But the industry also has a dark side, according to Tilray (NASDAQ:TLRY) CEO Brendan Kennedy. In a telephone interview with MarketWatch, Kennedy suggested that marijuana companies essentially lied to investors, and each other, about how much cannabis they could produce to support inflated market valuations.
In particular, Kennedy homed in on the industry's use of "funded capacity" -- i.e., the aggregate cultivation square footage cannabis growers could construct without needing an additional infusion of capital. Whereas a few reasonably large players existed in the very early stages of Canada's medical marijuana rollout, the only tangible means of expressing size and success was by analyzing the number of registered medical marijuana patients each company had. But this wasn't possible for early-stage small-cap companies that had no registered patients and were still in the process of gathering capital or constructing their grow farms.
According to MarketWatch, a number of cannabis industry insiders have blamed premium pot grower Supreme Cannabis (NASDAQOTH:SPRWF) for the advent of the phrase "funded capacity." Said Supreme Cannabis CEO Nav Dhaliwal in a telephone interview with MarketWatch in November 2018, "Talking to analysts, investors, and bankers -- we said we're going to build out this capacity in terms of financing." But the CEO now believes that "funded capacity is too broadly accepted as a metric" and added: "It's relevant to a point; it's a foundational metric. But once you start scaling, it becomes less relevant."
The problem, according to Tilray's CEO, is that cannabis companies misrepresented their actual growing potential by touting funded capacity. Now, with adult-use weed legal, a large number of growers, especially premium flower growers, are unable to meet their obligations. Tilray foresees a shortage of premium-quality pot for 18 to 24 more months.
This has been particularly irritating to Kennedy, who said the following to analysts during Tilray's first-quarter conference call this past week: