Marijuana and the Canadian Election
The Canadian marijuana market is suffering difficult times and has been hammered since March, 2014.
Tweed Marijuana Inc. did show a “profit” in its latest quarter, but that number was a fiction created by accounting standards and not real operations. (As an aside, this is yet another example of the International Standards Accounting Board imposing change without actually making a difference.) There is little opportunity for the MMPR’s to create value for their shareholders until two events play out.
The first event is the Allard decision from the Federal Court of Appeal. Click here and here for a review of why that decision is so important to the industry. The decision is due to be released anytime.
Our call is the Federal Court of Appeal will lean towards the Supreme Court of Canada’s philosophy in Smith – this means the rights of the medical patient will take priority over federal legislation, and the old MMAR’s will survive in some fashion for some time. That’s a huge negative for the new MMPR’s. Expect the market to take another hit when that decision is released.
The other major event is the federal election, set for October 19. Who wins what in the election will have a long-lasting impact on the medical, recreational and hemp markets.
What are the best guesses for the election outcome?
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The Canadian Broadcasting Corporation maintains a website with its most up-to-date predictions, poll by poll. The most current numbers show the leftist NDP has 32% of voting support, with the Liberals and Conservatives practically tied for second place. These numbers have been tracking with each party dancing at the 30% level.
The Election Almanac shows other polls with similar numbers. Each of the three major parties is flirting with 30.
The only realistic outcomes are a government consisting of NDP / Liberal, NDP / Conservative, or Liberal / Conservative. Whatever happens, the government of the day will be determined by which two parties can form a coalition against the third, and the leader of the party that wins the greatest number of seats may not necessarily be the Prime Minister. The fringe parties won’t win enough seats (if any) to make a difference.
Any coalition that has the Conservative party in it will not be favourable for the medical, recreational or hemp markets. As evidenced by Ms. Rona Ambrose’s ill-advised rant against the Supreme Court of Canada following the Smith decision, Prime Minister Harper’s team has consistently been against marijuana in any form and that can’t be expected to change. There might be a minor lift driven by edibles and cannabinoids, but don’t expect much upside in share prices for some time if the Conservatives have any power.
In a coalition with the Conservatives, neither the Liberals nor the NDP will choose to die on the marijuana battlefield.
The best result for marijuana and hemp companies is if the Liberals and NDP form the government coalition together. Then investors could expect some relaxation in the criminality of marijuana. The licencing restrictions on hemp may ease. Neither edibles nor CBD’s will be statutorily condemned. And all of that would create good revenue potential, and that would be good for share prices.
Experienced traders will trade on the poll results to make pennies as share prices move daily in reaction to perceived public sentiment. Long-term investors will make dollars predicting the actual election outcome.
Mr. Clausi is an experienced investment banker, executive and director. A graduate of Osgoode Hall Law School called to Ontario's bar in 1990, Mr. Clausi ... <Read more about Peter Clausi>