Amidst news and rumors that Coca-Cola was looking to penetrate the cannabis industry, the CEO of the soft-drink giants, James Quincey, has come out to say they are not interested in concocting a Coca-Cola cannabis drink.
As companies and celebrities from Mike Tyson to Richard Branson show a willingness to promote the fledgling cannabis industry, Coca-Cola is now distancing themselves from entering the pot affray.
Coca-Cola Cannabis Infused Drink?
Over the past two months, the news was circulating that the soft-drink company was interested in developing a Coca-Cola Cannabis CBD beverage infused with the medical aspects of cannabis that would be used to treat a number of conditions.
Coca-Cola CEO James Quincey has now poured scorn on the idea and has said that the evidence on consumable cannabis is still sketchy.
That’s quite amusing considering how many chemicals are in your pre-existing drink that you happily sell to people of all ages, especially kids. Sounds like someone needs a slap with the contradiction stick! Cannabis infused drink or chemical soup? I know which one I prefer.
Coca-Cola Firmly Sidelines Cannabis Drink
As Canada and many parts of the USA are now accepting the herb with open arms, and minds, Coca-Cola is heading in the opposite direction. Although a Coca-Cola cannabis drink sounds delicious, CEO Quincey gave his opinion when talking to CNBC’s Jim Cramer:
“I have a very simple way of thinking about ingredients, including CBD: is it legal, is it safe and is it consumable? It’s not legal in the United States and it’s not even legal for beverages in Canada yet. The science is out [on safety].”
Aspartame is fine though of course! Thank god Quincey is here to safeguard human beings! Because everyone knows that his main concern is people becoming health conscious, right? If so, Coca-Cola would’ve already gone bankrupt.
He went on further to say that consumers want are looking for trust. He also went onto to say in the same discussion that:
“We want to sell drinks that people can drink each day, so it’s not like something you have once, you have to be able to have [for example] one a day.”
So, is he concerned with people’s health or creating a product that will consistently sell? We already know the answer to that one. What a hypocrite.
I don’t think herb consumers will be concerned that a Coca-Cola cannabis drink is not being produced as they smoke on their phat blunts. Maybe it’s a decision Coca-Cola will come to regret.
Drink companies and other investors have begun making moves to profit from the cannabis industry through a series of M&A deals. In Canada, the recent legislation of use of recreational cannabis use has given a boost to the adoption of the industry in North America, as well as the US midterms which saw Attorney General Jeff Sessions (opposed to legalization of cannabis) step down.
In the United States, medical marijuana is currently legal in 30 states. Only nine states and Washington have legalized recreational marijuana for users above the age of 21 years.
Canada and America are very important for the growth of the industry as both countries currently contribute 90% of the global revenues. To take advantage of the sector, American companies have enlisted a little-known strategy known as ‘reverse merger’ to grow their operations.
Source: Shutterstock
Canadian Funds
Reverse Mergers, also known as Reverse Takeovers (RTO), are a speedy way of becoming a publicly traded company and have been on the increase due to the frenzy around the sector. They are used by private firms who acquire a publicly traded company (or a shell company), thereby becoming publicly traded without going through an Initial Public Offering (IPO).
For American firms, Canada remains a popular destination for raising capital, for an industry that is still federally illegal in the US. These firms going through this route can skip the troubles they would have faced if they had sought the traditional IPO route.
These include registration and vetting process from the Canadian Securities Administrators (Canada’s version of the SEC) and investment bankers, who will drill into the finances and barge the company with a ton of questions.
2018 has witnessed over 200 M&A deals in the cannabis sector, according to data from cannabis-focused analytical firm Virdian Capital Advisors. California based cannabis dispensary provider MedMen, whose high-end dispensaries have been compared to Apple stores, went public in May after purchasing Ladera Ventures—a Vancouver based oil and gas shell company, through an RTO.
The company also acquired PharmaCann in a $682 million stock transaction, doubling its market share overnight. MedMen’s competitor iAnthus has also been busy making deals, picking up Canadian diversified cannabis firm MPX Bioceutical in a major $640 million deal.
Entrant of Breweries
For an industry whose market cap was a little over $5 billion market in 2015, with an estimated projection expected to hit a conservative $20 billion by 2020, the market for the emerging cannabis sector can only get better.
