purchase Wana and its related entities once THC products become federally legal in the United States. 

“As we establish Canopy Growth as the world’s leading cannabis company, acquiring the number-one cannabis edibles brand in North America will serve to strengthen our market position in both Canada and the United States,” Canopy Growth CEO David Klein said in a press release. 

“The right to acquire Wana secures another major, direct pathway into the U.S. THC market upon federal permissibility, and in Canada, we’ll be adding the top-ranked cannabinoid gummies to our industry-leading house of brands. We’re confident in the future growth of the edibles category and the tremendous opportunities with Wana.”

The agreement provides Canopy Growth the right to acquire 100 percent of the outstanding membership interests in Wana Brands and its related entities Mountain High Products, Wana Wellness and The Cima Group, upon the federal legality of THC in the U.S. market. 

When exercising the option, Canopy Growth will make an additional payment equal to 15 percent of the fair market value of each entity at the time it is acquired. The two companies will continue to operate independently until the options are exercised.

Deal Will Unite Two Major Players

Wana manufactures and sells cannabis gummies in Colorado and licenses its intellectual property to partners producing cannabis edibles in 11 other states including California, Arizona, Illinois, Michigan and Florida, as well as across Canada. 

Canopy Growth is a Canadian-based cannabis and cannabinoid consumer products company serving adult-use customers with an array of regulated marijuana products through its Tweed and Tokyo Smoke branded dispensaries in Canada. The company also operates the medical brand Spectrum Therapeutics, which is a market leader in both Canada and Germany. 

In the United States, Canopy Growth offers hemp-derived CBD products via the First & Free and Martha Stewart health and wellness brands, giving the company a global footprint in cannabis and cannabis-related products. Additionally, in 2019, Canopy Growth announced a deal giving it the right to acquire U.S. multistate cannabis operator Acreage Holdings. Canopy Growth also has a conditional ownership interest in TerraAscend, another U.S.-based MSO.

Adding Wana Brands to its portfolio gives Canopy Growth several strategic benefits, including strengthening its access to the U.S. market. The deal leverages Wana’s leadership position and continuing expansion in the U.S., where it has the largest multi-market presence of any independent cannabis edibles brand. 

When Canopy exercises the acquisition option, it will own and operate Wana’s vertically integrated production facility in Colorado as well as its licensing division, which currently has deals in 11 states with plans to cover more than 20 states by the end of 2022. 

The acquisition will also give Canopy Growth a strong position in cannabis gummies, which are one of the fastest growing segments of the Canadian and US edibles markets, accounting for 71 of all edibles purchased, according to data from Headset.

“Edibles play a key role in attracting new consumers and adding the number-one edibles brand in North America strengthens our competitive position on both sides of the border,” Klein told Forbes in an interview. “In addition to our existing relationships with Acreage and TerrAscend, the agreement with Wana furthers Canopy’s positioning for rapid entry post-permissibility to the US THC market.”

Nancy Whiteman, the co-founder and CEO of Wana Brands, said that the announcement of the deal with Canopy Growth “reflects the culmination of more than a decade of hard work, dedication and vision put forth by our employees and partners, as well as an unwavering commitment to the plant and -our customers.” 

“We have long considered what the next phase of our growth might look like, and this deal is not only a great testament to our focus on bottom line growth and fiscal diligence, but also to the value we believe Wana can bring to Canopy and its shareholders now and in the future,” Whiteman said. 

“We have met many partners along the way over the past 11 years, but none have felt like the best and right fit until today. We are incredibly humbled and honored to be part of what Canopy Growth is building in terms of the future of this industry.”

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This is why we can’t have nice things, Canada.

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