Cannabis stocks wilt as Florida legalization fails

This story was republished with permission from Crain’s Chicago.

Cannabis stocks got crushed the day after a recreational-use referendum failed in Florida, which would have become one of the country’s largest markets for legal marijuana sales.

Shares in Green Thumb Industries, generally the industry’s best-performing stock, opened at a 52-week low before recovering slightly. The stock was down about 18% in mid-morning trading at $8.64.

Verano Holdings and Cresco Labs were hit even harder. Verano shares plunged 24% to $2.44, and Cresco’s stock was down 23% to $1.17 per share.

Marijuana stocks were left out of the broad post-election market surge that sent the S&P 500 into record territory.

Each of the three Chicago-based companies has a large presence in Florida, the nation’s third-largest state. But after a string of referendum wins in states such as Ohio, the industry lost in Florida, where approval was just shy of the 60% needed for legalization.

Former President Donald Trump supported the measure, but Florida Gov. Ron DeSantis waged an aggressive campaign to defeat it. It’s estimated that both sides spent $200 million combined.

“This is almost completely attributable to (the referendum) getting strong, but not enough, support to pass,” said Morgan Paxhia, managing director at cannabis investor Poseidon Asset Management. “The Florida-focused stocks are taking the brunt of the selling pressure as a result and likely causing a broader risk-off mindset.”

The state already has a large medical-use market, and industry researchers predicted Florida’s marijuana sales would nearly double to $4.5 billion to make it the second-largest market in the country.

Verano already has 79 stores in Florida and a manufacturing site. Cresco has 33 stores and a manufacturing facility. GTI has 20 stores and two production facilities.

Hopes remain that a long-awaited federal effort started under President Joe Biden to reschedule marijuana away from the most dangerous class of drugs will stay on track under a second Trump administration. Trump signaled support for rescheduling during the campaign.

Cannabis stocks have been struggling for more than a year as prospects for rescheduling, which would dramatically reduce taxes and make the marijuana business profitable for many operators, has dragged on longer than expected. Stocks also have suffered as hopes for banking reform have come and gone.