Yesterday we sent our subscribers our long-awaited piece about the ‘big boy weed play’ that, we think, is going to do some serious Godzilla stomping around that sector soon. We’ll be posting that for regular readers shortly, but I wanted to touch briefly on a situation that is confusing many.
Last week, I sold my stake in THC BioMed (THC.C) , partly because I thought they were nearing peak Greater Fool – the point whereby folks that are overvaluing a company far more than you, start to realize the error of their ways. I also didn’t like that they’re doing business with Affinor Growers (AFI.C), which I have long harpooned with regularity.
Yesterday, I spent much of my day writing a story about THC and AFI (mostly AFI), and how I thought they’d be the first ones to tumble downwards when the weed rise ebbed. It was pretty harsh, as I tend to be with folks who over-promise and under-deliver, but something tugged at me to stop writing halfway through and let it go.
It’s not that I’m worried about negative reactions at all – anyone who has read my work knows I embrace threats and recriminations with bear hugs. It’s that, despite those two companies leading that day in percentage rises in the weed sector (and they did, with huge gains), I could sense something was skewiff. That maybe the story would be radically different really soon.
To recap, THC had reportedly got news Health Canada would let it sell as well as grow, according to Twitter discussion last Friday. That’s good, but probably wired into the share price already. So I sold.
Then others noted that maybe Health Canada hadn’t done that at all. Then others said, nope, they had. Then the weekend came.
Quickly thereafter, AFI muckymuck Nick ‘Bruiser’ Brusatore got on Twitter and bragged that AFI had ‘set a delivery date’ for vertical grow equipment purchased by THC.
I doubt that. I think that date was already set, but Brusatore wanted an excuse to remind people his crew were connected to THC. He does that kind of thing a lot – LOIs fly about, promises are made, scans of letters from small town mayors are tweeted, grand claims of ‘game over’ for everyone else are common. It’s kind of Trumpian. “We’re gonna grow strawberries and they’ll be yuge! Great strawberries, you won’t believe these strawberries. Nobody grows strawberries like us.”
Regardless, both THC and AFI lifted hard on Monday. Harder than they should have. But I didn’t feel like I’d missed out because, spider senses tingling.
Today both companies led the few stock price drops seen in the marijuana sector. In fact, most companies are rocketing, but these two are going down hard.
Because nobody knows what the fuck is happening with THC BioMed’s sales license, is why. Here’s their news from today, that the license has been ‘amended,’ and if it clarifies anything for you, you’re a star.
[THC is] pleased to report that it has had its license amended by Health Canada and will begin to initiate its business plan by inter-trading between licensed producers to strengthen its products and service.
THC is currently working on good production practices surrounding the supply of starting material to registered patients, once regulatory requirements have been met and our E-Commerce Platform has been initiated.
THC intends to offer its 29 strains of dried Marihuana as well as Cannabis oil and Cannabis Resin, to patients registered under the ACMPR.
Management continues to work diligently to increase shareholder value while practicing fiscal discipline.
Okay, I don’t know precisely what this is, but it doesn’t appear to be a sales license in the sense that investors are waiting for, and the company appears to be saying it doesn’t strive for that anyway, saying their business plan is to inter-trade with others who will get the actual retail consumer price markup while THC BioMed, at best, does some wholesale business and works with the occasional home grower.
THC’s vision is to be on the leading edge of scientific research, development of products and services related to the medical cannabis industry while creating a standard of excellence. As the industry develops, it will become more important to focus on scientific research and development of products and services related to medical cannabis. Management believes THC is well-positioned to be in the forefront of this rapidly growing industry.
Small grow, no outward patients, I just don’t know that there’s anything here that warrants the existing share price, at all. And the release, if I’m being cynical, appears to be saying “nope, we didn’t get what y’all expected us to get, but we’re cool with that so chill.”
Look, selling to other LPs is a fine business, but it’s a lesser business than growing your own and selling to customers that will come back every month. It’s wholesale. It’s making plastic dolls for sale at dollar stores. It’s the guy who makes the plastic ends on your shoelaces, instead of making the shoelaces, or the shoes, or owning the shoe stores themselves.
And that vertical grow tech? It’s only useful for early early stage plants. Vertical grow is for leafy greens. As soon as you start getting tall plants, vertical is no help.
So it’s rapidly becoming clear that THC is looking to run a clone business (hence their recent acquisition of a clone shipper with clone shipping tech), which, frankly, does not a $100 million company make.
Like the Blue Jays hitters this past week, I’m outta there.
— Chris Parry