There is a big new for all cannabis stock investors. A year ago, Canada lifted the ban on recreational marijuana cannabis and gave a green signal to the sale of marijuana meant for an adult. Today, just exactly after one year, the country is all set for the next phase of the marijuana legalization process popularly known as ‘legalization 2.0.’
It will lead to the legalization of various marijuana derivates that may include cannabis-filled beverages, edibles, vape pens, etc and sale will commence from the middle of December 2019. The move will help in boosting the prices of shares. Earlier last year the prices of shared in Horizons Marijuana Life Sciences Index ETF witnessed a decline as companies’ revenue could not meet the expectations. The cannabis producers, analysts, and investors squarely blamed the Canadian regulations which led to sluggish growth in the opening of new retail outlets, poor sales, and higher costs.
Leading Investment bank and advisory firm Seaport Global has estimated that Canada may require approximately 1055 stores to achieve the true potential of the cannabis market.
Presently, a mere half of that figure exists, with approximately 300 of such stores based in Alberta where regulations are not that stringent as in other parts of the country. It is noteworthy that the highly populated provinces like Ontario and Quebec have trailed behind.
The poor rate at which the stores are being opened may cause the real issue for Canadian based licensed producers as they have expanded at a fast pace with cultivation and production facilities, said Seaport Global analyst Brett Hundley. They do not know where to go now, he added.
The poor result from the cannabis producer is likely to continue with more chances of worsening, Hundley warned.
To make matters worse, the biggest Canadian based cannabis companies that may include Aurora Cannabis and Canopy Growth reported huge losses in the latest quarter and may not generate profits shortly. They have blamed the current state of affairs to the lack of stores. Presently, there is a requirement for more stores so that the companies can sell their wares.
According to fresh regulations of the new marijuana products market now, each package will only include 10 milligrams of THC also known as the psychoactive compound in cannabis. The regulations for new marijuana products will only increase the woes of companies. The move may likely to increase the cost of the companies, said Ryan Greer, co-chairman of Canadian Chamber of Commerce’s National Cannabis Working Group.
As of now, each province will have to bear the responsibility for its own retail rules and taxes. However, the approach to regulate the industry is likely to increase the costs and cause distortions in the market, added Greer.
One such distortion has already been witnessed in prices as consumers have to shell out high prices for obtaining legal weed, pointed the industry experts.
Aurora Chief Corporate Officer Cam Battley said,
“Too high a level of taxation at the inception of a legal consumer system can be a disincentive for consumers to make that move from the black market to legal market.”