There’s nothing worse than an activist losing their raison d’tete, and that’s what I thought of when I read this piece. Perhaps the writer is just finding theirs. Either or, while it advances a noble concept, the fretful handwringing and alarmism that accompanies it is so typical in discourse around legal cannabis…..be it yay or nay or ‘they’.
Canada’s legalization has put many of the cool kids on the sidelines while placing the activists – folded neatly and bubble wrapped – right into the medical box. Their efforts and energy now reduced to bitching about taxes (Welcome to the mainstream people! Glad to finally see you here!).
Or the other primary trope……..: complaining about the evils of CORPORATE WEED (cue evil music). This author hits both of them, speaking to the virtuous minded reader with all the virtue they can muster. Hey – fine by me. Public discourse is aided by a range of opinions, and frankly, I welcome any ‘social justice’ initiatives to try and provide some equity for those shit on by the drug war.
I’ve seen some low brow takes bitching lately about the concept of ‘social justice’, and how it’ll be ‘bad’ for MSOs and investors.
That’s low-thinking-small-sighted bullshit.
Investing and trading will be the same as it is today as it was yesterday. It might see different players or markets or business modalities emerge. But. A Korean owned liquor store in South Central LA, or perhaps a brew-pub owned by a Black family isn’t going to impact AB Inbev or LVMH Moët Hennessy LV or Kweichow Moutai’s earnings.
And if one believes those initiatives will be ‘bad’ for an investor….step out of positions and wait. Simple right?
And what most who are neck deep in MSOs (or aren’t, like me) are waiting on: the long awaited cannabis bill to be introduced by the US Senate Majority Leader Chuck Schumer.
We’ve talked about Tiering and the Dormant Commerce Clause – and they aren’t going to bring the house down either. They will change the floor plan and furniture though….literally overnight. And that’s the thing to navigate. Social justice initiatives will be far less impactful, and in my opinion, far too long overdue.
The political process will broker something to a mushy middle, and as Canada has shown, the government will take what it wants to provide sustenance to itself. The State Monopolies here are a shining example of how little governments care about the investor and citizen alike.
While I’m glad to see some folks finally taking note of these economic abominations (we’ve talked about it for years) – many are bitching about the symptoms but not the underlying malaise. The State Monopolies are the single biggest inhibitor of profitability in legal cannabis in Canada. And that horse bolted……to almost complete silence at the time.
And it’ll never get put back in the barn.
I listened in to the WeedMD ($WMD) conference call yesterday. They had delayed their financials (there’s a few in that boat right now), and also announced a paper buy of a ‘craft’ producer in Cann Tx.
<Thanks to the OCS’ State Monopoly’s extremely arbitrary definition, any outfit producing less than 10k KG’s per year qualifies for their craft category. GoBlue refers to this as the ‘Broken Coast’ regulation. At $4/g, that’s a $40MM/yr annual run rate btw>
WeedMD’s buy got me thinking about the notion of ‘craft at scale’. We’ve seen indirect analogues in Shelter Market (and a far lesser light in Craft Depot). Canopy ($WEED) taking out Supreme ($FIRE) is a good example of the market chasing ‘quality’ to me as well. Since that’s pretty much the only thing that’s selling with a decent margin….it makes sense. It’d also make sense to pick up several of these sized outfits. <Sidebar – I think Norton over at $GTEC thinks far too much of himself, and is conflating himself getting rich with everyone else getting rich. I also think he doesn’t have the scale nor capital depth nor the humility he should. He made me some money. I sold it all>.
I wrote about ‘right sized’ assets in the sector 16 months ago. And $WMD’s interim CEO George Scorsis said many things on the call that I believe. That distribution is critical. That growing weed is easy, but growing good weed is extremely hard. That genetics are vital.
I also believe that State Monopoly 2.0 is in build. The monopolies will expand in gatekeeping listings, engaging in price discrimination, while quietly hosing retailers: and all the slimy things Monopolies do. I believe a desired cultivator is in a relatively ‘good’ position given that environment. Said another way: they’re better positioned than most.
$WMD guided their 1st quarter of 2021 to be $15MM for sales. Scorsis also said that their first 2 quarters of this year in sales will exceed last year’s entire revenue. That’s a hockey stick if true.
I took a position on $WMD for the things he said, and on the notion of ‘craft at scale’.
And hey – before one gets too interested….$WMD also reported a negative gross margin of 440% last year, which could be a record for the Canadian sector. This is an extremely speculative position based upon a notion of a hunch.
It’s certainly not on fundamentals. Full disclosure.
Speaking of Canopy ($WEED) dropped their ‘financials’ via press release – and did not post them to SEDAR prior to the conference call. If I recall correctly, that’s 3 in a row. And a grim sign.
Constellation ($STZ) wouldn’t dare pull that crap corporately. And it speaks to how bad $WEED’s quarter was.
We’ve talked a lot about it….but be wary of any outfit pulling this stunt. I can’t emphasize it enough.
The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. Of the companies mentioned, the author holds position in $WMD only.