This Week in Cannabis Investing September 20th

It was another down-week in the cannabis sector. The long-overdue (and much awaited) rally for North the American cannabis industry has yet to arrive. For true investors, this provides additional time to shop around for the best bargains among marijuana stocks.

There is still plenty of news to track in the cannabis space. In the U.S., respiratory illnesses (and deaths) have resulted from unregulated/partially-regulated vaping products. This has put even more pressure on the federal government to legalize cannabis – so that cannabis can be properly/fully regulated. That’s only one of several important regulatory issues currently looming for the U.S. cannabis industry.

Monday, The Seed Investor began the week debunking more anti-cannabis myths. Specifically, we found evidence that legalized cannabis is actually drawing increasing numbers of U.S. migrants into cannabis-legal states.

This parallels a previous survey that showed that 25% of tourists visiting the state of Colorado from 2014 to 2018 cited “legal cannabis” as a reason for their visit. While many politicians in the U.S. remain cannabis-phobic, a widening majority of Americans are enthusiastically embracing cannabis legalization.

Then we took another look at one of the problem markets for the U.S.’s legal cannabis industry: California. Even as the state launches a new (expensive) ‘War on Drugs’ law enforcement campaign against its cannabis black market, the number of cannabis licenses in the state has shrunk in 2019.

This is due to both the complexity of cannabis regulation in the Golden State as well as a major overhaul to the entire regulatory framework. Sadly, that overhaul didn’t deal with the main problem in California’s cannabis industry: local government.

Many of California’s counties remain either partially or completely off limits for the legal cannabis industry. These counties have refused to endorse cannabis legalization despite the will of the voters in approving legalization by state ballot.

Tuesday, we reported on increasing pressure on the FDA to (finally) produce a national regulatory framework for CBD products in the U.S. This is especially imperative for hemp-derived CBD, which is supposed to be fully legal in the U.S. following passage of the Farm Bill 2018. Political pressure is coming from several directions, including a bipartisan letter being circulated through Congress directly on this subject.

Then The Seed Investor took a quick look at the new endeavors of Bruce Linton, the former CEO of Canopy Growth (US:CGC / CAN:WEED). While a frequent target of pot-shots from the (grossly uninformed) mainstream media, Linton remains a respected figure within the cannabis industry. Among his new roles is as an “activist investor” for U.S. cannabis branding leader, SLANG Worldwide (CAN:SLNG / US:SLGWF).

Wednesday, we focused on the SAFE banking bill that has been on the table in Congress for several months now. Support is building for its passage, including pressure from the banking industry itself to make cannabis financing in the U.S. a reality.  One-third of the Senate has now signed on as co-sponsors of the legislation.

Then we zeroed-in on a “weapon” that the U.S. federal government has been using against the legal cannabis industry: anti-trust laws. For 30 years, U.S. politicians have almost completely ignored these laws – as the world’s largest multinational corporations were allowed to buy up and merge with each other.

However, when two cannabis companies (1/100th this size) want to combine, suddenly U.S. politicians have dusted off these rules to undermine the legal cannabis industry. We pointed out that U.S. cannabis companies needs to be able to consolidate, to generate enough efficiency and economies of scale to compete with black market cannabis. There is no justification of any kind for the U.S. government to be rejecting cannabis deals on “anti-trust” grounds.

Also on Wednesday, The Seed Investor alerted cannabis investors to more issues regarding cannabis legalization in New York. In an MSNBC interview, Governor Cuomo expressed his strong opposition to smoking cannabis. He also opined (based on personal ignorance) that cannabis consumers didn’t need access to cannabis dried flower because the THC in the cannabis plant could be extracted.

But THC is just one of roughly 100 cannabinoids in the cannabis plant. A growing body of scientific evidence suggests that it is the combination of these ~100 cannabinoids (along with terpenes and flavonoids) that produce the full medicinal/health benefits from cannabis. If Cuomo imposes a smoking ban as a condition for full legalization, he simply guarantees that New York’s cannabis black market will continue to thrive. Or, the legalization bill will simply fail again – as happened earlier this year.

Thursday, The Seed Investor shifted its gaze north of the Border. We provided cannabis investors with yet more examples of the gross ineptitude of Ontario’s government in rolling out legalized cannabis in that province. Simply, Ontario has done everything wrong.

As Canada’s largest province, this has had an enormously negative impact on Canada’s legal cannabis industry. And as we observed in our latest coverage of this regulatory train-wreck, there is little sign of the situation improving in the near future.

We then looked at something positive in the cannabis industry. We provided yet more coverage of the growing connection between cannabis and sports, both amateur and professional. An expert who has worked with more than 100 world and national athletic champions listed 7 ways in which medicinal cannabis can improve athletic performance – by improving the health of athletes.

As The Seed Investor observed, all of these health benefits being derived by elite amateur and professional athletes are available to all of us from the therapeutic use of cannabis. This reinforces previous articles reporting that cannabis is becoming the recreational drug-of-choice among educated professionals.

Friday, we wrapped up the week by noting that a (former) cannabis heavyweight in Israel’s emerging cannabis industry has shifted its focus. Private company, Tikun Olam has completely sold off its Israeli assets, but the company is moving into other cannabis jurisdictions – notably the large-and-growing California cannabis market.

Tikun Olam controlled roughly 40% of Israel’s medicinal market for cannabis. Israel is also one of the global R&D leaders in the cannabis industry. But the company was being restricted from further growth in Israel. As management looked to redeploy its cannabis expertise (and assets), they saw California as a premier destination.

As North American cannabis investors grapple with extremely depressed valuations in the cannabis industry, many “heavy hitters” in the corporate world continue to flock toward the emerging cannabis sector.