The Prince of Pot’s antics in Montreal this past week (see link below) have helped me see the Canadian marijuana industry in a new light.
While at one time I thought the current medical pot companies would be raking in fortunes when/if recreational pot is legalized, now I am not so optimistic about their revenues.
Sure, they will make money, but nothing like the billions that investors and the media are talking about. (Disclosure: I hold small numbers of stocks in marijuana-related companies.)
Because some “250,000 people in this country produce marijuana, sell it and distribute it” illegally — a number provided to the Montreal Gazette by Marc Emery of Cannabis Culture — and have had a long head start on them. They are firmly entrenched. The argument that the legal pot companies will sell cleaner strains is bogus: pot growers and sellers have been providing tokers with pot since the 1960s — and when was the last time you heard of someone coming down with some form of marijuana poisoning from bad pot?
Once/if the Canadian government gets around to legalizing pot and it makes its way down to the retail level, why would current tokers abandon their dealers and flock to shops to buy their stuff — and pay 15 percent sales tax on it?
That is the assumption many are making, and it’s not going to happen. The 250,000 illegal pot growers and sellers and distributors will undercut the legal outlets. And with the impending new law allowing people to grow up to four plants at home, some people will never buy it from shops or from illegal dealers.
Of course, there will be people who will buy their pot at the legal retail level — but not the numbers many are talking about.
And that’s why the marijuana companies are worried now, and some are urging Ottawa to crack down on the illegal market, with the lame excuse of unlicensed pot possibly being harmful. But there is no way Ottawa will be able to bust all the illegal growers in Canada. The government waited too long to legalize it, while at the same time turning a blind eye to its use by tokers. The government allowed an illegal industry to flourish for too long, and there is nothing they can do now to stop it, despite Prime Minister Justin Trudeau’s recent orders to law enforcement officials to enforce the old anti-pot laws.
Too little, too late.
My recommendation to investors in marijuana stocks: sell them as soon as the Senate passes the bill legalizing pot, because it will quickly become apparent afterward that the legal marijuana growers won’t be making as much as expected.
Photo: Field of dreams for marijuana investors. (Photo by Aleks on Wikimedia Commons)