In recent days, CGC shares have risen as much as 110% on expectations alone. The stock shot up another 24% in morning trading as sources indicated the order would be signed today. But when President Trump actually signed the directive — directing the attorney general to expedite the reclassification process — reality set in. Investors quickly dumped the shares, causing CGC to plummet and close down 12%.
Despite the sharp turnaround, the stock is still posting impressive gains of around 50% from pre-rumor levels, highlighting how profit-taking dominated after the main event.
Why profit taking was rational
It was perfectly reasonable for investors to lock in gains rather than hold on to uncertainty. While rescheduling marijuana to Schedule III represents a significant long-term positive impact – recognizing cannabis’ medical utility, easing research barriers, and potentially providing tax relief under IRS Section 280E – the immediate effects are minimal.
The executive order only accelerates the ongoing rulemaking process at the DEA, which includes public comment periods, reviews, and final publication. Experts estimate this could take 12 to 18 months, meaning cannabis companies like Canopy Growth will continue to operate under current restrictive federal conditions for the short term.
There will be no sudden flood of institutional capital or operational windfalls. Banks remain cautious, and full federal coordination with state regulatory markets is still in the future. Specific to CGC, fundamentals remain under pressure during this waiting period.
Canopy Growth’s Continued Challenges
Canopy Growth faces a mix of internal and external headwinds that are dampening enthusiasm, even with improving sector tailwinds. Internally, the company has struggled with high debt levels due to previous aggressive expansions, repeated restructuring efforts and inconsistent profitability.
Recent quarters have seen stagnation or decline in revenues in key Canadian markets, exacerbated by cost-cutting measures and asset sales to strengthen the balance sheet. Leadership transitions and strategic pivot points – such as the focus on American hemp products through Canopy USA – have not yet generated sustainable turnaround momentum.
Externally, intense competition in mature markets such as Canada has led to price compression and oversupply. Illegal markets continue to undermine legal sales, while slow progress in major U.S. opportunities leaves CGC dependent on international and domestic segments that are not experiencing explosive growth.
Regulatory hurdles also remain prominent, and consumers’ shift to value products is putting pressure on margins. These factors explain why CGC’s business appears weak compared to the hype, warranting caution despite policy progress.
In short
Canopy Growth wasn’t the only one to take a dip after the signing; the broader cannabis sector mirrored this move Tilray brands (TLRY) fell 4.2% and AuroraCannabis (ACB) fell 3.4% on the day. They all ended up close to where they started.
The executive order undeniably increases long-term investment for U.S.-exposed cannabis stocks by signaling federal recognition of medical benefits and a reduced risk profile.
However, now that the timeline for the realignment has been stretched, investors have ample time to evaluate the fundamentals and identify the strongest players poised to benefit – whether through efficient operations, entry into the US market or innovation in medical applications. Patience, not panic, will reward those who wait for concrete implementation plans.
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