This Is Why Canadian LP’s Continue To Get The Spotlight Around The Conversation For U.S. Cannabis Legalization

Following Canopy Growth’s (TSX: WEED) (Nasdaq: CGC) weaker-than-expected earning’s report, the Canadian cannabis sector has been under pressure. 

During the last year, we have noticed increasing interest in emerging international cannabis markets from Canadian Licensed Producers (LPs). From the European Union (EU) to North America (Mexico and the US), leading Canadian cannabis companies are investing and acquiring strategic assets and this is a trend that we are closely following. 

Last month, Tilray, Inc. (TSX: TLRY) (Nasdaq :TLRY) completed a mega-merger with Aphria, a leading Canadian LP, and we are favorable on the growth prospects that are associated with the combined company. Following the merger, Tilray is considered to be a leading play on the international cannabis market.

Through Aphria, Tilray is one of the best positioned Canadian LPs to capitalize on the US cannabis market when it’s legal at the federal level. Prior to the merger, Aphria acquired SweetWater Brewing Company, a well-known crafter brewer, for $300 million. Once cannabis is legalized at the federal level in the US, we expect Tilray to benefit from the infrastructure, facilities, and distribution network that is owned by SweetWater.

Although major conglomerates like Amazon, Inc. (Nasdaq: AMZN) and Uber, Inc. (Nasdaq: UBER) have voiced support for legalizing cannabis at the federal level in the US, the market has had mixed responses to these developments. While Canadian cannabis companies like Tilray and Aurora Cannabis, Inc. (TSX: ACB) (Nasdaq: ACB) have bounced higher on these announcements, we believe these are not the best US levered companies. 

Based on the recent developments, we expect cannabis legislation (legalization or decriminalization) to be passed in the US before 2022. Once this possibility becomes more visible, we expect to see capital leave the Canadian cannabis market and enter the US market. We believe legalization or decriminalization is the most significant potential catalyst for the cannabis sector and we will monitor how the rhetoric around it advances from here.

If you are interested in learning more about companies that are positioned to capitalize on the US cannabis market, please send an email to support@technical420.com with the subject “US Cannabis Companies” to be added to our distribution list.  

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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