You’re reading 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. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.
Friends,
A week ago, I called out the Canadian LP bargains that I see. Both stocks, which were then 29.7% of my model portfolio at 420 Investor, have declined. I added to both of them and restarted a new position in a third, and the model portfolio is now 39.5% exposed to Canadian LPs.
In that piece, I pointed out that Tilray and Canopy Growth are expensive and falling in price and that they could pressure the ones that I like. They are both down too. I continue to expect these stocks to be weak but am hopeful that it will not continue to weigh upon the cheaper stocks that I like.
As much as I find Tilray to be a big waste of time for cannabis investors, something they announced this week caught my attention. We didn’t share this press release, which was lacking any sort of financial details and many other important factors, as I discuss below, but Jeremy Berke did. Cultivated discussed how Tilray was getting into the intoxicating hemp business. The article covered the important parts of the Tilray press release, which was released Tuesday morning.
Tilray said that it will be launching hemp-derived Delta-9 THC beverages in key markets beginning in 2024. It is already in the U.S. market with hemp products due to its acquisition of Manitoba Harvest in late 2019 for more than $300 million. In the last fiscal year, the Wellness revenue, which is basically that entity, had revenue of just $55 million. At least Tilray didn’t use just cash to fund the purchase, as it paid almost half with its very high stock at the time.
The press release left out many details, like the source of the hemp or the THC from hemp, where these beverages would be sold, what they will cost, how much revenue Tilray expects and the potential profitability. One of the four brands that they are launching is in partnership with a company that is based here in the Houston area.
I discussed here at the end of August how industrial hemp could be a threat or an opportunity for American cannabis companies. Since then, this has started to become a big issue. California recently moved to ban THC products from hemp in the state. Other states are moving to regulate or ban these types of products, like Colorado, Massachusetts, Missouri, Nebraska, New Jersey and others. Just yesterday, Senator Wyden announced that he had introduced the Cannabinoid Safety and Regulation Act to establish national standards. The FDA punted already in early 2023, and things are very confusing currently to consumers and businesses.
Maybe Tilray, which is a big beverage company, gets it. At this point, my negative outlook on Tilray remains. Perhaps we will learn more about their efforts, but maybe some MSOs will dig deeper too. Again, cannabis investors should be paying attention to this issue.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
Exclusives
Canadian Cannabis Sales Rebound In July
Illinois Cannabis Sales Growth Remains Slow
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Sincerely,
Alan