The industry could witness an explosion when beverage companies make their long-expected entrance and replace part of their alcoholic content with cannabis. Last year, Constellation Brands, the makers of Corona beer, got into the action with a minority stake in Canadian marijuana producer Canopy Growth Corp.
Winnipeg brewery Fort Garry Brewing Co also joined forces with medical cannabis provider Delta 9 Cannabis to launch the “Legal Lager,” a beer filled with hemp seed.
According to the company’s press release at the time, the Legal Lager, which was released as “an ongoing research and development project to jointly produce a cannabis beer” that contains Tetrahydrocannabinol (THC), doesn’t contain:
“cannabis or any other psychoactive agent produced from the cannabis plant.”
The US mid-terms weren’t only good news for the Democrats. Pot stocks rallied higher after Jeff Sessions was forced to step down. After the resignation of the US Attorney General opposed to federal regulation of cannabis was announced, pot stocks leaped to even higher heights. Trading on Wednesday on the speculation that the next Attorney General to hold office may have a more favorable outlook on marijuana legalization.
Pot Stocks Rallied Higher
Pot stocks were so high a few weeks ago there was hardly an analyst alive who didn’t predict their downfall. Yet, throw in the latest developments and it goes to show that stock markets are heavily affected by external geopolitical forces.
Pot stocks were already trading high on Wednesday after Michigan announced that it would become the 10th state to legalize recreational marijuana.
But the Sessions’ step down is what really holds the key to legalization at a federal level, potentially opening up a gigantic market for marijuana producers. Shares in Tilray went up by a massive 30.4% to trade at $139.60 yesterday.
TLRY YahooFinanceChart
The Naysayers May Be Proven Wrong
So, pot stocks are high again, but does this mean the naysayers are proven wrong by their theories that the big bubble is waiting to burst? Not likely. Considering the lack of infrastructure, experience, the fact that most suppliers miscalculated demand in Canada at first, and also that the biggest thing behind pot stocks is still speculation.
If Sessions’ replacement has a different outlook on the fate of marijuana from his predecessor, that’s good news for pot stocks.
But let’s remember that they’re already trading at exuberant heights. They’re also incredibly volatile, with many companies, including Tilray seeing a drop by over 50% in just five days during September.
Canopy Growth and Aurora Cannabis also gained by 7.1% and 8.4% on the Toronto stock exchange on Wednesday.
A lot of people are getting high once again on pot stocks, but don’t let FOMO rob you of all your savings when the hype dies down.
Greek billionaire heir Alki David is one of the world’s most influential men. Having carved a niche for himself in manufacturing, property, and shipping, as well as bottling plants, the Nigerian-born mogul is now planning to start a retail business in cannabis.
The project began last year when he registered a new business for the sale of oil extracted from cannabis plants. David, who was inspired by the medicinal properties of cannabis, has finalized plans on opening a shop on Edinburgh’s Princes Street before the end of the first quarter of 2019.
The psychoactive drug (medical marijuana) is being used to treat a wide range of conditions, and this is the selling point the billionaire wants to exploit.
While airing his views on the immense advantages from the use of cannabis, the entrepreneur underscored its amazing benefits in proffering solutions to a wide range of health conditions. In an interview he said:
“Plant medicine is revolutionary. It has improved so many lives to the point of miracles happening. It’s helped my mother, and my friend has even been cured of multiple sclerosis (MS) through regular use of strong cannabis oils. There are heaps of arthritis cases too.”
Alki David Owns Swissx CBD Boutique
David owns a Swissx CBD (cannabidiol) boutique and Vegan café in Los Angeles and is ready to use it to attain an operational standard for the shop he’s about to set up in Scotland.
Alexander, his second son, is a student at the University of Edinburgh and this might be one of the motivations behind his choice of Scotland. He said:
“Scotland is very strategically placed. We have a model that we set up in the US, and that’s what we’re going to start emulating in Edinburgh.”
Cannabis Is Gaining Momentum
While legal restrictions in many countries have hindered the use of cannabis, its endorsement by physicians has reduced the restrictions being placed on its usage in other countries.
