Long time readers may have been asking themselves why, having established myself as a go-to guy in marijuana investing in Canada, I haven’t been wall-to-walling this site with cannabis articles this year?
Few reasons. First, there’s been better returns in some other sectors – lithium and gold as examples. Second, marijuana is still a mess in North America. Nobody can make an accurate guess which MMPR will be next to be approved, nobody can point to an existing MMPR and say ‘that guy is doing it right’, the market is still small, especially for 30+ growers to be sharing in, and recreational, while likely on the way, might still be a mess by the time the bureaucrats have finished ‘committeeing’ it to pieces.
Dispensaries? Drug stores? Liquor stores? Everyone sells to the government? Will they be allowed to market themselves? Will the MMAR be restored in some way? Will there be restrictions on the amount allowed? Will insurance offer coverage for it?
And will the MMPR program even continue to exist?
I can’t tell anyone that a company is a good bet when their industry looks like that. I mean, just look at Vodis Pharma (VP.C), which has been crucified in the market while engaged in the US in a leaseback scheme with a Washington State licensee. Or Golden Leaf Holdings (GLH.C), which, admittedly its own worst enemy for some time, had to actively inform the well-meaning Oregon government that it had accidentally made the industry illegal again, right at the worst financial time for the company. Lifestyle Delivery Systems (LDS.C) has been no stranger in these pages, with its plans to license out its cannabis breath strip technology, followed by 100 broken promises and what looks like a good old fashioned pumpy-dumpy routine.
Then there was Medijean, the Richmond BC-based MMPR applicant that spent millions building a pretty lab and buying nice white lab coats for its staff so they could walk around looking busy for touring press, even though they weren’t licensed, weren’t allowed to produce anything and, oh yeah, the boss was denied security clearance when he allegedly got ‘tired and emotional’ with the missus.
In fact, I was an early investor in an MMPR applicant that I was sure would be right up the front when they handed out licenses, and I now suspect has been quietly selling out the back door to keep the lights on.
The industry is a mess and that’s seen me move my money and attention elsewhere. I’m sure some are still doing well with it – I still have a piece of GLH, and some play money on Aphria (APH.V) – but I just got tired of dealing with 3am emails from CEOs and megalomaniacs and lifestyle businesses and broken promises.
What I’ve been looking for, in the meantime, was a sign.
A sign that the industry had left the hype spike/reality crush/slow recovery phases behind and was now engaged with big business. That there was enough ‘oomph’ there for someone to come in and finally roll it up, do it right, and build national brands and revenue in ways that, frankly, Health Canada doesn’t allow yet.
It would have to be US-based to work. It would have to show real business being done. No weed drinks and vape pens. No ‘we’re gonna sell a bunch of these to dispensaries’ promises. No ‘one-SKU’ shells and miners-cum-growers.
Give me something real. Give me an actual business that will thrive, with high upside and negligible down. Diversity. Depth. Something that will survive due diligence.
The company has asked me not to write about them because they’re accruing assets and finalizing deals and don’t want valuations to start jumping, but you’re going to want to know so I’m giving them a few days while I write this thing up DEEP.
You can’t invest in it yet, but you will soon. This is the moment that the business grows up. Watch this space, as you’ll see it here before you see it anywhere.
— Chris Parry