This Week in Cannabis Investing September 27th

This Week in Cannabis Investing September 27th

There was lots to talk about (and lots to write about) this week in the cannabis industry. What will top the list for most people was the U.S. House of Representatives voting to pass the SAFE banking bill, to open up banking services for the legal cannabis industry. But there was plenty more.

As the health problem surrounding tainted/defective vape pens has unfolded, more information has surfaced. We now have info on how and why contaminants and dangerous substances have made their way into (mostly) U.S. black market products. And there were other significant developments this week.

Monday, with cannabis valuations at low tide, we thought it was good time to ask a question: is iAnthus the best value among MSO’s? We tracked what iAnthus Capital Holdings (CAN:IAN / US:ITHUF) has accomplished over the past year, even as its stock has moved in the opposite direction.

We then took a look at a socioeconomic issue: racism and cannabis in the United States. More and more state governments are openly acknowledging that there was a significant “racial component” in the enforcement of cannabis Prohibition laws.

Calls for “racial justice” are emerging with respect to the legal cannabis industry. We examined the “solutions” being proposed and asked the question: is this not just cannabis racism in a different form?

Tuesday, The Seed Investor looked at another prevalent medical condition for which medicinal cannabis is a potent therapy: Post-Traumatic Stress Disorder (PTSD). There are more than ½ a million PTSD sufferers in the United States today, the vast majority being military veterans. But obtaining medicinal cannabis for their condition can present assorted hurdles.

We then covered some interesting news. Several former JPMorgan (US:JPM) and Deutsche Bank (US:DBK) investment bankers are raising US$2 billion for lending and direct investment in the cannabis sector. This is interesting from a few different angles. But since we plan on saying more about this early next week, we will reserve further comment for now.

Wednesday, we noted an encouraging development for the Canadian cannabis industry. Canada’s Chamber of Commerce is taking a more active/vocal role in promoting the cannabis industry, via its National Cannabis Working Group.

This will be welcome news to both Canadian cannabis companies and their shareholders. The CCC has already identified several areas where it is pushing government for positive changes.

The Seed Investor then looked at a new study on cannabis legalization, originally reported by Marijuana Moment. Looking at Washington State data, researchers have seen a correlation between “higher intensity” cannabis regulation (i.e. stricter regulations) and increased black market activity.

The study supports what many states seem to be proving on their own: over-regulation of the legal cannabis industry allows the cannabis black market to flourish.

Thursday, we covered the momentous vote in the House to pass SAFE. It’s being described as an “historic” moment for the legal cannabis industry in the United States. But we asked the question being asked by many, will this prove to be moot as SAFE heads to the Senate?

House Republicans voted against SAFE (but were outvoted by the Democrat majority). The Republicans control the Senate and Mitch McConnell has publicly stated he is against anything resembling cannabis legalization in the U.S. (except hemp). SAFE faces a tough road ahead.

Then we took an even more detailed look at the serious health issue surrounding illicit and poorly-regulated (legal) vape pens in the United States. It’s not a “crisis” or an “epidemic”, as has been labeled by the fearmongers in the mainstream media. What this is is a blatant regulatory failure in the United States, on multiple levels.

A massive black market for vape pens is flourishing in the U.S., for both tobacco and cannabis vapes. Part of this is due to the U.S. federal government failing to end cannabis Prohibition. Part of this is a state and federal failure to properly regulate legal products.

Also on Thursday, we reported yet another cannabis store-opening for Choom Holdings (CAN:CHOO / US:CHOOF), once again in the province of Alberta – where legal cannabis is booming.

Friday, The Seed Investor covered an important bulletin from the CDC and FDA on “e-cigarette use, or vaping”. What was made clear in this bulletin is that the respiratory illnesses and deaths are in no way connected to cannabis. Rather, it is defects in the manufacturing process (including the introduction of contaminants) which has been causing these illnesses. Poor regulation.

We then ended the week by providing some reassurance for cannabis investors. As more and more media voices warn of “recession risks”, we pointed out how and why marijuana stocks (and the cannabis industry itself) are inherently recession-proof. With cannabis company valuations currently in a deep trough, this is an ideal time for investors to add to their cannabis positions.

It was another down-week for cannabis stocks. But the disconnect between industry fundamentals and valuations in the sector continues to widen. With the cannabis industry still early in the first inning, and with major players continuing to flock to the industry, value investors will continue to hold these companies with enthusiasm.

DISCLOSURE: Choom Holdings is a client of The Seed Investor.
 

Published at Fri, 27 Sep 2019 21:54:56 +0000

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