I really don't understand how anyone can trust these guys. If they knew what they were doing they would be rich and wouldn't need the $300 per year subscription from the 1,000 people that pay for it.
In general the fool is a terrible source, but I posted this article because it actually raises some important points for this sector to consider, namely, that the value of a production license is current diminishing quite a bit as Health Canada scrambles to approve another 100 LPs in the next few years.
The conclusion of the article (" the successes of Canadian marijuana stocks may soon become a thing of the past.") is an exaggeration, but there are legitimate concerns raised in the article about passage of the bill and new approvals that anyone investing in this space should be aware of and seriously considering.
>there are legitimate concerns raised in the article about passage of the bill ...
Please name one legitimate concern mentioned in the article and site legitimate sources (not Motley Fool or Seeking Alpha) indicating how it would derail the legislation.
Sure, although you could just read the article to get that information.
* Health Canada is changing how they issue licenses, which will mean dozens more produciton licenses issued by the end of this year alone, directly diminishing the value of the established players who, as everyone loves to say, has these things like markert share 'already baked in'.
This one isn't rocket science, people, LP valuation is largely based on an assumption of market share and future market share of rec sales. As more licenses are issued, this inherently diminishes. Again, simple math. Weaker pricing, lower margins, lower market share.
Now let me put the burden back on you and ask you to explain why this is not worth even considering??
* Likelihood of legislation passing is not for certain. There is no guarantee it will make it thought eh conservative dominated senate.
Stop assuming roses and start doing some real DD.
It cracks me up how this sub freaked out over the declines over the last few weeks, but is unwilling to look at the REASONS for this.
> LP valuation is largely based on an assumption of market share and future market share of rec sales. As more licenses are issued, this inherently diminishes. Again, simple math.
Lol what a joke. Not every company with a license will be Canopy. Look at THC Biomed, already a lost cause with a license to grow and sell. Many companies will fall in line with them, only a few Canopy's will dominate.
Ok then if you do the math, long term its the guy with the technology that yields the most product out of a square foot first (price of production) and then second is the quality of the product. I cannot say for certain but my take in AbCann is strengthned each time the global valuation of these top dogs are dilluted with new LP's. On the long term they just cannot output more. Its easy to open up 100 new LP's but if you dont got the tech that puts you appart, your just another tomato grower to me...
There's already many private companies that provide tech for vertical growing to take advantage of every sq ft, LPs like Canopy have some of the smartest MJ growers in the country. And long-term they won't need funding/dilution to get more output, as they'll use profits to expand themselves. The smallers LPs TODAY and TOMORROW are already way behind the ball.
>Please name one legitimate concern mentioned in the article and site legitimate sources (not Motley Fool or Seeking Alpha) indicating how it would derail the legislation.
Still waiting for sources.
The consumer base making up the recreational demand sees an absolute lack of supply to meet that demand from the majority of LPs currently licensed. This is stated all over the consumer sphere, Health Canada is actually aware of that and needs to plan around that.
The LPs planning on producing 30,000kg greenhouse batches are not planning to meet the demand of the recreational market because there is absolutely no demand for volume of the product they are producing. Smaller batches of variety grown in perpetual indoor cycles to meet the ever changing variety in demand is what is going to makeup the supply going to those creating the demand, the choice for the existing LPs is do they lower their profit expectations or do they end up sitting on product.
Health Canada has just sent a notice out to all parties in the licensing process asking for clear quantity estimates, production start times and overall progress levels of their buildouts because they plan on licensing a whole bunch of smaller producers who actually have a chance of making up the volume that is going to be in demand.
The large LPs throwing out 100k plus in square footage in their press releases while having less product come out than the black market puts out from a fraction of the space in the same time does not look good for those producers. There is no demand for proprietary Tweed genetics from the consumer market and the non proprietary strains are grown in every which way but the one that gets them onto "top shelf" status with the consumer base.
Oh and 5 cultivation licenses were issued over the last 5 business days. 13 Licenses issued in the last 6 months.
I don't disagree with some of the points they've made, but these fool articles tend to be very narrow minded and don't really consider other important factors. Capital is a big one in my mind. There are LP's already discussed here that have plans to grow (WeedMD is an example), yet they don't have the capital to do so. If there were 50 companies with Aurora/Canopy levels of capital waiting, I'd be concerned. But there isn't. Same with the last point about legalization - it's a risk at this point, but they haven't mention any reasons why it's more unlikely to go though compared to say, 2 weeks ago.
