EDITOR: | September 19th, 2018 | 4 Comments

To be a Billionaire or not? The Canadian Cannabis Breakfast Club struggles with U.S. border entry concerns.

| September 19, 2018 | 4 Comments

You know there was something to be said for growing up in the seventies and eighties, life simply wasn’t this complicated. We were supposed to have 5 servings of milk, meat and fruit daily, exercise and if one was an overachiever they secured a Presidents Fitness Award patch. “The Cosby Show” was ranked #1 for being a good ‘safe’ family television should you get caught with weed in your wallet: you went to jail….

It was 1985 and I was graduating from Jefferson County High School in Jefferson County, Tennessee. This remotely positioned Triple A football loving high school with nearly 2000 students, required a ride to school to survive. My ride was a friend’s souped-up Chevy with a set of bull horns on the front, this was the year “The Breakfast Club” film was a box office hit, we lived in a dry county.

My introduction to weed was through a club attempting to be Banksy in this rural community by graffitiing the letters “FHO” on any water towers they could find. Later I would discover that this rebel group’s acronym stood “for hell raisers only”, a music lover I was impressed they had jerry-rigged a radio station together with a 4-mile transmission radius we could only access at school: this was the year Guns N’ Roses were formed.

It’s very hard to get people to articulate their honest opinions on anything never mind a topic that will send you to jail. And the fact is — that in 1985, if you smoked dope, you went to jail. What one didn’t do is light up during a press conference to attract the support of what has become the largest group of fast rising billionaires in the global market: what I am now going to affectionately refer to as the Canadian Cannabis Breakfast Club, the CCBC.

Should we give the CCBC a hand for making money after we are still dealing with the endless law suits from those addicted to tobacco or friends still fighting the addiction? After all, in the eighties, we not only drove fast (without seatbelts), we smoked in our cars while driving. On the other hand, we were not fighting an opioid crisis, or the many other challenges that we deal with today.

But hey, they tell us its ok if we chew on it instead? Health benefits, I have read and reviewed tell us that it will help children with seizures, help us deal with pain, even get our mojo going! As Sharron Clayton from our management team stated best – “I am on the fence.”

In the market to make money, one must recognize performance. And this group of high-risk investors, placing their hard-earned money into the most high-risk market in modern day memory — the cannabis sector, have made all us wish we were CCBC elite.

Could this be another how the ‘bad kid kicks ****’ in the market theme again? Is there anyone beyond me wondering how did we miss out on getting rich (again)? Better yet, can we still get into this market and make money? Now the rational minds steps in, and we must ask, ok if we can still get in and we do manage to get wickedly wealthy, can we then still visit our family and friends in the U.S. and shower them with gifts?

This is the intro to a CCBC series that the InvestorIntel Editorial Board has been debating non-stop for over 4-years now. With input from our editorial team, we are going to delve into significant issues facing our fast-rising CCBC billionaires, starting with what we deem to be their #1 critical challenge today with the classic: “But I am rich and can’t get into the U.S. problem….”

Let’s see if we can help, shall we?

Last week, two of the biggest pot companies — Canopy Growth Corporation (TSX: WEED | NYSE: CGC) and Aurora Cannabis Inc. (TSX: ACB | OTCQB: ACBFF) — saw their shares fall 14 and 9 per cent, respectively, on Thursday, the day a Politico report came out citing a senior U.S. border official that Canadians who invest in cannabis companies or work in the industry could be denied entry in the USA, even after the Cannabis Act is in place and cannabis is legal in Canada. Our email inboxes were flooded…but we already dealt with this, I responded to many…

It is not the first time this kind of narrative has affected the share price of cannabis stocks. In January of this year, US Attorney General Jeff Sessions revoked of the Cole Memo also rattled the cannabis industry with anxiety, which incited a market correction from which most cannabis stocks have recovered since then.

One of my associates reassures me that Canadian cannabis industry stakeholders are not being singled out. Then adds: “In the USA the use and possession of cannabis is illegal under federal law for any purpose, by way of the Controlled Substances Act of 1970. Under the CSA, cannabis is classified as a Schedule I substance, determined to have a high potential for abuse and no accepted medical use – thereby prohibiting even medical use of the drug. At the state level, however, policies regarding the medical and recreational use of cannabis vary greatly, and in many states conflict significantly with federal law.”

