Today, I am happy to be joined by Debra Borchardt . Debra is the CEO, Co-founder, and Editor-in-Chief of the cannabis financial news website Green Market Report . She began her career in the securities industry where she was a Vice President at Bear Stearns and is also co-founder of the cannabis executive women’s networking group, Industry Power Women. Debra is also a board member of the cannabis newswire AxisWire.
5:50 – What brought Debra to the cannabis sector. Debra worked for many years in the securities industry; after leaving worked as a financial reporter, working with Jim Cramer and then began in 2013 to get interested in cannabis penny stocks . A lot of shady players that Debra began to cover at The Street; while mainstream news was uninterested and thought it was a joke, Debra thought it was the biggest story of the decade and so started the Green Market Report.
10:00 – Is CBD market where the THC market was many years ago? Curve is straight up for the CBD market, though not all players are created equal. FDA is trying to wrap their hands around the industry but they’re slow to address all the issues, though they’re trying to do it the right way with public hearings, etc. Can’t make health claims about CBD – important for companies like Curaleaf ( CURLF ) and Charlotte’s Web ( CWBHF ) to act accordingly. Supplements vs. prescription drugs.
16:16 – Cannabis market in general is down across the board. Part of the growth curve and investors are getting more demanding abou t earnings . MedMen’s (MMNFF) outrageous expense levels now being looked at more critically for instance. Scandals and underperformance have hurt the industry and it’s hard for investors to see beyond the positive spin that companies put out.
18:55 – Aurora ( ACB ) – which reports today after market close – is reporting great revenue growth but not profitability; what’s the timeline for companies like that to become profitable? ACB made lots of acquisitions recently, but where’s the breakeven? Why so many companies report pro-forma revenue; ‘here’s our revenue but if you add in all the companies we acquired, this is what it would reallybe .’ Canadian market is also adding vapes and edibles later this year so lots of things to figure out before stabilization sets into the market.
21:10 – The future of the industry – consolidation and a shakeout are likely – many companies will either go under or get acquired. Many companies’ capital comes from convertible debentures that they have to pay back so what happens when they haven’t made enough to repay it? When/if the descheduling happens in the US within the next few years, the federal government will take over regulation and it will become a product like tobacco or alcohol. Retailers will then fight to have the product in their stores and what’s that going to look like? 4 or 5 major alcohol and tobacco companies rule their respective markets – descheduling won’t destroy dispensaries but will shut many of them down. Investment dollars that have gone to licenses and dispensaries may be pointless. People really in the know are already preparing for this inevitability.
27:00 – Debra thinks US will close its borders – or at least fight very hard to stop it – to international cannabis. Shipping cannabis across borders is a high hurdle to jump. Companies though would be wise to open up operations globally but then it becomes an issue of exporting – where to export the product? Africa as the next big market.
30:25 – Green Market Summit happening today and tomorrow in Los Angeles. Networking is the main draw with targeted focus this year on the economics of cannabis brands. Over 6,000 cannabis brands currently and 75% increase in brands since March 2019! What makes a great brand. Celebrity branding.
34:40 – Advice for investors in the cannabis space. Have to be in it for the long run. Don’t listen to headlines with lofty numbers but don’t listen to the widespread negativity and fear either. It’s been a tough year, but now is really the time to get in. Edibles and vapes in Canada, numbers will jump and stabilization from recent M&As will occur. ETFs might be a better way to get into the industry for less risk.
36:30 – Which ETFs are best? Check if it’s actively managed and how often ‘active’ is. For ETFs to work efficiently the stocks need to have some amount of liquidity – only a few ETFs do this – also look for portfolio managers who have been around the sector for awhile. The Horizons funds have gotten huge – maybe too big. Tim Seymour for instance has been around and knows a lot about the cannabis industry.
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