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Friends,
While the U.S. gets a lot of attention from cannabis investors, the industry faces many challenges in America. More than 12 years have passed since Colorado stores opened their doors to adults, extending beyond medical patients, and many states have adopted medical cannabis and adult-use cannabis since then. While legal cannabis has extended substantially, it remains a state-regulated market, and each state is very different in terms of rules and regulations. Cannabis remains illegal federally, and the industry continues to be weighed down by 280E taxation.
Cannabis markets outside of the U.S. continue to evolve. Canada revised its federal medical cannabis program in 2013, with MMPR replacing MMAR, and the current Access to Cannabis for Medical Purposes Regulations (ACMPR) replaced MMPR in 2016. Justin Trudeau, who was elected prime minister in late 2015, had cannabis legalization for adults on his agenda, and Canada became the first large country in the world to accomplish adult-use legalization in 2018. The program has its challenges, but the industry has grown as it has matured. StatsCan will provide the December sales data tomorrow, and it appears that cannabis sales increased about 4% for 2025.
Other countries have advanced their medical cannabis, including Australia, Germany and Israel, and Germany legalized for adult-use. The Netherlands have been trialing in coffee shops. Uruguay, a small country, began legal cannabis sales for adult-use in 2017, and Germany began a program in 2024 that makes cannabis legal for adults, though the sales are through social clubs. While this program hasn’t created commercial opportunities directly, it has boosted the medical cannabis market. Unlike Canada, where cannabis is sold by the provinces, cannabis in Germany is sold at traditional pharmacies. A substantial amount of the medical cannabis sold in Germany is imported from Canada. David Brown of StratCann suggested six months ago that nearly 50% of German cannabis imports in Q2 were from Canada.
The Global Cannabis Stock Index, which was last rebalanced at year-end, has 7 Canadian LPs in it, and these NASDAQ-listed companies tend to be active in international markets. Most of the MSOs in the U.S. operate solely there, but one, Curaleaf, does have international operations. Curaleaf trades on the TSX in Canada, but it trades over-the-counter in the U.S. The company reported overall revenue in its Q3 of $320 million, and its international operations (in Canada, Germany, Portugal, Spain and the U.K.) represented just 14.4%. Year-to-date, it was reported at just 12.9%, as it has been growing while domestic revenue has been falling.
The Canadian LPs in the index are Aurora Cannabis, Canopy Growth, Cronos Group, Organigram, SNDL, Tilray Brands and Village Farms. SNDL, which is more of an alcohol retailer than a cannabis retailer, has no international sales of cannabis. The other six are active and getting more active. This week, Organigram announced a pending acquisition of the rest of a German cannabis company, and it was already active in other markets. Cronos Group announced an acquisition of CanAdelaar, a deal that is supposed to close soon and to give it access to the Netherlands. Canopy Growth is acquiring MTL Cannabis, and increasing exports of medical cannabis was a benefit that it pointed out.
I warned here about Canadian LPs in late November, and I now am more optimistic on this part of the cannabis market. At the time, I had 5 of the 7 GCSI members on my Focus List at 420 Investor, but I added Aurora Cannabis when they reported their fiscal Q3 and fell. Here is how all 7 have performed since late November:
My 420 Investor model portfolio includes a small position in Tilray Brands, a large position in Aurora Cannabis, and a very large position in Organigram. These three positions represent 31.9% of the portfolio, while the GCSI has 27.4% exposure.
The Canadian LP market has certainly been cheaper than it is now, but it seems cheap enough. The balance sheets have improved dramatically, and some of these large companies trade below tangible book value. The NASDAQ listings are superior to the OTC listings that the MSOs hold. The Canadian market could improve, though I am not counting on it, and international expansion could continue to help the federally legal Canadian LPs export more or expand into other countries. These international operations introduce risks too. I see a big international opportunity potentially for the Canadian LPs, and it seems that investors aren’t quite excited currently.
Sincerely,
Alan
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past 2 weeks:
Exclusives
Big Cannabis Companies Are Set to Report Q4 Financials
M&A
Organigram Global to Buy Sanity Group
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