The recent announcement by the Drug Enforcement Agency (DEA) regarding its intention to reclassify marijuana stocks may have opened the door for Nasdaq and other exchanges to embrace listings of U.S. cannabis companies.
Previously, cannabis stocks primarily found their place on Canadian exchanges or were offered over-the-counter (OTC). The primary barrier to listing cannabis companies stemmed from the stringent classification by the DEA. However, with an imminent reclassification on the horizon, at least one prominent analyst anticipates that Nasdaq is contemplating relaxing its own restrictions on listing pot stocks.
Consequently, for investors in these companies, a major U.S. listing could notably boost liquidity, pique investor interest, and potentially elevate valuation.
A Possible Shift in U.S. Stock Exchange Policy
Speculation is mounting about a potential shift in U.S. exchange policy. Jefferies (NYSE:JEF) analyst Owen Bennett suggests that Nasdaq, which already allows Canadian cannabis companies with U.S. holdings to trade, could be open to U.S.-based Curaleaf (CURLF). This optimism stems from Curaleaf chairman Boris Jordan’s comments on social media platform X, hinting at discussions with a “major exchange.” If accurate, this could be a groundbreaking moment, paving the way for the first U.S. cannabis company to list on a major U.S. exchange outside the OTC market.
Why There Are No U.S. Cannabis Company Listings
Traditionally, major U.S. exchanges such as Nasdaq have been cautious about listing U.S.-based cannabis companies. This caution stems from marijuana’s classification as a Schedule I drug under U.S. federal law, despite its legalization in many states. However, it’s important to note that state laws don’t hold sway here; federal agencies govern public market exchanges, and they are assumed to adhere to federal laws.
Exchanges may have previously been hesitant to list U.S. stocks in this sector due to the absence of U.S. banking relationships for these companies. This is primarily because federal banking restrictions on cannabis businesses have impeded their access to traditional financial systems enjoyed by other publicly traded companies. However, the potential rescheduling by the DEA could likely alleviate this lack of access to mainstream banking tools.
An Exchange Listing Is a Major Milestone
For U.S. cannabis companies, attaining a listing on a major exchange carries considerable weight and has the potential to spark a bull run in the cannabis sector. This is because more active exchanges offer a multitude of advantages. Foremost among the benefits is the boost in liquidity. Major exchanges such as Nasdaq provide broader investor access, thus expanding the pool of potential transactions.
Consequently, this is expected to result in higher trading volume on the listed stock and a possible upsurge in stock price. This increased liquidity would be a game-changer compared to the often-stagnant OTC markets or Canadian exchanges, which can act as a cautionary flag for U.S. investors.
A listing on a major U.S. exchange also leads to a higher level of credibility. This is because a major exchange listing signifies that the company has successfully survived a strict vetting process, which provides increased transparency and fosters greater investor confidence. This process could potentially unlock a wave of new investment capital.
Key Takeaway
The potential Nasdaq listing of a U.S. cannabis company like Curaleaf signifies more than just a single event—it could set off a chain reaction. If other major exchanges take note of the benefits, they might follow suit, ushering in a new era for U.S. cannabis companies eager to enter the public market.
Simultaneously, the DEA’s decision to reschedule marijuana marks a major milestone for the industry, potentially paving the way for broader acceptance. As major exchange listings loom on the horizon, investors are advised to keep a close eye on this changing landscape. A successful debut by a U.S. cannabis company on a major exchange could not only kickstart an uptrend but also send the entire industry to unprecedented heights.
