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Money Investors are delusional when it comes to Canadian marijuana companies

18:05  10 january  2018
18:05  10 january  2018 Source:   macleans.ca

Dogs overdosing on marijuana, veterinarian warns

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But as these companies , some valued in the billions of dollars despite generating no profits, continue to attract starry-eyed investors , it ’s worth examining what kind of opportunities will exist for these firms when provinces regulate retail pot sales. READ: How big is Canada ’s marijuana market, really?

RELATED: Investors are delusional when it comes to Canadian marijuana companies . Companies are boosting marijuana inventory in anticipation of legal recreational sales in July, and have much more weed than can possibly be sold at this point.

a group of people standing in front of a building: Marijuana plants grow in a climate controlled growing room at Tweed Inc., now Canopy Growth, in Smith Falls, Ontario in 2015. (James MacDonald/Bloomberg/Getty Images)© Used with permission of / © Rogers Media Inc. 2018. Marijuana plants grow in a climate controlled growing room at Tweed Inc., now Canopy Growth, in Smith Falls, Ontario in 2015. (James MacDonald/Bloomberg/Getty Images)

Allan Gregory is a professor of economics at Queen’s University.

Quotes in the article

Canadian Tire Corp Ltd

CDNAF

Canadian cannabis producers set their sights on global domination

  Canadian cannabis producers set their sights on global domination The Czech Republic has joined Germany, Australia, New Zealand and a growing list of other nations which are turning to Canada as a safe and legal source for medical grade cannabis. In recent months, more than a dozen countries have legalized medical marijuana. New laws are pending in at least a dozen more as national regulators and even the World Health Organization recognize legitimate medical uses for a drug which had long been banned under international treaties.The moves have sparked an unprecedented demand for legally grown, high quality marijuana, as well as the oil which is extracted from it.

As the July deadline for the provinces to legalize marijuana approaches, the stock prices of Canadian publicly-traded weed producers have been on a tear. But as these companies , some valued in the billions of dollars despite generating no profits, continue to attract starry-eyed investors , it ’s worth

Investors are delusional when it comes to Canadian marijuana companies . The model of state-run alcohol sales gives us an important clue as to why high-flying marijuana producers face tough times ahead.

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As the July deadline for the provinces to legalize marijuana approaches, the stock prices of Canadian publicly-traded weed producers have been on a tear. On Monday alone shares in Canopy Growth Corp., soared nearly 20 per cent. The surge in market value comes as firms try to position themselves with sufficient product to meet anticipated demand. But as these companies, some valued in the billions of dollars despite generating no profits, continue to attract starry-eyed investors, it’s worth examining what kind of opportunities will exist for these firms when provinces regulate retail pot sales. It is not difficult to predict profit margins will fall under regulation and that current market cap valuations are predicated on unrealistic expectations.

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As the July deadline for the provinces to legalize marijuana approaches, the stock prices of Canadian publicly-traded weed producers have been on a tear. But as these companies , some valued in the billions of dollars despite generating no profits, continue to attract starry-eyed investors , it ’s worth

When it comes to the growing list of marijuana stocks, investors can research an array of public companies , but the events that have recently transpired May 20, 2014 Canadian Medical Marijuana Companies : Good, Bad and Delusional : Tweed, Bedrocan, Supreme Pharmaceuticals Inc

While there are some variations across provinces in their distribution plans for legalized marijuana, the largest two provinces, Ontario and Quebec, intend to have provincial run outlets modelled on their government-controlled alcohol sales. Indeed, the alcohol model gives us an important clue as to how the industry is likely to shake out—and why marijuana producers face tough times ahead. Keep in mind that there will still be online purchases and the proportional divide between physical store and e-commerce is unclear. Ontario with only a planned 150 outlets might give us an early indication as to online traffic. But let us consider the possible ramifications from only the government outlets.

READ: How big is Canada’s marijuana market, really?

The Ontario Liquor Control Board (LCBO) and Société des alcools du Québec (SAQ) effectively have a monopoly on the sales of most alcohol products in their respective provinces (with the exception of beer and some wine). The LCBO is one of the world’s largest buyers and demands much from its suppliers in terms of large quantities and price discounts. Minor producers, even in Ontario, who are unable to meet the demands of the LCBO must sell their products elsewhere.

Are Canadian Cannabis Companies Growing Responsibly?

  Are Canadian Cannabis Companies Growing Responsibly? Can Canopy Growth Corp. (TSX:WEED) and Canada's other large cannabis producers stick to growing responsibly, or is the current industry growth rate unsustainable?0000

Discussion in ' Canadian Patients' started by gb123, Jan 10, 2018 at 10:43 AM .

" Investors are delusional when it comes to Canadian marijuana companies " – Maclean's. ===== Chinese authorities voiced their opinion that U.S. Treasury bonds are not great investments and this caused bond markets and equity futures to fall Wednesday morning.

