Why Tomorrow Is a Big Day for Cannabis Investors

Investors of Canopy Growth Corp (TSX:WEED)(NYSE:CGC) and other pot stocks could get some good news tomorrow.

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Pot legalization is coming full steam ahead and tomorrow we could see a big step in the process take place. The Senate is now ready to vote on Bill C-45, legislation that will legalize marijuana, sometime on Thursday. However, before investors get too excited, it should be noted that even if the bill does pass tomorrow, it’s still not quite done.

Because the Senate has made changes to the bill, it will have to go back to the House of Commons if the bill passes. More than 40 changes were made to the bill, and it could take a little time before all those modifications are signed off on. If there are disagreements between the House and the Senate, then we could see a bit more back and forth before the bill (inevitably) is passed.

However, if all goes well and the House has no objections, then it will officially become law. It’s expected that it could take another two to three months after that before provinces are ready for cannabis to be sold. While many cannabis hopefuls heard July 1 as being the date when pot was expected to be legalized, and it’s likely we could see the bill passed by then, customers won’t be able to buy pot until possibly August or even September depending on the individual provinces.

Should investors be worried?

Ultimately, we knew this would be priority for the Liberal government, and it’s hard to imagine it not going through at this point. It would be shocking if the cannabis legislation somehow halted. Conservatives may try to come up whatever roadblocks possible to prevent the bill from passing, but it will only be a matter of time before it’s approved.

What does this mean for investors?

From an investor’s point of view, while getting all the approvals in place for marijuana to be legalized would be great, it’s also a bit of a formality. How much we might expected Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) to rise after the bill is passed is questionable, as the stock has already soared so much in the past year, and its high share price is no doubt based on the expectation that marijuana will probably be legalized this year.

That said, pot stocks are very sensitive to news, and this development could very well give share prices an increase, but I wouldn’t anticipate it’ll send the stocks soaring. The hype could potentially push stocks up 5% or perhaps as high as 10%, depending on how much of a frenzy we see in the market afterward.

Stocks like Canopy Growth and Aurora Cannabis Inc. (TSX:ACB) are trading at big premiums and so investors wanting to get in now will be paying a big price in order to do so. However, there could still be gains to be made in the market as the industry has been fueled by hype and expectations, which could rise further if the bill is successful.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

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