Today, the medical use of cannabis is legal (with a doctor’s recommendation) in 31 states, the District of Columbia, and the territories of Guam and Puerto Rico. Fifteen other states have laws that limit THC content, for the purpose of allowing access to products that are rich in cannabidiol (CBD), a non-psychoactive component of cannabis. Although cannabis remains a Schedule I drug, the Rohrabacher–Farr amendment prohibits federal prosecution of individuals complying with state medical cannabis laws.

The recreational use of cannabis is legal in 9 states (Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont, and Washington) plus the District of Columbia, and decriminalized in another 13 states plus the U.S. Virgin Islands.

On Thursday, cannabis stocks corrected, which we should see as not more than a sign of an extremely active investment market. Already the correction from last Thursday has been offset by gains in the following three trading sessions. Does this mean that no one believes this is an issue or they simply don’t care?

Corrections are inevitable. Canadian cannabis stocks have been “soaring” for a few weeks in anticipation worldwide, for the Cannabis Act on October 17. This does not affect the fundamentals of the industry. Neither does it affect optics.  Realistically the Canadian market is unchanged.  The Colorado market is unchanged. California, the biggest cannabis market is the USA is unchanged, the European demand for medical cannabis is unchanged.

Fiona Brown and Partner at Aird & Berlis wrote us in response to the question about whether an investor in the cannabis sector can get into the U.S. or not with: “If you indicate you have invested in or are doing business with a US-based cannabis company, whether directly or indirectly, you may be denied entry or barred permanently from entering the US. This is because cannabis is still a controlled substance that is illegal under US federal laws. However, so far, it seems that US officials have not taken the same level of interest in Canadians who are strictly involved with the Canadian cannabis industry.”

Still unsure of whether one can risk this lifetime barring for travel, one of our editors who asked that he be kept nameless, said: “Regardless the threat of a travel ban has existed for years. U.S. cannabis industry stakeholders would be right to scoff at this.” Adding: “Let’s not forget the fundamentals of the cannabis market:  there is a huge demand for medical and recreational cannabis worldwide. We should expect a time when cannabis will not be Schedule 1 drug along with heroin.”

Alright one source seems to think we should ‘scoff’ at this, and believe me, we all want to believe this, just as we all want to be asked to join the CCBC; but I have travelled through the border too many times to count and well, with Trudeau and Trump not exactly each other’s best friends today, could this be a fast way for the border patrol to make a point?

Not sure I want to be that illustrious example, the conclusion I have today is that “it depends”. If your border patrol officer doesn’t ask, no one cares. If they ask, then how do you answer? I mean if you only own shares in a CBD oil company that comes from hemp, does that count?

More investigation is needed. For now, we watch, wait and try and separate the endless fiction online as no one wants to be dealing with a lifetime entry restriction into the U.S. because they had a good year in market returns.


Tracy Weslosky is the founder and CEO for InvestorIntel Corp. (2001-Present), a leading online source of investor information that since 2001 has provided public market ... <Read more about Tracy Weslosky>

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  • Tracy Weslosky

    PUBLISHER’s NOTE: I received this email late last night and the source has agreed to allow me to publish the letter to me, as long as we publish ANONYMOUSLY.
    EXCERPT: “This is becoming a serious issue – or is it just some blowing smoke up our asses?

    The question really is how far will they go at the US border?

    So there are some obvious groups of people that US Customs or Border Police (whatever they are officially called) have concerns with and have referred to. Those obvious ones are founders and executives of such companies. Employees of cannabis companies are included in this group as well now. This is obvious, but how far will they go at the US border is yet to be seen.

    As per the article everyone is talking about, we now we have the issue of individual investors investing in the individual cannabis stocks. Not sure what to say about that – however we all read that recent article published a week back that everyone across Canada has re-circulated to one other. I received it from Bay Street people, doctors, business people and I think even my mother-in-law sent a copy to me. It was posted all over Facebook….. Will this truly be a problem for people trying to cross to the US? We will soon see as the snowbirds are going to start leaving in droves beginning the end of October through December – and then comes all the vacationers over Christmas. Many of these vacationers are condo owners in Florida, or California or Arizona. You get the idea.

