Cannabis Focus Shifting From Expansion To Profitability With Debra Borchardt (Podcast)

Summary

• Debra Borchardt, CEO, Co-founder and Editor-in-Chief of cannabis financial news site Green Market Report, joins us for our 50th episode to discuss the state of the cannabis market.
• We cover the disruptive possibility of the US descheduling cannabis, Canada's correction and Europe's disappointing cannabis picture.
• We also discuss why Debra's bullish on Trulieve despite short report, as well as Cresco Labs, Green Thumb Industries, Acreage Holdings + more!

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By Rena Sherbill

Today, I am happy to be joined again by Debra Borchardt. Debra is the CEO, Co-founder, and Editor-in-Chief of the cannabis financial news website Green Market Report. She began her career in the securities industry where she was a Vice President at Bear Stearns and is also co-founder of the cannabis executive women's networking group, Industry Power Women. Debra, named by Forbes to be one of the 15 most powerful and innovative women in cannabis, was on the show back in September and as an industry veteran, we're happy to have her back on to discuss cannabis in 2020, what happens if the US government deschedules cannabis and the somewhat promising picture in Illinois.

Topics include:

• 7:00 - Canadian LPs and cannabis 2.0 ultimately will play out well but it has gotten off to a much slower start than anticipated and has thus dampened investors' spirits.
• 8:20 - Regulations and restrictions have contributed to slow roll out. Prices going down, companies struggling with capital and a supply glut all contribute to disappointing picture in Canada as well as some of the State's rollout. There were some lines out the door but not as big numbers as anticipated because of temporary restrictions. The markets will gain traction. Vote coming this week in Detroit that's expected to go adult-use legal.
• 12:00 - Illinois expected to be a big market but lots of restrictions. Cresco Labs (OTCQX:CRLBF) and Green Thumb Industries (OTCQX:GTBIF) are good plays for Illinois as they've pretty much locked up that market and have first-mover advantage. They're also both well-run companies.
• 15:05 - Have to be in it for the long-term. Trulieve (OTCQX:TCNNF) has locked up the Florida market and is profitable. Some truth in the Grizzly Report, but much of it was already disclosed. Some bits for investors to grapple with, but nothing that looks illegal. It has been difficult to get real estate because of capital restrictions so uncomfortable and creative workarounds look different in this environment than in the environment of a few years ago. Trulieve has real grows, real products, real money, and they've been upfront.
• 20:45 - Cam Battley leaving Aurora (ACB). Aurora went on a spending spree a few years ago at inflated prices so it's not surprising it's come back to bite them. Analysts have recently downgraded the stock, but it's not limited to Aurora. Other companies have gotten out over their skies and that's why they're starting to sell assets and licenses. The word of the day has shifted from expansion to profitability.
• 22:49 - Top picks for responsible growers: Green Thumb, Cresco Labs, some private up and coming MSOs. Trulieve you have to decide your level of comfort but still bullish on the stock.
• 25:53 - 2020 cannabis outlook. Industry is under lots of pressure, we'll see a shakeout and players go under. Already hearing of companies not paying their bills and investors are starting to get antsy because they're getting to the three year mark of 3-5 year promised payout. 2020 will see a push to profitability and if you're not profitable you'll get pushed out. Capital is drying up sector wide; we'll see budgets get trimmed. We'll see more consolidation but the winners will also come to the forefront. It will be a healthy business cycle.
• 29:39 - Canadian LPs plans haven't panned out, but the numbers were never going to be that big because of size. Problems in Europe have to do with stigma, packaging restrictions and other prohibitive regulations - still considered a gateway drug there. Much more challenging than people hoped for. Valuations are correcting themselves.
• 35:45 - CBD market will be huge, but it will be difficult to figure out because FDA is still figuring out regulatory picture. Will likely be divided into supplemental, pharma/drug and food divisions, but companies can't really describe and market their products until that's figured out. Charlotte's Web (OTCQX:CWBHF) is an interesting case because it's been shown to be an effective product and a respected seller, but it's a struggle to describe their product. Still very little information and they're facing a lot of competition, but they're well run. CV Sciences (OTCQB:CVSI) has been under a lot of pressure, but is another good CBD play.
• 41:00 - International markets. Africa looks promising, but it still seems too soon to tell. Big gamble considering regulatory + government restrictions. But other people argue that if cannabis gets descheduled there wouldn't be any issues with importing and exporting and it would become another commodity.
• 44:10 - SAFE Banking Act has a better chance of passing than the States Act because it's less stigmatized. But with impeachment, it's the last thing people are talking about. Debra more convinced of the nuclear option - full descheduling of cannabis - which would mean cannabis in convenience stores and change the industry dramatically. Acreage Holdings (OTCQX:ACRGF) making deals based on this possibility. Lobbying coming from convenience stores, big tobacco and alcohol. Fire and Flower (OTCQX:FFLWF), Couche-Tard (OTCPK:ANCUF) some plays on this.