In Europe, countries like Germany, Belgium, and the Netherlands allow the use of cannabis based on the recommendation of physicians.
Some countries like the US also sanction the recommended use of cannabis. Canada went a step further last month by legalizing the recreational use of cannabis. Time will tell if Scotland will follow suit.
Canadian cannabis stores in Alberta and other parts of the nation have run out of legal cannabis just four days after legalization came into effect. Annual sales for the cannabis industry in Canada are expected to reach $6.5 billion… but that won’t happen if stores are already ‘smoked out’ just a few days in.
After the first day of cannabis legalization in Canada, Vice reported that pot stores across Canada’s Northwest Territories, Newfoundland, Quebec, and Saskatchewan were already struggling to keep up with the demand. It appears that when Canadians voted with their lungs to legalese weed, they were deadly serious.
Running out of Legal Cannabis
One of the ongoing issues that the cannabis industry faces is the amount of legally compliant growers is now not enough to feed the rabid demand for marijuana in Canada.
Although cannabis legalization sounds great, there are only a handful of licensed growers and websites in Canada to stock the licensed stores. Stores can’t just buy weed from local unlicensed home-growers or black market green-thumbs.
The owner of Waldo’s 420 licensed cannabis store in Alberta Patrick Wallace summed up the sentiments that Canadian cannabis stores are currently experiencing by telling CBC that:
“It’s a mess. The supply is just a mess.”
Vast Gulf in Supply and Demand
Reports were surfacing after only one day of legalization that cannabis stores across the nation were already struggling to meet the high demand for legal cannabis.
One company out of Winnipeg told Vice that they sold out on the first morning, selling more than $50,000 worth of products. Other news articles reported how Alberta ran dry of Cannabis oil on the first day, although some products were still available across Nova Scotia.
Smaller unlicensed growers across Canada were initially concerned that legalization would affect their underground grow-ops as stores could only buy products from licensed growers of ‘legal’ weed. However, eager consumers might now look to the streets to solve the problem, which is the exact opposite of what the legalization was supposed to achieve in the first place.
It seems that authorities were completely taken off guard by the supply and demand for legal cannabis in Canada. Maybe they were hitting the pipe too hard and thought it seemed like a good idea at the time. Let’s be honest, we’ve all been there!
As of midnight last night in Newfoundland (Canada’s most eastern province) recreational marijuana become legal. At the time of writing, marijuana in Canada is now legal across all provinces. “I feel great,” said Ian Power, one of the first people to purchase the drug over the counter. Is that great about making history, or great because he’d already taken a few tokes?
Recreational Marijuana in Canada Ends “Prohibition”
An active cannabis advocate for most of his life, Power went on to say, “the prohibition has ended right now,” and “the stigma ends tonight.” As of 12.01 a.m this Wednesday morning, adults in Canda are legally allowed to purchase, carry, and even share up to 30 grams of legal marijuana in public, the amount deemed suitable for recreation use. That is, enough to get high on but not enough to start your own drug cartel.
Cheers from the jubilant public about Canada making history showed how high emotions were at the scene. They also weren’t exactly accurate since Canada is not the first country to legalize recreational marijuana. In fact, their South American neighbors Uruguay legalized the production, sale, and consumption of the plant back in 2013. Although, Canada is the first G7 nation to do so.
Canadians will also be allowed to home-grow up to four plants, as well as make edible products for personal use–bring on the hash brownies! Interestingly, consumers of recreational marijuana will need to be 18 years old or more, compared to alcohol which is still illegal before 19 years of age in some provinces.
Marijuana in Canada will not be sold in the same places as cigarettes or beer. Consumers will have to go to designated sellers that are regulated and licensed.
What’s in Store for Pot Stocks Now?
Ever since the Senate passed the bill in June of this year, investors have been clamoring to join in the green rush, throwing money at cannabis producers such as Tilray (NASDAQ:TLRY) and Canopy Growth (NYSE:CGC).
Tilray Stock yesterday
Tilray Stock 5 days
One might have thought that stock would rally upon the legalization taking effect. However, there has already been a decent amount of hype surrounding pot stocks over recent months and Tilray actually saw its stock drop slightly yesterday compared to last week. Although, it’s definitely worth keeping an eye on it as Wednesday unfolds.
