Silver Linings for the Cannabis Industry

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As cannabis consumers and the industry prepare to celebrate the most challenging 4/20 imaginable tomorrow, it’s easy to get caught up in the negativity of the current moment. Beyond the extensive loss of lives, the threat to the welfare of all of us and the unimaginable rapid loss of so many jobs, our industry in particular has been waylaid by the health crisis.

We have written extensively over the past month of the intensification of the capital crunch, and this will continue to weigh upon the industry for quite some time. It has also become clear that legal cannabis consumption will be challenged by logistical barriers as well as legal ones, like Massachusetts shutting down the adult-use market.

Many of the positive drivers we had expected to emerge in the back half of the year will now be deferred. The Canadian cannabis market is in desperate need of a quick roll out of the newly legal products like vape pens and edibles as well as the opening of stores in Ontario, but both of these will be delayed. In the United States, the potential for several states to legalize through the legislative process has slipped away, for now.

Despite these setbacks, we are more optimistic than ever that legalization efforts will be successful when the crisis passes, as state governments will be looking to plug massive budget deficits and add jobs.

Another silver lining is that the pandemic has moved several states to liberalize how patients and consumers access their cannabis, permitting curbside pickup and delivery when these were previously not allowed. We think that these are likely to become permanent fixtures, a move that could help the legal cannabis industry gain an edge over the illicit market, which certainly has enjoyed the convenience advantage.

Finally, while it is certainly tragic for the many companies that won’t make it, we think that some of the largest cannabis operators will enjoy greater market share when we emerge from this downturn.

Leading cannabis ancillary operator KushCo Holdings announced a new strategic plan of getting to positive Adjusted EBITDA when they released their FY20-Q2 results on April 10th. According to the company, and following comprehensive restructuring activities, it will benefit from significantly lower revenue levels needed to achieve profitability. Since 2010, KushCo has sold more than 1 billion units across North America, South America, and Europe to legally operated medical and adult-use dispensaries, growers, brands, processors, and producers. Today, 80% of business is now driven by a more stable, predictable, creditworthy and financially stronger customer group.

Get up to speed by visiting the KushCo Holdings Investor Dashboard that we maintain on their behalf as a client of New Cannabis Ventures. Click the blue Follow Company button in order to stay up to date with their progress.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:

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Alan & Joel

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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