The outcome of elections can shape policies and decisions for years to come, and the US is no exception. Following the election of Donald Trump as the 47th President of the United States and the Republicans gaining control of the Senate and House of Representatives, some companies and industries could potentially benefit from the change in governance at the national level. Others, not so much. One sector that is potentially in danger of losing out is the cannabis market. And as one of the leaders in this field, Tilray brands‘ (NASDAQ:TLRY) prospects can take a hit.
The cannabis industry has faced significant challenges since Canada legalized the recreational use of marijuana in 2018, from intense competition to strict regulations for operating in the sector. Companies in this sector have generally performed terribly. Tilray is no different. The company’s revenues and profits – or lack thereof – have been inconsistent at best.
Do you miss the morning spoon? Wake up with Breakfast news in your inbox every market day. Register for free »
TLRY Earnings (Quarterly) Data per YCharts.
And to the extent that Tilray’s revenue grew at a good pace in some quarters, much of that was due to acquisitions. That’s why the company decided to diversify away from its Canadian cannabis operations and specifically enter the beverage market. Thanks to a series of acquisitions, Tilray is now the fifth largest craft brewer in the US
The company hopes to eventually combine these two markets as cannabis legalization occurs at the federal level in the US. Tilray’s CEO, Irwin Simon, even said, “After legalization [in the U.S.] One day we will infuse these drinks with THC, with CBD, but we will have the distribution, and we will have the brands when and if legalization happens.” There would be a lot of money to be made here, but not anytime soon.
On election night, three states had the opportunity to legalize recreational marijuana use by adults: Florida, North Dakota and South Dakota. All three states rejected the measure. For what it’s worth, Nebraska voters voted to legalize marijuana for medical use, but that’s cold comfort to Tilray and his colleagues. Individual states rejecting the possibility of legalizing recreational cannabis won’t matter even if the substance wins at the federal level.
But it now seems less likely that this will happen in the near future. Florida, North Dakota and South Dakota all voted red in the election. This highlights an important point: Republicans are less likely to support legalization. A Gallup poll conducted last year found that 55% of Republicans are in favor. The national average is 70%. Among Democrats this is 87%.
