Canada

U.S. pot stocks are doing much better

Unlike in Canada, where marijuana has been legal nationwide since October 2018, new markets are continuing to pop up in the U.S., and that is making it easier for cannabis companies to expand and boost their top lines.

Multistate operator Trulieve Cannabis (OTC:TCNNF) is coming off an impressive 2020 in which its revenue of $521.5 million grew 106%. And the company is still expanding into new markets, including Massachusetts, where it recently obtained approval to begin growing plants at its facility in Holyoke.

Increasingly, a group of larger companies known as multistate operators, or MSOs, dominate the industry. While still small compared with, say, liquor companies, the largest MSOs have dozens of stores and hundreds of millions in annual revenue. Leading MSOs such as Curaleaf, Cresco Labs, and Columbia Care have raised money by going public in Canada.

The Canadian cannabis industry has been plagued with several issues. Many pot companies have experienced massive declines in their market value over the past year. The slow rollout of retail stores in major Canadian provinces led to lower-than-expected demand, which drove inventory levels higher, resulting in massive writedowns and lower profit margins.

The cannabis bankruptcy filings are starting to roll in.

Already plagued by a tough regulatory environment, disappointing sales and capital markets that had closed to all but the strongest companies, the industry is now facing a pandemic-related collapse in stock markets and ever-shrinking financing options. Pot companies completed two capital raises worth just $5.6 million the week ended March 27, according to data from Viridian Capital Advisors. That’s the lowest level of activity this year and compares to 17 capital raises worth $169 million for the same period in 2019.

Traditional drug dealers are still formidable competitors in U.S. states where cannabis is legal. Governments planning for huge tax windfalls and investors expecting rapid market-share gains have to adjust to a slower burn.

A new report from Stifel, a Wall Street projection firm, says the global weed market will expand 25-fold in a decade, with the US contributing to half of the total sales.

Sorry prohibitionists: there's no holding back the growth of the legal cannabis industry. Despite concerns that the recent boom in cannabis investment might be a temporary bubble, and the fact that federal cannabis reform is moving slower than molasses, financial analysts still believe the industry will overcome these obstacles and expand exponentially.

Fueled in part by CBD product sales and Canada's recent legalization of marijuana, the world's cannabis market could notch $15 billion this year.

Industry insiders are forecasting that global cannabis sales could total $14.9 billion in 2019, up 36% from 2018, according to a new report released Thursday.

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.

A while back, I wrote that New Jersey’s proposed tax on marijuana sales — at $42 an ounce — was too high and I predicted that would result in people buying cheaper black-market pot.

People wrote to me to say I was nuts because consumers would want the better quality pot that was being sold by legally sanctioned distributors.

Well, New Jersey has delayed pot sales. But Canada, where recreational marijuana has been legalized, is confirming that what I suggested about the weed business is true.

Canopy Growth Corp. is not outright acquiring Acreage Holdings Inc., as reports said Wednesday, but it is preparing to pay billions for the rights to buy the U.S.-based pot company.

A source familiar with the negotiations confirmed Wednesday afternoon that a Canopy Growth CGC, +2.81% WEED, +2.81% deal with Acreage ACRGF, +9.14% was “98% done,” though the final price was still being worked out. Acreage had a market cap of $2.45 billion as of Wednesday’s close, but the deal will be worth “several billions” in Canadian dollars, the source said.