Why Canopy Growth stock fell 11% on Tuesday

Stocks of Canadian Cannabis Companies canopy growth (CGC -11.27%) The bad news from Germany sent it down 11.4% by midday ET on Tuesday.

Germany’s parliament, the Bundestag, was expected to vote on a new law legalizing cannabis, expanding the market for marijuana companies like Canopy, which has a German subsidiary. But late Monday, Social Democratic leaders decided to postpone the vote until next year.

How Germany’s Delay Affects Marijuana Inventories

MarijuanaMoment, a cannabis news outlet that reported on the law’s delay, noted that the Social Democrats did not elaborate on the concerns that prompted the vote delay. But despite the lack of clarity, the delay doesn’t sound too worrisome to Canopy Growth’s investors.

First of all, the fact that the Social Democrats want to postpone the vote to 2024 rather than cancel it means the party still expects to be able to pass the law. On the other hand, previous legal delays tended to be aimed at providing time. loosen Restrictions on marijuana – rather than tightening them – tend to increase consumption and are therefore good for canopy growth.

Finally, according to Dirk Heidenblut, the Social Democratic lawmaker responsible for cannabis policy, passing the bill in January instead of December would allow legalization to begin by early April 2024, starting with allowing domestically grown marijuana for personal use. There will be plenty of time to do it. It would later expand to greater permission to use marijuana in public.

What Delays Mean for Canopy Growth, Especially in Germany

So does all of this really justify the more than 11% drop in Canopy Growth stock? I don’t think so.

Germany is Canopy Growth’s third-largest market, accounting for 12% of total sales, according to data from S&P Global Market Intelligence. But these sales aren’t going away; they’re still happening. In fact, despite the Bundestag’s delay, sales are still likely to increase further once the German marijuana law is passed.

None of this necessarily means Canopy Growth is a buy.. It still has more debt than cash on its balance sheet, is unprofitable, and isn’t expected to become profitable before 2028. But I guess yesterday’s news wasn’t bad enough if you thought it was worth owning the stock on Monday. What this means is that you should sell your stocks today.