Aaron Sonshine comments on the cannabis industry in Canada one year after legalization in Lexpert. He shares his views on:
“There will be a growing divide between ‘haves’ and the ‘have-nots’ as access to capital continues to tighten. We’re likely to see more distressed M&A and opportunistic buying by the larger and better capitalized players. We will also continue to see large and mid-market companies making acquisitions to fill gaps in their operations — by adding production facilities, extraction capability, supply chain expertise and, perhaps above all, human talent.”
“All eyes have been on the U.S. in the past 12 months, and this trend will continue. We see more and more U.S. companies, absent viable listing options in the U.S., accessing the public markets by listing on the CSE. We're also seeing U.S. family offices and, increasingly, U.S. institutional funds, gaining exposure to the sector by investing in Canadian LPs. Canadian LPs are looking to gain a toehold in the U.S. cannabis market, too, most recently by acquiring or partnering with U.S. hemp CBD producers.”
“Products such as edibles and vapables will bring substantial new opportunities to the industry. There are vape pens coming to market that contain a few dollars' worth of hardware and cannabis oil and retail for $75. Next-generation products have given rise to ancillary products and services companies and attracted traditional consumer packaged goods firms looking to penetrate the sector. As Mark Twain once said, the gold rush was a great time to be in the pick-and-shovel business.”
“Right now there's a much greater emphasis on operating results and financial performance. An increasingly sophisticated investor base, including strategics from the tobacco, liquor and pharma sectors, are simply demanding it. We are witnessing a handover to a second generation of management, often with greater experience managing supply chains and bringing highly regulated products to market. It remains to be seen whether these new leadership teams will remain nimble enough to respond to ever-changing regulations and market forces.”