Marijuana stocks remained level before the opening of Canada’s recreational cannabis market on Wednesday, with investors on the U.S. side of the border concerned that economic opportunity may be passing by them. As Canadian cannabis companies take advantage of a new dawn, American marijuana producers struggle to keep up momentum while walking the line between federal prohibition and a patchwork of state regulations.
Still, industry insiders remain hopeful, as do the investors that continue to pump money into the market. After all, the whole of Canada can’t compete with the California cannabis market alone, in terms of size.
Andrew Glashow knows a thing or two about the U.S. cannabis market. He sits on the board of CLS Holdings, (OTCQB:CLSH) a Nevada based cannabis seed-to-sale vertical company.
CLS is currently in the process of acquiring Oasis Cannabis, a Las Vegas-based vertically integrated cannabis company.
A proud graduate of the University of New Hampshire's Whitemore School of Business and Economics, Glashow is also an investment banker specializing in microcap transactions in the $5 million to $50 million range. He has more than twenty years of experience in the capital markets, having also served as CEO and president of multiple companies which he helped capitalize.
PotNetwork spoke with Andrew Glashow on the eve of Canadian cannabis legalization to discuss what this historic event means for U.S. cannabis companies and investors in the dawn of a new era of commercial cannabis.
Cannabis investors expected significant gains this year, though volatility in the marijuana stock market continues to be the dominating thread. What’s your take on where the market is now and where you think it might be heading?
What’s happening in the marketplace today is, you have a lot of transactions that are being priced and closing. In other words, a lot of companies are becoming public, and a lot of companies are raising an extraordinary amount of money. And I think that valuations are what they are. I know that that’s a cliché, but I think what the market is waiting for, in my opinion, is to see how some of these folks actually execute with all the capital that’s being deployed.
You have one great catalyst, and that is cannabis becoming legal in Canada. I think the next catalyst is potentially Congress in the U.S. being controlled by the Democrats as opposed to the Republicans, and I think you’ll get a real favorable outcome there. At least you’ll get some legislation that will be able to be pushed forward as opposed to today where you’ve got the Republicans who won’t even allow some of these [cannabis reform] measures to be brought to a vote.
So it all comes down to the midterm elections?
When people start to see some of the things that are going on in Canada, as well as the next catalyst, our U.S. elections, then I think, in 2019, that people will start to take a closer look at all the capital that was deployed and start to see what companies potentially are going to be winners and those companies that aren’t going to be winners.
I think the next thing that’s going to be a catalyst – and this is probably a little further out, I view this as a 2020 catalyst – I think the pace of M&A, mergers, and acquisitions, are going to pick up tremendously, because you’ve got a number of very well-capitalized players in the marketplace and these folks need and are going to be looking for growth opportunities. That comes through M&A. I think there’s going to be not only M&A but I think you’re going to get some consolidation as well. And you’re starting to see that right now; I think there was a big deal with MedMen and PharmaCann, I believe, that was just announced recently. I think that’s coming, and it’s coming in a big way.
We also have companies like Constellation Brands talking about adult cannabis beverages and companies like Coca-Cola talking about CBD. Even Walmart is looking at cannabis. What kind of penetration do you see over the coming years as far as consumer markets and products for people that aren’t, necessarily, pot smokers?
I think that’s the best-growing segment of the marketplace. I really do. Today, even in our dispensary out in Las Vegas, we still see about 70 percent of adult use in the form of flower. We see that people are looking at things like vapes and things like edibles and creams, I think there’s going to be some really good holistic products introduced to the marketplace, alternatives to traditional medicine. That’s going to be really rapidly growing, and the more states that go from a medicinal-only marketplace to a marketplace that has adult-use, recreational, whatever it is you want to call it, it becomes more and more mainstream.
Somebody that doesn’t have any desire to go into a marijuana dispensary today might have a desire as these things become more mainstream — i.e. you get more recreational use, more adult use. Massachusetts you’re going to see that, Colorado you’re seeing it, and Nevada we’re seeing it, but I think that the non-smoking portion of the cannabis marketplace is going to grow exponentially. And I think that’s why mainstream brands like alcohol, and Coca-Cola, and others are looking at the market because they’re in need of growth as well. The beverage market and the beer market isn’t necessarily growing all that much, but the cannabis market is in the very early stages.
CBD has a huge potential for growth in the mainstream market in a way that marijuana might not have. Do you think it’s the same play for investors — the same stocks are as good a bet for CBD as they are for marijuana — or do you see these as two separate industries?
I see them as two separate industries. I’m not knowledgeable enough to know what the actual effects are for CBD-only related products. We believe that in order to achieve the efficacy or the outcome that an individual is looking for, that there needs to be some THC in a CBD-related product in order to be able to activate the CBD. Whether that’s for anti-inflammation, whether that is for things like headaches, whether that’s things like muscle soreness, all of those types of things, we think that you need to have some THC into the CBD in order to be able to have the outcome that the customer is looking for.
A lot of our readers are familiar with what’s going on in the cannabis industry. Is there something that you think a lot of them don’t know that they ought to know?
That’s a really good question. I think people that are cannabis-related investors probably have a pretty good understanding of what’s going on in the marketplace. I think people that aren’t necessarily cannabis-related investors probably still think of it as a drug, and as something highly illegal. I don’t think necessarily you’re going to change a lot of their opinions until you get to federal legislation or more clarity on what the rules are around cannabis. But I think people are pretty educated, and I think it’s going to be exciting to see what happens in Canada. You know, there are estimates out there that cannabis could add $8 billion to Canada’s GDP, and the U.S. market is several times larger than Canada.
With all of the volatility happening in the marijuana markets this year, what do you see for the future? Is now the time for investors to make their move, or should they wait and see how the market plays out?
Well, I can only speak for CLS and some of the things that we’re doing, all of which is in the public domain. For CLS, we certainly feel comfortable with our ability to execute. CLS, I think, has an opportunity to do quite well in this environment. We’re going into Massachusetts, which is exciting, and we’re trying to expand our footprint in Las Vegas, which is exciting. Those are two really exciting marketplaces.
Business for us is very good. Our retail business is very good, and our City Trees brand business is really growing extraordinarily well. So we’re very, very optimistic about what the future holds, not only globally or on a macro basis but also on a micro basis for CLS specifically. We feel pretty comfortable.
As it relates to CLS, I think it’s not such a bad entry point, and I’m sure that there are a number of other really good public companies that are deserving of investor capital as well. Again, I just don’t know of any marketplace where the dynamics are such that you have 25, 30 percent annual growth as far as the eye can see right now. That’s pretty exciting.
Any final thoughts or predictions for the near-term, especially now that cannabis is legal in Canada?
On a global basis, one of the things that we found is the people that we’ve talked to, whether it’s through wanting to acquire or wanting to partner with or do business, one of the things that we’ve found in the cannabis space is that the people are really quite nice. Everybody has a mission, I think, to do right by their customers and it’s really exciting to see the entrepreneurial spirit and the creativity that’s taking place in the market, that’s pretty cool. We meet some really neat people and some really smart young people that are doing some extraordinary things, and that’s exciting.