Giant provincial alcohol buyers with market power drive tough bargains in terms of price and quantity which dissipates suppliers’ profits. Of course, having a virtual monopoly on the retail side has meant that these pricing discounts are rarely passed onto its customers. I see the same tactics for recreational marijuana. There is the false belief that the licensed producers (LPs) of marijuana will get the same price from the provinces they have enjoyed in the retail-based medical market business.  However, aggressive bulk buying by large provincial authorities will whittle the producer price down markedly.

Provincial buyers are going to want to deal with licensed producers that can supply large amount of product at low prices. At present the average price of medical marijuana is roughly $10 per gram. Some publicly traded companies have boasted that their all-in costs are in the range of 70 cents to $1.75 per gram which translates into profit margins of more than 80 per cent. However, we can expect provincial agencies will severely cut into these margins. The Ontario wine industry provides us with some idea of profit margins that LPs might reasonably expect. In a recent study on Ontario Wine and Grape Industry (2015), for large scale operations the profit margins are just under 15 per cent and in fact many smaller vineyards were posting losses.

Quebec landlords push ban on smoking pot inside apartments

  Quebec landlords push ban on smoking pot inside apartments Landlords in Quebec are taking steps to ensure their rental properties remain free of pot smoke, even though the drug will be legal in Canada come July 1st. Under Quebec's proposed marijuana law , residents will be allowed to use marijuana recreationally in their homes but won't be permitted to grow cannabis for personal use. Yet some landlords have already sent notices to tenants informing them they won't be allowed to smoke weed in their apartments.

Investors are delusional when it comes to Canadian marijuana companies - Macleans.ca. First Nations people with a valid certificate of Indian Status card will not have to pay tax on marijuana sales when buying it from a business located on reserve land.

RELATED: Investors are delusional when it comes to Canadian marijuana companies . To understand, gird yourself for a brief accounting lesson. The problem, according to the Rosens, starts with International Financial Reporting Standards (IFRS).

READ: Ottawa’s dangerous hustle to legalize weed

Meanwhile at implementation this will likely mean only the largest producers will be entering into contract with the provincial authorities. The notion of boutique suppliers of cannabis will have to wait, just like craft beer producers waited in alcohol sales. Establishing reliable supply lines will dominate initially any gourmet pot considerations.

Will provinces favour producers in their own backyards? Of course they will. Just as Ontario has favoured its own wine industry and shelves mostly their products for the domestic lines in their stores, so will it be true for provincial distributors. For instance, if you are a cannabis producer hoping to sell in Canada’s biggest markets, you will likely need a physical grow-op in Ontario or Quebec. This means regional producers will face additional barriers to growth. At present only the government of New Brunswick has announced a commitment to Organigram, a Moncton-based producer, to buy five million grams a year. The company, which has seen its shares soar 31 per cent in value so far this year, estimates that deal will translate into a retail value of $40 million to $60 million. (At present, Organigram’s market value stands at $630 million.) Other provinces will soon follow suit I believe and strike distribution arrangements for local provincial growers.

'She had the munchies': Pot dog treat spooks pet owner

  'She had the munchies': Pot dog treat spooks pet owner Vets remain divided on the use of cannabis dog treats, but many pet owners stand by them. She woke up one morning to find her elderly pooch Stella — a 13-year-old pug with spinal issues — couldn't stand up.

RELATED: Investors are delusional when it comes to Canadian marijuana companies . To understand, gird yourself for a brief accounting lesson. The problem, according to the Rosens, starts with International Financial Reporting Standards (IFRS).

If all goes as planned, then Canadian marijuana producers will be in an all-out race to supply So it ’s no secret that pesticides are one of the biggest issues when it comes to growing marijuana . Aurora Cannabis: The Strategic Investor . When Aurora, the second-largest marijuana company in the

As in many stock market interactions, the industry tells a rosy story of growth and opportunity. But I would suggest a careful recall of the dot com bubble offers a somber warning. Canopy Growth Corp. is currently valued at just over $7.5 billion yet loses about 12 cents a share. At the same time, Canadian Tire Corp. has a valuation of $11.5 billion and earns $10 a share—and pays a dividend yield of 2.14 per cent.  What company offers a better long-term investment?

MORE ABOUT MARIJUANA:

  • The problem with cities asking for a share of the marijuana tax
  • Justin Trudeau on trade, pot and Die Hard’s status as a Christmas movie
  • Ottawa’s pot penthouse in the sky
  • How should Canadian employers prepare for legal marijuana?
  • Should the NHL change its approach to marijuana after legalization?
  • Ottawa proposes marijuana tax: $1 per gram – plus GST
  • Why liquor and weed are a perfect (financial) mix
  • Ranking Canadian Universities by Marijuana Use of Students

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