With respect to these financials, what to say?

GoBlue has beat the drum of trends and trajectory. Progress quarters, versus walking backwards. As his write-up reveals, there are challenges littered about these financials. Let me add to a couple of them.

The cash float and $33B market cap of an $STZ can backstop a ton of runway, and the fact that $CGC can move product suggests there might be a business in there somewhere, if only it can be found. Sales, ok. Moving product is good. The capital structure is a slasher movie. As is the quality of operations. These financials suggests being first movers may have accumulated an operational profile that laid foundations off centre and un-level. A worst case scenario? It’s un-fixable. That’s happened before in other companies and sectors.

I’ve been cheeky at times about Canopy Growth – driven by the discordance between their press releases and enthusiastic adherents……versus the reality of their actual business model. 

GoBlue said at one point in conversation that $CGC/Tweed is a brand for investors, not consumers. And I don’t believe he was being cheeky. The moment we’ve been talking about – Q4 of this year – and about the sector coming towards another Oct 18, 2018 – is a part of this. 

I now count the following companies coming online this summer with one or more of the following: expanded offerings, outdoor grows, strategic re-positioning, production ramps, or value brands. Recreational sales are expanding, but how long can that can support them all? Is it fast enough?

These are in varying degrees of financial distress/stability, cash position, and ability to access capital. In no particular order:

1. Aleafia
2. Zenabis
3. Supreme
4. Auxly (Robinsons)
5. Flowr
6. Aurora
7. WeedMD/Starseed
8. Hexo
9. Village Farms
10. Green Organic Dutchman
11. Aphria
12. Organigram

I’ve probably missed a couple (I’ve also deliberately ignored many bottom feeders). Other obvious ones like Sundial has its’ own (serious) issues. CannTrust is a bonfire, despite getting a licence back. What to say or add about Cronos and Tilray?

I was speaking with Cyto and GoBlue briefly on the phone about the latest $CGC financials this morning, and a thought occurred to me. 

The thought was that the Canadian legal cannabis industry as a whole would be far better off if $CGC went down, and out. Like, gone. I’m thinking that the sector would be better off with varied operators and companies and platforms – that the promoters and capital inrushes that fuelled $CGC into becoming what it is – served only to build a behemoth. A behemoth that is sucking oxygen out of the sector, and continues to shovel capital into a black hole at full speed.

There could be a stripe of anti-corporate ‘Big Business’ sentiment in that. For the moment, it feels spot on.

Take a look at GoBlue’s latest Rundown on $CGC, and see what you think.

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. The author holds no position in any of the companies mentioned. The author may be initiating positions in the near future (>10 days).