Canadian Cannabis 2.0

Canada gold, junior mining companies

Over at Seeking Alpha I am going to be taking a deep dive into the realities of the new Canadian recreational marijuana business.

I’ll be looking at the new regulations, the various provincial approaches to distribution and how this will impact various publicly listed cannabis companies including client FSD Pharma.

My first article is Canadian Cannabis 2.0. Here’s an excerpt.


The Real Canadian Market

Mike Tyson is quoted as saying, “Everybody has a plan until they get punched in the mouth.”

At its peak on January 9, 2018, the Canadian Marijuana Index (NYSE:CMI) stood at 1045, it is currently trading around 618. The companies included in the index have a current, collective market cap of 25.7 billion dollars.

Part of the reason for the decline in the CMI may have been the market’s recognition that the recreational marijuana regime proposed by the federal government is only partial legalization. The draft legislation only dealt with dried marijuana leaving edibles, concentrates, oils and all the other marijuana derivatives in regulatory limbo. The American experience has shown, the marijuana derivatives market can have a larger market share than the “flower” product.

The market may also have been reacting to the widely varying regulatory schemes being adopted by the provinces. Ontario, our most populous province, proposed to sell pot exclusively through government-owned and controlled marijuana shops. A number of provinces were keen to outlaw marijuana advertising. Canada’s Senate, in its consideration of the legislation to legalize pot, proposed an amendment which would prohibit “swag” – promotional t-shirts, stickers, ball caps.

But perhaps the biggest factor in the decline of the CMI was the recognition that the incumbent companies had built their business plans on a set of assumptions which were no longer valid or were, at least, open to question.


….Read the whole thing

Leave a Reply

Your email address will not be published. Required fields are marked *