EDITOR: | October 20th, 2015 | 4 Comments

The Impact of the Liberal Majority on Canada’s Marijuana Industry

| October 20, 2015 | 4 Comments
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medical-marijuanaWe’ve previously looked at the possible impact of various electoral outcomes on Canada’s cannabis industry. On Oct 19 the Liberal Party cruised home to a majority of seats in the House of Commons, meaning their agenda will be implemented with little real opposition over the next four years.

The Liberal Position on marijuana is very clear: “If we pass smart laws that tax and strictly regulate marijuana, we can better protect our kids, while preventing millions of dollars from going into the pockets of criminal organizations and street gangs.”

Watch for legislation to be introduced that amends the Criminal Code and the Controlled Drugs and Substances Act to allow for decriminalization and licencing, much like alcohol and tobacco. On the medical side, expect further licences to be granted to MMPR applicants, and expect the range of medical products to be expanded (see our analysis on the Smith decision from the Supreme Court of Canada.)

This will generate additional tax revenue to the feds and the provinces (see our prior tax analysis here). Full-time jobs will be created. There will also be less government money spent on street level policing for marijuana, and a clearing of the backlog in the criminal justice system. Financially, all of that is good for Canadians and the dollar.

On a more micro basis, there is less risk associated today with the marijuana stocks so expect them to rally. Share prices will fluctuate in accordance with the usual factors but over the long run the market is in a far better position than it would have been under the Conservatives.

The next two drivers of value in the cannabis industry will be the Allard decision from the Federal Court of Appeal (our historic analysis is here, and remains accurate) and the exact terms of the legislation to be introduced by the Liberals when Parliament is formed. The grey market in MMPR applicants continues to grow with valuations decreasing as more capital is consumed pending the application process being completed.

We are at the end of Marijuana Prohibition. The Allard decision will go a long way to determining who the winners will be, but the Liberal majority ensures that there will be winners.


Peter Clausi

Editor:

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>


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Comments

  • Luc C Duchesne

    Peter, I agree with your analysis. I think the only unknown is the timing of the legalization. I’m guessing the new government will leverage the current licensed production system (MMPR) for production to protect the public and detract naysayers. Notwithstanding the above, the Allard decision will also carry a lot of weight. I also guess the new government is going to look at the MJ industry as a source of revenues, which may speed up the legalization process. Do you think they will call this Act 4/20?

    October 23, 2015 - 8:15 PM

  • Ted Gulliver

    Hi Peter: Is the Allard case at the Federal Court level or the Federal Court of Appeal. If the Federal Court, the case could go to the Federal Court of Appeal and then the Supreme Court of Canada. If the interim injunction stays in place, we could be in for a long wait before a decision. I am not sure whether this will interfere with the Liberal`s plans. on the legality of marihuana as opposed to the decriminalization.. Cheers Ted

    October 26, 2015 - 9:04 PM

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