With a polarizing U.S. presidential election coming up soon, the cannabis industry is eagerly awaiting the outcome. Will the winner be Donald Trump or Joseph Biden? No one knows for sure, but the result will have an impact on marijuana companies like Tilray (NASDAQ:TLRY). Therefore, the current and potential owners of Tilray stock should prepare themselves accordingly.
But what does it mean for the owners of marijuana stocks to prepare for a presidential election? Does it mean selling all of their shares due to fear of a selloff? That’s one approach, but it could result in missing out on major gains by Tilray stock.
Instead of focusing on an uncertain election outcome, it’s best to concentrate on what we know. And one thing that we know for certain is that cannabis companies like Tilray haven’t had a champion in the White House for a long time.
That could change soon, however. Indeed, if a particular cannabis rights advocate gets her way, the barriers to decriminalization could come crashing down. It’s not a sure bet, but at least it’s a cause for excitement and anticipation among the longtime owners of Tilray stock.
A Closer Look at Tilray Stock
From a technical standpoint, it’s evident that Tilray stock investors could use a shot in the arm. It’s no exaggeration to say that the share price has collapsed since it peaked in late 2018.
The onset of the novel coronavirus was particularly hard on the shares. Within a matter of weeks, the share price took a gut-wrenching fall from $24.75 to $2.43.
On the other hand, Tilray stock has recovered somewhat, and it closed at $5.86 on Oct. 26. Value-oriented investors might consider this an opportunity as the stock is closer to the 52-week low than the 52-week high.
Furthermore, Tilray stock generally appears to be doing well in October. But what, or who, could possibly have galvanized investors to bid Tilray’s share price up this month?
Here Comes Kamala
By her own admission, California Senator and Biden running mate Kamala Harris is no advocate of “half-steppin'” when it comes to marijuana law reform.
Biden hasn’t been particularly outspoken about revising cannabis laws. But then, on that topic at least, Harris has been doing enough talking for both of them.
During a virtual town hall meeting in September, Harris swept any doubts aside and made her stance on cannabis decriminalization crystal clear:
“Under a Biden-Harris administration, we will decriminalize the use of marijuana and automatically expunge all marijuana-use convictions and end incarceration for drug use alone… This is no time for incrementalism. We need to deal with the system and there needs to be significant change in the design of the system.”
Notice the wording that Harris used. She used the pronoun “we,” signaling a (pardon the pun) joint effort to decriminalize marijuana use.
On the Right Path
Tilray shareholders undoubtedly have varying political leanings. Yet they seemed united in their enthusiasm for the shares after Harris once again went all in on her pro-cannabis stance earlier this month.
“[W]e will decriminalize marijuana, and we will expunge the records of those how have been convicted of marijuana,” Harris declared during the Oct. 7 vice-presidential debate.
The debate took place after the stock market had already closed for the day. Nonetheless, Tilray stock moved up 18.3% the following day. Many other cannabis-sector stocks posted gains, as well.
This is a well-timed development for Tilray in particular, which is in the process of moving its balance sheet into the green.
As Chairman and CEO Brendan Kennedy explained, Tilray strengthened its balance sheet during the second quarter of 2020 “with the closing of a $60 million debt facility and an $85.3 million net equity offering.” Those two transactions, Kennedy added, should provide Tilray with enough capital to focus on its path to profitability.
The Bottom Line
There’s no guarantee that any candidate will win the election. Still, it’s a nice change of pace to see Tilray stock holders getting fired up again.
I’m not expecting a miracle. Still, if Harris can rally the troops in the pro-cannabis fight, that could be massively bullish for Tilray stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
