Welcome to the Deep Dive Video Essay series. Today we are looking at US Cannabis.
Okay, so with the Senate recently flipped blue, Biden and the Democrats now have control over the Presidency, Senate and House. Investors who follow cannabis stocks are now expecting the US to head towards some form of either descheduling or legalization.
Call it recency bias, but we believe the path is opening up for a new cannabis bubble. Except this time in the US, with major exchanges, access to apps like Robinhood and institutional capital pouring in that will make the Canadian pot stock bubble of 2018 look tiny.
Cannabis stocks have been around for years. Some are already even listed on the NYSE and NASDAQ, such as Canopy Growth, Aphria and Tilray – but the big difference is – the presence of US operations. For the most part, US operating companies haven’t been able to access the big American exchanges, because their business model involves producing and selling cannabis which is still a schedule 1 drug. Thus they haven’t been able to access popular retail trading platforms like Robinhood; which should in theory drive stock prices upwards.
The common blanket statement you hear about cannabis companies in general is the idea that they aren’t making money. Which is somewhat true, the Canadian operators are still not making money and are still in the process of rightsizing their operations. Conversely, many of the U.S operators are generating positive EBITDA and operating cash flow.
You may ask yourself “what’s the difference between Canada and the US?”
1. It’s a much larger population.
2. There are limited licenses in large states like New York and Florida
3. US Operators can brand, market, and own every part of the process from seed to sale. Meaning they can grow their own product, process it, package it, and sell it in their own stores.
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