These Shareholders Must All Be Stoned…



Posted by Ed 41 days ago

I have watched the publicly traded Canadian cannabis sector in stunned awe for the past few years. I really cannot think of a worse place to be invested. You have the basic economics of growing celery, with all the government regulation of an HMO, complete with the regulatory risk of manufacturing pharmaceuticals, with a two-tier system of legal and illegal producers—where legal prices are dramatically more expensive, with hundreds of entrants, funded with billions in equity capital who don’t care about near-term economics, all locked in a vicious price war, focused on gaining marketing share. If it sounds like an insane place to invest—that’s because it is—particularly as demand is stagnating. You’d have to be stoned out of your mind, to want to own any of these companies.


I’m willing to admit that early entrants made fortunes as they navigated Byzantine legal structures and capitalized on the initial gold rush phase. However, the boom is rapidly collapsing. Let’s face it, cannabis is a commodity product, it is priced based on supply and demand. With a lag, you can build endless production facilities and produce unlimited quantities of cannabis. It’s called “weed” for a reason. When this happens, what do you think happens to pricing?

This is why, despite billions in subsidies, there aren’t many rich farmers. Agriculture is a terrible business.


Ed 41 days ago

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