This Week in Cannabis Investing December 6th

This Week in Cannabis Investing December 6th

As we move into the first week of December, The Seed Investor’s coverage was an even mix. We covered some of the biggest news items this week, but we also stepped back to take a hard look at cannabis laws and cannabis politics.

It’s been a disappointing year for the legal cannabis industry, but clearly the reasons for this have much more to do with government regulations and government effort to roll out legalized cannabis than with the execution of legal cannabis companies.

Monday, we started the week by once again making an obvious point: cannabis taxes need to be low. The only way in which the legal cannabis industry can phase out the cannabis black market (that was created by our governments) is if it can compete with the black market in the price of cannabis products.

With governments already undermining the legal industry with excessive regulation, high taxes make it virtually impossible for Canadian LP’s to compete with the black market on equal terms.

That said, we took a look at one Canadian cannabis retailer that has been making steady progress in expanding it retail store network and building its revenue. Fire & Flower Holdings (CAN:FAF / US:FFLWF). Fire & Flower now has a total retail network of 38 cannabis stores, ranking it as Canada’s new industry leader.

The Company also boasts strong financial backing. Strategic shareholder Alimentation Couche-Tard (CAN:ATD.A / US:ANCTF) has expressed a willingness to commit up to CAD $380 million in growth capital. Couche-Tard can potentially acquire majority control of Fire & Flower.

Tuesday, it was back to politics, specifically the U.S. “politics of cannabis”. The general picture is well understood. Roughly 70% of Americans support full cannabis legalization (which now includes a majority of Republican voters). Yet full legalization – at the federal level – is nowhere in sight.

Republicans are generally perceived as the primary Obstructionists with respect to overhauling the U.S.’s archaic (and unjust) cannabis laws. However, we pointed out that the Democrats have done more than enough “playing politics” with the legal cannabis industry to earn the contempt of cannabis investors.

Wednesday, we focused on specific facet of federal inaction on cannabis reform: addressing the vaping crisis. As the deaths and illnesses mount, the U.S. federal government continues to do absolutely nothing to address this serious health issue.

We pointed out that cannabis lawyers have taken note of this and have put the government on notice. There is only one real way to address the cannabis vaping deaths/illnesses from black market vaping products: legalize and regulate the cannabis industry – at the federal level.

If the federal government continues to choose to do nothing to address these mounting deaths and illnesses? We connected the dots on how and when this failure to act may lead to legal liability for the government.

Thursday, we reported on some big news in the cannabis industry this week – on the international front. Brazil, South America’s largest nation, has announced the official approval of a legal market for medicinal cannabis.

This adds a population of 211 million (potential) new cannabis consumers. That’s roughly the same size population as the number of Americans that currently have legal access to medicinal cannabis. Obviously, this market won’t get off the ground overnight.

However, Brazil is continuing its ban on cannabis cultivation. This makes this huge population base a potential export market for whatever countries (and companies) are first to capitalize.

Friday, we thought we would end the week on an upbeat note: how and why “cannabis will be everywhere”. With so much cannabis disinformation still in circulation, we continue to see a need to educate and clarify.

Cannabis is an incredibly versatile and incredibly potent medicine. But it has an unparalleled safety/tolerance profile. For precisely these reasons, governments should be encouraging cannabis use as a safe alternative to alcohol or nicotine products. The potential savings in both human lives and healthcare dollars are astronomical.

Cannabis will (eventually) be everywhere as medicine. It will be everywhere as a recreational drug, with the possible exception of societies that already outlaw alcohol use. As cannabis investors view their battered portfolios, there is plenty of cause for future optimism.

Next week, with Cannabis 2.0 products in Canada only days away from appearing on retail store shelves, we’ll spend extra time focusing on this new market. With a potential 3 million new cannabis consumers added to the legal market (an approximate 50% increase), this really is a big industry and investment driver for 2020.
Published at Fri, 06 Dec 2019 22:08:35 +0000