It seems that pot stocks have become so inflated it’s inevitable the bubble will burst once the actual demand is established. Many analysts predict that demand will outstrip supply in the beginning, forcing “sold out” signs to go up in many points of sale. This would serve to confirm investors’ belief of massive demand and hence, massive opportunity for cannabis producers.
However, this situation is unlikely to hold. According to Motley Fool, as supply eventually catches up with and outstrips demand, pot stocks will crash down from the epic high they’ve been on.
Canopy Growth is one of the largest cannabis-focused companies that can be bought on a stock exchange. Pot stocks are hot with investors, but there’s every reason to be careful in a sector that’s still illegal in most countries. Canopy Growth spun off Canopy Rivers last month, but it’s been a bumpy ride.
Canopy Rivers is focused on cannabis Venture Capital (VC) investment, and their market cap initially jumped to nearly C$2 billion. The stock’s value has halved over the last couple of weeks, which should help investors realize how risky the cannabis sector can be.
Canopy Rivers stock is up and down
There’s no shortage of cannabis companies more than happy to sell their THC-encrusted dreams. But making money selling legal dope is much harder. Despite the fact that many US states have legalized weed, the federal government is still not on board. This leaves companies like Canopy Growth and Tilray in a sticky spot when it comes to expanding into the USA.
Ok, How Do You Make Money Again?
Most drug dealers talk an amazing game. Their stuff is the best you’ve ever had, and after a few tokes, you’ll be talking to unicorns. Well, the legal cannabis space seems to be shaping up to be a lot more of the same. Tilray is currently trading at around $125 USD/share, which values the company at more than $12 billion USD.
For $12 billion USD investors will get a company that lost $.17 per share last quarter and has to contend with federal regulations in the US that are firmly opposed to their business model. The hopes that a publicly traded pot company will somehow take advantage of relaxed cannabis laws at a state level seem like a pipe dream.
US-based cannabis companies can’t even use the banking system, as they’re operating in violation of federal drug laws.
Canada is a more promising destination for cannabis development. Tilray has substantial Canadian operations, though that may not make as much money as investors hope.
The sale of medicinal cannabis in Canada is strictly regulated. It is unlikely that Canadian sales will match a state like California or Colorado, where cannabis is basically legal.
Too Early for Green Shoots
When Tilray went public, they were expecting to get around $15USD/share for their equity. The fact that a company that loses money in a field that was totally illegal a decade ago saw their shares rise to nearly $300USD (or a market cap of more than $20 billion USD), is a warning sign for the entire cannabis sector.
If cannabis becomes legal at a federal level in the US, the market will be enormous. But that hasn’t happened yet, and these high flying pot stocks won’t make much of a profit.
There’s nothing wrong with buying a little bit of best-in-breed issues like Canopy Growth, Tilray or Aurora Cannabis–as long as you understand they may drop to the ground before the legal cannabis industry takes off.
Canopy Rivers’ swoon over the last few weeks is a vivid demonstration of the volatility that pot investors assume in their portfolio, and there may be a lot more to come.
In case you haven’t noticed, there are plenty of people making money trading pot stocks right now. Getting high on marijuana? Yes. In some cases, positively flying. Just look at the Tilray (TLRY) cannabis company, whose shares increased by over 1,160% since its IPO to reach a market cap bigger than Twitter.
So what’s the deal with this quasi-legal industry that brings back memories of sitting in the principal’s office after school? Is it possible that the mother of all come-downs is about to catch up with pot stocks? If Bitcoin is a bubble, pot stocks are going up in smoke. Here’s why.
Cannabis Is Getting Legal
Cannabis is being increasingly legalized across North America. In fact, Canada is on the brink of becoming the first industrialized country ever to legalize recreational marijuana. Instead of a clandestine handshake in the back of a nightclub, you’ll actually be able to buy weed straight over the counter. Although, where’s the fun in that?
In the US, though, there are still some mixed feelings towards the drug. But since lawmakers started opening up to the idea of medicinal cannabis and even recreational pot, talk of marijuana IPOs and pot stocks has been gripping the wider public.
