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One can now see why the likelihood of interprovincial trade barriers appears more likely than not and if so the LPs in other Provinces where they may have a significant cost advantage may have limited access to Canada’s largest market. One can appreciate why there is a growing interest in international expansion. Something else CannaInvestor Magazine was a pioneer in predicting and advocating. Again, it comes down to Economics. The total market size is only so much in each Province.
These and other market and cost factors will directly impact the market share, cost of production, and therefore the bottom line of each Licensed Producer. The acceler-ation of the approval of Licensed Producers necessarily will take market share away from the existing Licensed Producers. This may explain in part Canopy Growth’s Craft line – a recognition that increased competition necessarily erodes market share. And in all of this, there is also the Revenue Recognition rules governing Licensed Producers and that is recognizing the “gain” of their biological assets before they even go to market as the crops transition from seed to final harvest. These pre-market accounting gains may erode if cannabis becomes commoditized without coordinated supply management. As an aside, be wearing of those with bearish comments regarding the industry’s accounting rules and how they are applied because chances are that they either do not understand them and/or hoping that you do not either,
Now apply these same demand and supply forces to the share prices (and market caps) of publicly listed companies. There is at any moment in time a finite level of capital dollars. This can be calculated at any point in time as the aggregate sum of the market caps of the companies. New listings necessarily add to that aggregate market cap but also compete for market cap from existing companies and new investment dollars entering the market may be outpaced by the demand for those investment dollars - ie: demand exceeds supply. It could also result in a redis-tribution of “wealth” and this may explain why we have seen the share prices on the heels of recent IPOs fall for a period of time.
Think of three tall full glasses of water and you are tasked with distributing that water across 9 smaller glasses and you do not need to do it equally and the smaller glasses are of different sizes. But not to worry, you are being given some more water to assist with the exercise. No matter how you distribute it including the added water, not one of the new glasses has as much water in it as any of the previous three larger glasses even though there is more water. But what if some of the glasses could be combined – hence the M&A activity CannaInvestor Magazine predicted from the onset as core to the Ecoforming process. The Consolidation Curve cannot be avoided. As a side note any person that is pretending to have invented the model of the M&A activity that is happening – avoid and ignore as either they are being intentionally misleading. A successful Retail Investor needs sources such as CannaInvestor Magazine that connects the dots in advance.