This Week In Cannabis Investing October 4th

There was plenty to cover this week in the cannabis industry. In the U.S. SAFE now moves to the Senate. The U.S. vaping health problem continues to expand – and the politicians react. And there was very interesting news regarding evolving attitudes in the U.S. toward drug laws.

In Canada, some new numbers on Canada’s (now) thriving cannabis industry. There were also new numbers on how much a Canadian retail cannabis store is worth. Canopy Growth announced a significant deal which we think looks like a winner.

Monday, we revisited news reported last week that several former JPMorgan and Deutsche Bank investment bankers were raising $2 billion to put into a new cannabis fund. Part of that money will go into direct lending with the rest aimed at public and private equity investment.

There is obviously an opportunistic aspect to this new fund. At the same time, it does represent additional funding for the sector, at a time when capital-raising has become more difficult.

Also on Monday, we took a critical look at the decision by Massachusetts to (temporarily) ban vaping products in that state, noting that the ban is being challenged in court. We had more to say about this later in the week.

We wrapped up our Monday coverage by taking a closer look at how U.S. politics is impacting the SAFE banking bill that has now reached the Senate. Both parties have been “playing politics”, but it’s Republicans who represent the major threat to kill this legislation.

Tuesday, we reported on insider buying (and selling) of leading U.S. cannabis stocks over the past 6 months, as the companies have sunk into a trough. Several companies have seen insider buying, generally seen as a gesture of faith in that company.

Several others have seen some selling, to no huge surprise. We singled out the insider selling of one company as perhaps raising some eyebrows. Perhaps the biggest surprise, however, was the lack of activity. U.S. industry leader Curaleaf (CAN:CURA / US:CURLF) was among several of the leading companies that reported no (net) insider activity.

Wednesday, we found some new numbers to help to attach a value to a Canadian retail cannabis store. This time, the data we looked at was the asking price of sellers. What we found was consistent with the number-crunching we had done previously on the value of a retail cannabis store.

We then reported on the latest acquisition of Canopy Growth (US:CGC / CAN:WEED). The industry leader is making a splash in the sports drink market by acquiring BioSteel Sports Nutrition Inc. The goal is to use this as a vehicle for cannabis-infused sports drinks. Such products become legal in Phase 2 of cannabis legalization.

This Canadian-based company has deep connections to the NHL. This includes “brand ambassadors” like Wayne Gretzky and Connor McDavid, as well as female golfer Brooke Henderson.

The Seed Investor has been closely covering the growing connection between cannabis and sports. We see this product as being a strong candidate for success and a good move by Canopy.

Thursday, Statistics Canada came out with its July numbers on the Canadian economy, including some exciting numbers for the Canadian cannabis industry. The (legal) industry is on track to more than triple in size in the first year that recreational cannabis has also become legal.

Two weeks from now, Phase 2 legalization arrives with products expected to hit store shelves by mid-December. With an expected 50% increase in the consumer base and retail stores finally reaching a critical mass, we think this bodes extremely well for the legal cannabis industry in 2020.

We then switched our gaze back toward the U.S. and the troubling trend of state “vaping bans”. Temporary or not, we see this as terrible public policy: forcing consumers to rely upon only black market products – which represent the greatest danger.

Other voices are saying the same thing, including the U.S. cannabis industry itself. “Legalize and regulate” says a letter delivered to House and Senate leaders by 800 “industry leaders” in the U.S. The Seed Investor provided coverage,

Friday, we led with numbers from a new U.S. poll which even a few years ago would have been unthinkable. For the first time, a majority of Americans want all drugs decriminalized, in other words, the end of the War on Drugs.

The facts speak for themselves. Alcohol Prohibition was a catastrophic failure. Cannabis Prohibition wasn’t merely a catastrophic failure, it was entirely unjustified. The War on Drugs itself has been a catastrophic failure. We pointed out the key role that cannabis legalization has played in changing American attitudes here.

We ended the week by noting a small put positive step on the regulatory front in Canada. It appears that the TSX Venture Exchange has begun to relax its rules (ever so slightly) regarding U.S. cannabis-related assets.

Plenty to cover in the cannabis industry on both sides of the border. While tainted vapes continue to weigh on the U.S. industry, there are much more positive signs in Canada’s cannabis industry.