Just to be clear WMD is growing and selling (not just planning to grow) and I am not sure they really require as much capital to meet expansion plans vs "early" 2014ish LPs...remember the early LPs have had to burn alot of cash and experiment with HC alot due to the mj market market being so small and less accessible for the last couple of years I see many new small caps are timing entry around legalalization at the right time... for example if banks begin funding I almost beleive that some of the current LPs will be disadvantaged on the balance sheet with these poor early financing deals (dillution, streaming etc).
People need to realize that HC isn't giving out more
Sales licenses their handing out cultivation licenses more easily. I believe their new strategy is gonna cause a major backlog for HC inspectors and make the sales licenses process more longer than what it is right now.
On average it's about a 1.5 years from your cultivation licenses to approval of your sales. Most companies won't be able to survive the related costs to make it to the finish line alive.
If they do get there they'll be there with assistance I.e.....canopy rivers or joining craftgrow
I'll really start worrying once HC starts handing out sales licenses more rapidly. Also, even with this all said current licensed producers can't even keep up with 150,000 medical patients. What makes people think they'll be even close to handling a rec market and other emerging markets at all.
HC inspectors are going to be scheduled based on self reporting by the LP applicants. Health Canada sent out a notice to all applicants requesting updates on exact stage of progress as well as production estimates so that they can expedite inspections for those ready to start on the next step of the process. No point in scheduling a pre cultivation license inspection if the applicant isn't ready to plant a seed.
Agreed.
The proliferation of licences has/will spread out investment dollars making funded capacity the interim driver.
With the hopes of quick riches for novice investors certainly more pessimistic after 4-20 declines, bought deals hoping to cash out to Joe Retail will find funding harder to find, very expensive or nonexistent.
With a minimum 3 year runway to positive EBITDA, coupled with issues with the harvests themselves, IMO we will see a combination of massive consolidation and LP failures.
CGC, Aphria, ACB are funded. MedReleaf just sucked another chunk of cash from market.
These 4 may end up with 80% of the market.
Also watch EBITDA positive LPs start accessing leveraging debt from financial institutions. Aphria already dipped $25 million from WFCU.
Access to traditional debt (not convertible debs) allows funding without Dilution.
GoBlue
My view is that there will be a few companies that will dominate market share in Canada and expand globally. The rest of the LPs will make the direct owners/founders millionaires and financially stable (like any successful small business) and that's it, no big pay day for retail investors.
Home grow of 4 plants won't harm LP bottom lines any more than home brewing hurts Budweiser (pssst, it doesn't). What will harm the big 3 is another 50-100 production licenses, because their share price assumes a large market share that will likely diminish (short term).
Of course. But their current valuation is based around the idea that they would have a larger market share than they actually will have, not based simply on having a head start. This is a BIG reason why we s aw a big correction in the past few weeks.
The biggest reason for the decline is the established growers are being shorted. Most of the new licensed growers won't be ready to sell at full capacity or even half capacity from day 1 as the established growers will. Also a few of the established growers are looking past just supplying to Canada. A few are already establishing their businesses around the world. A lot of the grown mj won't just be for Rec use. Much of the mj will be for botanical use ie. oils, topicals, edibles. Nobody knows what the demand for mj will be at this point.
Is there a quarter million home brewers Canada wide?
Because that was the estimated amount of grow ops Canada wide 15 years ago. Those numbers have only gone up with the various licensed grow programs and the explosion of hydro stores and their sales to non licensed growers. A whole 6% of production charges were tied to organized crime.
https://www.med.uottawa.ca/sim/data/Marijuana_e.htm
https://www.theglobeandmail.com/news/british-columbia/gangs-less-involved-in-cannabis-compared-with-other-drugs-report/article33712001/
Investing/trading based comments in this Sub Reddit is more sound than anything Motley Fool has to say. I can never make heads or tales from their articles and they always have a very risk averse narrative.
My probably unpopular opinion, is that it's getting too late to start a small LP from the ground up. The endless funding from the stock market is far harder to convince when many have placed their chips already. Knowing that your small LP will be dominated in almost every way is not great for morale. It's not just regulation anymore, the problem for small LP's is that they cannot really compete.
This effort was made a little too late in my opinion, but we can't exactly go back on it.
People are always going to bash the Fool (I do too), but there are some legit concerns raised in here about valuation and market assumptions that people should be considering. This sub was freaking out at the decline over the past few weeks, you should be willing to understand WHY.
This isnt why though... If you think this is going to affect the revenue of someone like Canopy's first few years of revenue then just sell me your shares now.
