It was compelling right up to the part where they talked about demand. Compared the demand in Canada (pop. 36M with $120B+ tourism industry) to Oregon and Washington (pop. 10M with $12B tourism industry). A better comparison of demand will be California with pop. 38M and $125B tourism industry. The demand numbers in Oregon and Washington were 563,000 kg in Year 1 and 902,000 kg in Year 2. Not hard to project double the demand with double the population and a 10x larger tourist industry.
Another factor that they don't take into account is that in America, you can't transport cannabis Internationally or across State lines, it's a Federal offense, so cannabis companies in America are geographically isolated. Canadian Cannabis Companies are already preparing for International distribution.
Another factor is that they are basing the numbers on PROJECTED supply. The problem with that, and it's something that Hugo Alves (President of Cannabis Wheaton (CBW)) touched on in a Q&A he did last month, is that a lot of these companies are planning expansions without the necessary power capabilities. He commented that when CBW would go into these expansions meetings with companies looking for financing, a lot of the deals would fall through in the due diligence portion because the grid that these expansions would occur on couldn't support the power needed grow the product. He said, he no longer is surprised when CBW turns down a deal based on power supply.
Not worried about over supply, at least not for a couple years. But the price per gram will almost assuredly trend downward over time, so there are some points in the piece that I agree with. Trying to estimate demand is just speculation. I am curious to see just how much California sells so I that we can at least get a better comp on how the Canadian market demand will be.
BTW, Cannabis Wheaton is now the #1 holding for this ETF. Disclaimer: I own shares of CBW.
