Sean Spicer’s anti-marijuana comments just sent weed stocks plunging

White House Press Secretary Sean Spicer has made it crystal-clear that Americans should expect an anti-marijuana crackdown under the Trump administration, sending Canadian weed stocks into a brief tailspin early Friday.

Responding to a question regarding the state-federal conflict of marijuana regulation at Thursday’s daily news briefing, Spicer said there would be “greater enforcement” of federal laws when it comes to the recreational use of marijuana, a sharp pivot from the Obama administration’s approach to dealing with the illegal consumption of marijuana.

Canadian weed stocks then went into a tizzy, despite their relative strength in the last few months in anticipation of Canadian Prime Minister Justin Trudeau’s plan to legalize recreational weed altogether.

Canopy Growth Corp., North America’s biggest medical marijuana producer, saw its stock lose 80 cents a share— a 6 percent decline — in the early trading hours of Friday morning, while Aphria Inc., another Ontario-based medical marijuana grower, saw its stock price decline by 2 percent as of 2 p.m. Friday. Canna Royalty, one of North America’s biggest investors in the weed sector also saw its stock decline by about 3 percent.

So why are Canadian weed companies reacting to an American crackdown of the weed sector?

There are currently eight American states and Washington, D.C., that have legalized recreational marijuana — 20 more have legalized weed for medical use. In fact, analysts estimate that the U.S. market for recreational marijuana could potentially be more than twice the size of Canada’s. Any kind of regulation that might reduce the long-term potential of Canadian weed producers to capitalize on the recreational U.S. market has a negative impact on weed stocks.

Canadian weed companies also have investments in the U.S. Last October, for instance, Aphria entered into an intellectual property agreement with Arizona-based Copperstate Farms, a high-tech Dutch-style greenhouse facility in Snowflake, Arizona — one of the largest marijuana growing facilities in the West Coast.

CannaRoyalty also has big plays in the U.S. — it owns a portfolio of 18 marijuana companies, 15 of which are south of the border. Right now, CannaRoyalty remains the sole option for Canadian weed investors to have access to the U.S. recreational marijuana market.

“Recreational weed dreams of many investors are up in smoke, in my view. Sessions AG will probably enforce federal prohibition against cannabis,” wrote Chris Damas, of BCMI Research, in a note this morning. His advice when it comes to investing in weed stocks in the short run? “Stand aside.”