    Will the US Border people begin to do spot checks and check peoples cell phone for specific words or company names to read their e-mails? Time will tell.

    Tracy, I have no idea how far this will go however could they go after executives or employees at Bell or Rogers who both provide internet services in most of these facilities? These companies also probably provide in some way an important piece of the security system for these companies as well. Remember, you can log into your phone (if you are an executive) and monitor the systems…..and all sorts of other things. Is the US Customs going to ban employees at any level at Bell or Rogers too as they provide a service to allow these cannabis companies to operate properly within the stipulated security regulations as per the Canadian rules for LP’s. I know it’s a far reach, but just saying…

    Let me take this a step further and I have no idea who these individual investors are – but does anyone on this e-mail list know if any of Canada’s large pension funds have stepped in and purchased cannabis stocks yet? Teacher’s Pension Plan, Hydro Pension Plan……If so, technically every single full time employee at these companies (school teachers, janitors, secretaries etc) who are forced into their pension plans technically could be turned back at the border. Am I crazy?

    What if you are simply a passive investors and invest in mutual funds? Need I say more. These investors don’t even really have an idea if you own any of these stocks in the funds.

    Could every single XXXXXX Bank employee be prohibited from entering the US? Why am I asking as an example? I think you know where I am going with this as XXXXXX is a wholly owned subsidiary of XXXXXX Bank. I know for fact that XXXXXX is allowing investors to buy and sell these stocks and XXXXXX is also acting as custodian of these stocks on behalf of their clients as well once the stocks are purchased. This goes for every other Canadian bank out there.

    The real question is where is the line drawn for this?

    Will Trudeau be allowed to cross the border? He is voting for the legalization of cannabis publicly. He can cross the border today to negotiate NAFTA but can he after this new policy that may be enacted becomes a reality? Is he not to be treated the same as any other Canadian citizen? He can openly pass the laws but still travel openly?

    I know I might be pushing the envelope a bit with these thoughts but where is the line drawn?

    Will the executives of Coke Canada (we saw the news a couple days ago regarding the fact they are talking to major cannabis companies now) be able to have meetings with the head office of Coke in the US?

    Did XXXXXX not participate a year or so back in the Canopy financing? Well what if you worked for XXXXXX? You work for a company that helped financing the largest cannabis company in Canada.

    I think this is way too big an issue for now.

    What will be interesting is if the US Customs people decided to monitor the Canadian Companies and start tracking the published executives. That is where I could see them starting. For example, Linton trying to go to NYC for a meeting and as soon as they scan his passport BOOM – he is rejected at the border. Could happen to others as well.

    Tracy, I am sure I am not he only one to have thought how deep this could go but it sure is going to be fun to watch for the next 3-4 months how it really plays out.

    If the US is really serious about this, what I mentioned above is the most obvious way to begin. Have you seen how these companies are trading? Did you see Tilray today? Canopy, Aphria or Aurora?

    The only ones at obvious risk are the public executives of these companies as they are todays ROCK STARS. Everyone knows who they are and it’s easy to get a list of the top 15-20, 30 or 50 cannabis companies and put their name in the system to stop them at the border.” — end of excerpt

    September 20, 2018 - 8:35 AM

    • Tracy Weslosky

      Just received an email from this ANONYMOUS source requesting that the following point must be stressed as a condition for the publishing of this email. ANONYMOUS writes: “Does this mean that a huge population will now be turned back at the border for being an employee at any of these institutions?” —

      September 20, 2018 - 8:39 AM

  • Sharron Clayton

    The pension plans that have already participated that we know of to date are Alberta Investment Management Corp. and British Columbia Investment Management Corp. as well as Canada Post who had all invested in Canopy Growth.

    September 20, 2018 - 10:02 AM

  • Sharron Clayton

    “The federal government is looking to scour social-media platforms to find out what Canadians really think about pot as the country enters its new era of legalized weed.” It makes me wonder what else they will use the data for.

    September 21, 2018 - 8:13 AM

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