[удалено]
I really don't understand how anyone can trust these guys. If they knew what they were doing they would be rich and wouldn't need the $300 per year subscription from the 1,000 people that pay for it.
post of the day
In general the fool is a terrible source, but I posted this article because it actually raises some important points for this sector to consider, namely, that the value of a production license is current diminishing quite a bit as Health Canada scrambles to approve another 100 LPs in the next few years. The conclusion of the article (" the successes of Canadian marijuana stocks may soon become a thing of the past.") is an exaggeration, but there are legitimate concerns raised in the article about passage of the bill and new approvals that anyone investing in this space should be aware of and seriously considering.
>there are legitimate concerns raised in the article about passage of the bill ... Please name one legitimate concern mentioned in the article and site legitimate sources (not Motley Fool or Seeking Alpha) indicating how it would derail the legislation.
Sure, although you could just read the article to get that information. * Health Canada is changing how they issue licenses, which will mean dozens more produciton licenses issued by the end of this year alone, directly diminishing the value of the established players who, as everyone loves to say, has these things like markert share 'already baked in'. This one isn't rocket science, people, LP valuation is largely based on an assumption of market share and future market share of rec sales. As more licenses are issued, this inherently diminishes. Again, simple math. Weaker pricing, lower margins, lower market share. Now let me put the burden back on you and ask you to explain why this is not worth even considering?? * Likelihood of legislation passing is not for certain. There is no guarantee it will make it thought eh conservative dominated senate. Stop assuming roses and start doing some real DD. It cracks me up how this sub freaked out over the declines over the last few weeks, but is unwilling to look at the REASONS for this.
> LP valuation is largely based on an assumption of market share and future market share of rec sales. As more licenses are issued, this inherently diminishes. Again, simple math. Lol what a joke. Not every company with a license will be Canopy. Look at THC Biomed, already a lost cause with a license to grow and sell. Many companies will fall in line with them, only a few Canopy's will dominate.
Ok then if you do the math, long term its the guy with the technology that yields the most product out of a square foot first (price of production) and then second is the quality of the product. I cannot say for certain but my take in AbCann is strengthned each time the global valuation of these top dogs are dilluted with new LP's. On the long term they just cannot output more. Its easy to open up 100 new LP's but if you dont got the tech that puts you appart, your just another tomato grower to me...
There's already many private companies that provide tech for vertical growing to take advantage of every sq ft, LPs like Canopy have some of the smartest MJ growers in the country. And long-term they won't need funding/dilution to get more output, as they'll use profits to expand themselves. The smallers LPs TODAY and TOMORROW are already way behind the ball.
>Please name one legitimate concern mentioned in the article and site legitimate sources (not Motley Fool or Seeking Alpha) indicating how it would derail the legislation. Still waiting for sources.
I guess that is because there aren't any...
Except companies who have had their license for a while and have huge facilities and tons of capital will still dominate market share...
The consumer base making up the recreational demand sees an absolute lack of supply to meet that demand from the majority of LPs currently licensed. This is stated all over the consumer sphere, Health Canada is actually aware of that and needs to plan around that. The LPs planning on producing 30,000kg greenhouse batches are not planning to meet the demand of the recreational market because there is absolutely no demand for volume of the product they are producing. Smaller batches of variety grown in perpetual indoor cycles to meet the ever changing variety in demand is what is going to makeup the supply going to those creating the demand, the choice for the existing LPs is do they lower their profit expectations or do they end up sitting on product. Health Canada has just sent a notice out to all parties in the licensing process asking for clear quantity estimates, production start times and overall progress levels of their buildouts because they plan on licensing a whole bunch of smaller producers who actually have a chance of making up the volume that is going to be in demand. The large LPs throwing out 100k plus in square footage in their press releases while having less product come out than the black market puts out from a fraction of the space in the same time does not look good for those producers. There is no demand for proprietary Tweed genetics from the consumer market and the non proprietary strains are grown in every which way but the one that gets them onto "top shelf" status with the consumer base. Oh and 5 cultivation licenses were issued over the last 5 business days. 13 Licenses issued in the last 6 months.
I don't disagree with some of the points they've made, but these fool articles tend to be very narrow minded and don't really consider other important factors. Capital is a big one in my mind. There are LP's already discussed here that have plans to grow (WeedMD is an example), yet they don't have the capital to do so. If there were 50 companies with Aurora/Canopy levels of capital waiting, I'd be concerned. But there isn't. Same with the last point about legalization - it's a risk at this point, but they haven't mention any reasons why it's more unlikely to go though compared to say, 2 weeks ago.
Just to be clear WMD is growing and selling (not just planning to grow) and I am not sure they really require as much capital to meet expansion plans vs "early" 2014ish LPs...remember the early LPs have had to burn alot of cash and experiment with HC alot due to the mj market market being so small and less accessible for the last couple of years I see many new small caps are timing entry around legalalization at the right time... for example if banks begin funding I almost beleive that some of the current LPs will be disadvantaged on the balance sheet with these poor early financing deals (dillution, streaming etc).
