This Week In Cannabis Investing October 18th

Happy birthday Canada! Canada’s legal cannabis industry reached its first anniversary of legalized recreational cannabis this week. We have our own “first anniversary” article prepared for release on Monday.

In the meantime, there was plenty to discuss this week in the world of cannabis investing.

At the top of the list was profitable cannabis companies. No misprint. While the myopic mainstream media can only see the problems in the cannabis industry, a number of Canada’s leading companies are currently making the transition to profitability. We also had more news and analysis on the U.S. cannabis industry.

As many cannabis investors know, U.S. Senate Majority Leader Mitch McConnell had a private meeting with U.S. cannabis industry representatives last week. Monday, we took our own look at that meeting. Our question was simple: was the cannabis industry courting Mitch McConnell? Or, was Mitch McConnell courting the U.S. cannabis industry? We suggest it was some of both.

Also on Monday, we revisited the Colorado cannabis market after the U.S.’s leading cannabis jurisdiction reported its 4th monthly sales record in the last 5 months. For the world’s most mature cannabis market (now in its sixth year of full legalization), this is impressive.

Perhaps more impressive was that the August sales record broke the record just set in July by 4%. That is an exceptional rate of month-over-month growth for a mature cannabis market. For that reason, we concluded that Colorado shows there is no ceiling for the legal cannabis industry.

Tuesday, we took a hard look at financial conditions in the cannabis industry, specifically the (sudden and increasing) challenge for cannabis companies to raise capital. While current conditions are quite grim, we offered our reasons as to why this is only a temporary problem for the legal industry. And we suggested that a few management teams in the cannabis industry may have been guilty of panicking.

Also on Tuesday, we reported on the second consecutive profitable quarter for major Canadian LP, Aphria Inc (US:APHA / CAN:APHA).  The numbers weren’t exceptional, but it was a concrete rebuttal to the constant drone from the mainstream media that “none of these companies are profitable”.

Wednesday, we led off the day with a focus on National Access Cannabis (CAN:META), Canada’s largest cannabis retailer. Despite delays and incompetence from Canada’s provinces in opening up retail stores, META is reporting a very good year after just one year of legalization of recreational cannabis.

It’s reporting over CAD$60 million in revenues, with very strong margins (32%) from its 33 operational cannabis stores. This is already translating into positive adjusted EBITDA in National Access’ most recent quarter.

We concluded our Wednesday reporting covering guess what? Another profitable Canadian cannabis company. In this case it is one of Canada’s cannabis extraction leaders, Valens GroWorks (CAN:VGW / US:VGWCF).

Valens is currently Canada’s leader in third-party extraction. It reported a very strong quarter that included record revenues, growth of 87.1% from the previous quarter, record adjusted EBITDA, and net income of CAD$5.9 million for the quarter.

Thursday, our focus was back on the U.S. cannabis industry. We looked at how “cannabis justice” is (finally) coming to America. Why is this important for cannabis investors and the U.S. cannabis industry?

Because cannabis legalization in the United States has been entirely driven by the will of the People. The American people are fed up with cannabis Prohibition. They are fed up with racially-motivated arrests and prosecutions for (so-called) cannabis “crimes”.

The American people are now demanding cannabis justice – just like they demanded (and forced) the legalization of medicinal cannabis. And the only way that the U.S. government can deliver that justice is through full (national) legalization of cannabis. We assert that no U.S. 2020 presidential candidate that refuses to endorse cannabis legalization will be electable.

Friday, we wrapped up the week by taking a close look at the “bold move” by Canadian cannabis giant, HEXO Corp (US:HEXO / CAN:HEXO). With its new Original Stash low-cost dried cannabis product, HEXO is delivering legal cannabis to Canadians at a sub-black market price.

Phasing out the cannabis black market is (supposedly) one of the top priorities of Canada’s government in legalizing cannabis. It’s of paramount importance to the legal cannabis industry, since overall the cannabis black market still controls a vast majority of overall revenues/commerce.

Canada’s federal and provincial governments have done virtually nothing to assist the legal cannabis industry in eliminating the black market. Only Alberta has fully stepped to the plate in opening up a legal industry.

HEXO’s Original Stash is an important strategic move in eliminating the cannabis black market in Quebec (where HEXO dominates). However, we pointed out that in other provinces (with more fragmented markets) it’s not possible for the legal cannabis industry to out-compete the black market without actual assistance from both levels of government in Canada. And we outlined what forms that assistance should take.

That was our look at cannabis investing this week. One year under the belt for Canada’s legal cannabis industry. Several leading companies currently moving to profitability. Next week, we’ll take a more detailed look at Year 1 in Canada and also revisit progress of SAFE as it (hopefully) moves through the U.S. Senate.
 

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MJ Shareholders

MJShareholders.com is the largest dedicated financial network and leading corporate communications firm serving the legal cannabis industry. Our network aims to connect public marijuana companies with these focused cannabis audiences across the US and Canada that are critical for growth: Short and long term cannabis investors Active funding sources Mainstream media Business leaders Cannabis consumers




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