In Showdown Between Canadian and US Cannabis Producers, Canada is the Goliath

Canadian Companies Have the Upper Hand If/When Cannabis Legalized in the US

'My lips are wet, my mouth is watering to get a piece of that': There's a war brewing between US and Canadian cannabis companies to claim a $75 billion marketProjections are that the US cannabis market will be worth about $75 billion, if or when cannabis is legalized south of the border. Often, that would spell trouble for Canadian companies, which traditionally get bought out or stamped out by their American counterparts. But in this case, Canada is the Goliath for several reasons.

First, having a head start in a country where cannabis is legalized federally is a huge benefit. Canadian companies can raise cash in Canadian stock markets and even be listed on US stock exchanges. However, US stock exchanges will not list US-based cannabis producers, presumably until cannabis is legalized.

Second, US companies that are operating today are fragmented, again because of the federal law. They cannot transport product from state to state, even if it is legal in both states. The market in the US then is actually 33 (and counting) individual state markets. This will make it difficult to streamline if cannabis is ever legalized by the US federal government.

Since the US mid-term elections and the swing to a Democrat-majority congress, the feeling is that the US may legalize cannabis federally sooner rather than later. Canadian companies are “shoring up their balance sheets” in preparation to invade the US cannabis market. Licensed producers such as Aurora, Tilray, and Canopy Growth are cited as three examples. “You’re seeing the American system really move quickly now,” said Cam Battley, the chief corporate officer of Aurora. “My lips are wet, my mouth is watering to get a piece of that.”

The Cannabis Market War is Starting, Not Ending

That doesn’t mean that US companies are backing down. Acreage Holdings CEO Kevin Murphy said that it has a “balance sheet to match any balance sheet”. It was recently part of a reverse takeover in order to get listed on the Canadian Securities Exchange to raise its own war chest.

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