The Downside of Narrowly Focused Cannabis Operations

0
33

You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.

Friends,

Five weeks ago, we discussed how several cannabis companies lacked focus in the industry and were dooming themselves to mediocrity by trying to be in too many markets without adequate capital. We cited MedMen as a great example, and this week’s news of Acreage Holdings retrenching across multiple markets adds further evidence that empire-building is a risky endeavor.

Several weeks into the COVID-19 crisis, though, we are reminded that those companies with too narrow of a geographic focus may be taking too much risk as well. Take Planet 13, for example. Though the company, which has done a fabulous job in Las Vegas with its 10% market share through a single dispensary, is moving to diversify its current business, that single store is extremely vulnerable to a lengthy hiatus in Las Vegas tourism. Several other companies depend greatly on the Nevada market as well.

Companies that are overly reliant upon the Massachusetts adult-use market are also taking a hit, as the state moved to shut down all non-medical sales. This isn’t the first time the governor there has taken an aggressive move that is harmful to cannabis operators, as the state banned all cannabis vape sales  for three months in September.

This week’s sudden and disturbing news that Ontario had changed its prior view and had removed cannabis retail from its list of “essential services” will hurt Canadian LPs if it persists too long, as that is a big market, even if it is under-served, and it reminds us that companies shouldn’t depend excessively on any single channel of distribution.

While the current crisis is leading to these near-term operating risks in certain geographies, we are reminded of the challenges the pioneers in the Colorado market faced following legalization, with constant packaging rule changes causing them substantial financial burden. Market disruptions can happen for all sorts of reasons.

When the dust settles and these interruptions are behind us, investors, who are already beginning to better appreciate balance sheet and cash flow risks, may also pay more attention to geographic risk. There is a happy medium between empire-building and putting all of one’s eggs in a single basket. Fortunately, several companies are well positioned from both of these perspectives.


Join NRGene for a Free Hemp Webinar on April 15th at 12pm EST
Clones or Seeds – Why Choose?

The hemp industry in Europe is very different from its counterpart in North America. In this webinar we invited Yannik Schlup, Chief Business Officer of Puregene, a leading Swiss hemp/cannabis breeding company, to present an overview of the hemp markets in Switzerland and major EU markets. He will explain the advantages and logistics of working with both clonally propagated and seeded varieties and how applying genomics accelerates the improvement thereof. Register Here.


New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:


To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Get ahead of the crowd! If you are a cannabis investor and find value in our Sunday newsletters, subscribe to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013. Gain immediate access to real-time and in-depth information and market intelligence about the publicly traded cannabis sector, including daily videos, weekly chats, model portfolios, a community forum and much more.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks that generate industry sales of more than US$7.5M per quarter.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan & Joel

Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

Get Our Sunday Newsletter


LEAVE A REPLY

Please enter your comment!
Please enter your name here

2 × two =