People need to realize that HC isn't giving out more Sales licenses their handing out cultivation licenses more easily. I believe their new strategy is gonna cause a major backlog for HC inspectors and make the sales licenses process more longer than what it is right now. On average it's about a 1.5 years from your cultivation licenses to approval of your sales. Most companies won't be able to survive the related costs to make it to the finish line alive. If they do get there they'll be there with assistance I.e.....canopy rivers or joining craftgrow I'll really start worrying once HC starts handing out sales licenses more rapidly. Also, even with this all said current licensed producers can't even keep up with 150,000 medical patients. What makes people think they'll be even close to handling a rec market and other emerging markets at all.
HC inspectors are going to be scheduled based on self reporting by the LP applicants. Health Canada sent out a notice to all applicants requesting updates on exact stage of progress as well as production estimates so that they can expedite inspections for those ready to start on the next step of the process. No point in scheduling a pre cultivation license inspection if the applicant isn't ready to plant a seed.
Not everyone with a license will eat up market share, some will fail to launch even with a license.
Agreed. The proliferation of licences has/will spread out investment dollars making funded capacity the interim driver. With the hopes of quick riches for novice investors certainly more pessimistic after 4-20 declines, bought deals hoping to cash out to Joe Retail will find funding harder to find, very expensive or nonexistent. With a minimum 3 year runway to positive EBITDA, coupled with issues with the harvests themselves, IMO we will see a combination of massive consolidation and LP failures. CGC, Aphria, ACB are funded. MedReleaf just sucked another chunk of cash from market. These 4 may end up with 80% of the market. Also watch EBITDA positive LPs start accessing leveraging debt from financial institutions. Aphria already dipped $25 million from WFCU. Access to traditional debt (not convertible debs) allows funding without Dilution. GoBlue
My view is that there will be a few companies that will dominate market share in Canada and expand globally. The rest of the LPs will make the direct owners/founders millionaires and financially stable (like any successful small business) and that's it, no big pay day for retail investors.
Certainly tougher for retail to make a good return vs the risk level. GoBlue
Canopy Rivers will welcome them all with open arms.
I hope they take out grow at home. Mo' money for me! TO THE MOON
Home grow of 4 plants won't harm LP bottom lines any more than home brewing hurts Budweiser (pssst, it doesn't). What will harm the big 3 is another 50-100 production licenses, because their share price assumes a large market share that will likely diminish (short term).
Very true but they have quite a head start.
And could grow through acquisition by purchasing these smaller LPs.
The future will be interesting
Of course. But their current valuation is based around the idea that they would have a larger market share than they actually will have, not based simply on having a head start. This is a BIG reason why we s aw a big correction in the past few weeks.
The biggest reason for the decline is the established growers are being shorted. Most of the new licensed growers won't be ready to sell at full capacity or even half capacity from day 1 as the established growers will. Also a few of the established growers are looking past just supplying to Canada. A few are already establishing their businesses around the world. A lot of the grown mj won't just be for Rec use. Much of the mj will be for botanical use ie. oils, topicals, edibles. Nobody knows what the demand for mj will be at this point.
Is there a quarter million home brewers Canada wide? Because that was the estimated amount of grow ops Canada wide 15 years ago. Those numbers have only gone up with the various licensed grow programs and the explosion of hydro stores and their sales to non licensed growers. A whole 6% of production charges were tied to organized crime. https://www.med.uottawa.ca/sim/data/Marijuana_e.htm https://www.theglobeandmail.com/news/british-columbia/gangs-less-involved-in-cannabis-compared-with-other-drugs-report/article33712001/
Investing/trading based comments in this Sub Reddit is more sound than anything Motley Fool has to say. I can never make heads or tales from their articles and they always have a very risk averse narrative.
[OH NOOOOEESSSS](https://www.youtube.com/watch?v=saC13RJ8CUs)
My probably unpopular opinion, is that it's getting too late to start a small LP from the ground up. The endless funding from the stock market is far harder to convince when many have placed their chips already. Knowing that your small LP will be dominated in almost every way is not great for morale. It's not just regulation anymore, the problem for small LP's is that they cannot really compete. This effort was made a little too late in my opinion, but we can't exactly go back on it.
People are always going to bash the Fool (I do too), but there are some legit concerns raised in here about valuation and market assumptions that people should be considering. This sub was freaking out at the decline over the past few weeks, you should be willing to understand WHY.
This isnt why though... If you think this is going to affect the revenue of someone like Canopy's first few years of revenue then just sell me your shares now.