The 420 Investor Breaks Down Growth In The Canadian Marijuana Market

Since the start of the year, the Canadian marijuana market has quietly exploded.

The industry expanded from fewer than 10 publicly traded licensed producers to 23, all contributing to a total of 67.

“It’s gotten a lot more challenging for people to kind of stumble into the Canadian market and figure out what’s going on,” Alan Brochstein, author of 420 Investor and the founding partner of New Cannabis Ventures, said on Benzinga’s PreMarket Prep radio show. “They’ve been giving these [licenses] out like Halloween candy.”

The increasing competition ultimately weighs on profits already lacking in the fledgling global industry, as investors don’t know which stocks to direct their funds to.

Dubious Profitability

While many Canadian marijuana companies claim to be profitable, Brochstein said it’s just not the case. He attributes alleged financial growth to returns on the firms’ investment portfolios.

“There’s an accounting thing that when their plants grow, they book that as a negative cost of goods in their accounting statements, so for Aphria and for some of the others that are ‘profitable,’ these biological assets they have are what’s driving that growth,” he said.

Nonetheless, he registers great revenue boosts across the country. The market’s “Big 6” — Canopy Growth Corp WEED TWMJF, MedReleaf Corp LEAF MEDFF, Aphria Inc APH APHQF, Aurora Cannabis Inc ACB ACBFF, Cann Trust Holdings Inc TRST, Cannimed Therapeutics Inc CMED CMMDF — are on track to exceed $12 million CAD ($10 million USD) this year.

Prospects For Pot

Brochstein expects those dominating medical sales to maintain their market share and challenge the emergence of new competitors.

“The more important point is the Canadian market right now is kind of in preseason in some ways,” he said.

Sales are limited to the prescription medical market, as well as to mail rather than in-shop transactions. However, regulations loosen July 1, and Brochstein expects a proliferation in exports and international joint ventures.

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