A potential market in Canada
It is a flourishing era for the marijuana industry in Canada. Companies are looking to take advantage of the marijuana’s legalization for recreational use on July 1, 2018. In the neighboring nation of the United States, there are twenty-two states with existing legalized medical marijuana law. More so, about seven states have legalized the recreational use of marijuana. Canada wants to tow this line and make hundreds of millions of dollars from the opportunity that comes with an opiate like marijuana.
Comparing the U.S. and Canada cross-border markets
More recently, agricultural companies like the Maple Leaf Green World are snapping up investment funds to become more active in the Canadian stock exchange listings. With their Marijuana for Medical Purposes Regulation (MMPR) License, Maple Leaf Green World will assume dominant roles in Canada’s emerging health market after raising public capital from the U.S stock market.
However, there is a huge potential for revenue for any emerging agricultural company that sells medical or recreational marijuana. When they list their shares on the stock market of both sides of the border; bigger pools of investors are watching to place their money where their mouths are. Capital investment is supreme in the struggle for marijuana’s market share.
According to research firm – ArcView Market Research, by 2027, the U.S aims a record spending of US$57 billion. Comparing cross-border listing events between the U.S and Canada; there is a significantly growing population of entrepreneurs and investors interested in the value chain of medical and recreational marijuana.
Recently, Cheryl Reicin, the head of life sciences at Torys said; “We are getting several inquiries from investors in the U.S (including big institutions) on how to invest in cannabis in a comfortable way. Obviously, they’re more comfortable in a Canadian cannabis company than in a U.S. cannabis company. In the future, the U.S cannabis industry will remain illegal at the federal level.”
More issue arising
Already, there are operators in the Toronto Stock Exchange (TSX) and Toronto Venture Exchange (TSXV) who are waiting to divest into the legal business of cannabis as soon as the bill is passed into law. However, there is skepticism about the willingness of traditional banks in Canada to support marijuana businesses like in the U.S.
To keep large sums of money in marijuana shops will result to public security risks, and more legislation can address this risk. However, Toronto-Dominion Bank and The Bank of Montreal are collaborating with marijuana investors by opening business accounts for them. Marijuana producers and dispensaries may face an uphill task of tax deductions in Canada.
At first, these investors can receive tax waivers considering their start-up expenditures, and cost of goods sold. The policy of waiving tax in the first few years of a new business will effectively allow competition in this sector. The effect of state incomes and federal tax laws on agricultural products that’s a controlled substance can raise the level of trafficking. When there is a sudden case of bankruptcy, will marijuana businesses in Canada be eligible for relief under the law?
Is cannabis trade brighter in Canada?
Reversing the U.S policy (Cole Memo) that allows states to legalize marijuana will increase revenues for the Canadian cannabis investor. In the U.S, cannabis companies face limits because of the Schedule-1 federal drug law. But a reasonable legislation from the government of Canada will support and expand the business of marijuana companies in Canada and beyond.
It is safer to invest in the Canadian cannabis market, than in the U.S where companies possibly suffer from federal drug laws. In Canada, companies like Delta 9 are seeking some access to form a chain of end-users’ cannabis outlets in all regions. This move is in response to the provincial government’s request.
Already, Delta 9 is taking advantage of the favorable weather to grow medical marijuana in Winnipeg and expand their 80,000 square foot production setup. As a producer with medical marijuana license that conforms with the ACMPR law; the shares of Delta 9 are trading on the TSX Venture Exchange (their trading symbol is “NINE”).
There are several odds that favor cannabis investments in Canada. The merits that a favorable legislation brings will put local investors ahead of their counterparts in the U.S, and the limit on the use of recreational cannabis in the U.S is still on. More so, financial institutions are declining to grant businesses credit to cannabis firms. It’s a bigger risk to lend any business some huge capital, and have the U.S. marshals appear with a warrant. The prosecutors might declare accruable profits as a crime.
What do you expect from Cannabis legislation in Canada?
Financial institutions and their policies affect businesses. In the US, as cannabis producers struggle to access funding and payment processing services, the Liberal government of Canada should change this tale. With investment-friendly policies, the Canadian government stands to gain a whopping $22.6b yearly from tax revenues of the marijuana industry. Dispensaries, pot-shops, greenhouse farms, recreational parks and other value chains of medical marijuana will boost tax returns and productivity.
The Liberal government has put forward a discussion paper and a panel of nine members to effect a new legislation. Anne McLellan, a former deputy P.M leads the panel that has five are doctors to guide them. There will be town hall meetings with participants (cannabis users, nonusers, municipal, and provincial governments).
What is unknown for now is whether Prime Minister Justin Trudeau will allow marijuana sales at corner stores. But with the task force; all private-sector production of cannabis must have government licensing. More so, the distribution of medical cannabis could vary from province to province.