Currently, there are 10 states, including Washington, D.C., that have legalized recreational marijuana, with 29 more legalizing medicinal cannabis. The industry that used to be brandished as criminal is now a seething hotbed of M&As, deals, and IPOs. And investments this year have already surpassed the $5 billion mark.
Beyond Tilray’s mindbending IPO, Aurora Cannabis (TSE: ACB) pulled off the largest marijuana acquisition in history with a $2.5 billion buyout of Ontario’s MedReleaf. And the North American Marijuana Index that measures the largest cannabis industry players has almost tripled in value, up some 650% since February 2016.
No way dude. Cannabis is finally having its moment in the spotlight. But it’s a classic case of smoke and mirrors.
Hype, Hype, and More Hype
As Canada prepares to reshape the cannabis industry forever, marijuana companies of all stripes are finding their way to the mainstream. The marketing term they weren’t allowed to use is now the buzzword du jour.
From recreational-style products to life sciences, medical, and even hemp clothing and beauty products, with less than 10 days to go, the hype is reaching fever pitch.
There’s a decent amount of FOMO in pot stocks right now. So it’s a great idea to invest if you love buying at an all-time high and watching your stock promptly dwindle. Sound good? Check out the hottest pot stocks right now if you’re looking to win (then lose) a fortune.
Tilray Stock Freefalling
1. Canopy Growth (NYSE: CGC)
Already one of Canada’s major medical cannabis producers, Canopy Growth is well-placed to ride the transition to recreational users as well. Thanks to a vast production capacity, millions of square feet of space to grow on, and even some facilities outside of the country, this is set to be one of the largest producers around.
The company has also been busy establishing its distribution network. With supply agreements all over the country, Canopy now has legal POS for all their crop. Even better than that? In an attempt to straddle the mainstream further, they’ll be launching cannabis-infused beverages with partner Constellation Brands soon. Of course, regulation of these won’t be finalized until 2019, but you have to love the idea of getting high drinking a soda.
2. Aphria (TSE: APH)
Alongside Canopy, Aphria’s production capacity is not to be sniffed at either. In fact, they’re looking at producing some 225,000 kilos a year by 2019, overshadowing Tilray and becoming the third largest grower in terms of capacity. They’ve also been astute when it comes to networking, having lined up agreements across Canada’s provinces.
The company further signed a deal with Emblem Cannabis to supply 175,000 kilograms of cannabis over a five-year period beginning in 2019. Oh, and Coca-Cola is reportedly looking for a cannabis partner to make marijuana beverages as well.
Whether Aphria will sign the line with the FMCG giant or not is TBD. But there are plenty of beverage companies in the works that would allow Aphria to further deepen their foothold in the recreational space. And the speculation does wonders for their stock.
3. Aurora Cannabis (TSE: ACB)
Making history through its Medreleaf M&A, Aurora Cannabis has been acquiring cannabis producers left, right, and center. This means it has some pretty deep roots in this burgeoning industry that leave it well-positioned to be one of its biggest players.
With a current capacity of 150,000 kilograms by the end of this year, we should soon see this leap to around half a million kilos thanks to all this company’s buyouts.
There are also plans in the works to list their stock outside of Canada on a major U.S. stock exchange, giving the company greater exposure to US investors. Who may or may not be interested after the pot stocks go puff.
Invest in Pot Stocks?
There are plenty of reasons to invest in pot stocks right now. Firstly, because everyone else is doing it. Secondly, because, if you like taking baths, the mother of bubbles is about to burst. And finally, because no one is really sure how high demand for the legalized product will be. It could be explosive leading to shortages in supply(!!). Or, we might just find that people were pretty happy with their neighborhood provider after all.
Analysis from ArcView Market Research and BDS Analytics estimates that the Canadian recreational marijuana market will reach around $2.1 billion next year, with around another $600 million for medical cannabis. These are some bullish projections, to say the least, indicating that share prices could indeed continue to rise. Or, on second thoughts, probably contributing to their high prices currently.
Over-hype, escalating FOMO, and unconfirmed levels of demand… Remember the Bitcoin “bubble“? Pot stocks are headed for a similar fate, get on board now if you don’t want to miss out.
