Alan Brochstein, founding partner at New Cannabis Ventures and founder at 420 Investor was a guest in Benzinga’s PreMarket Prep show this week and shared some insight into the cannabis industry going into 2017.
The Situation In The U.S.: A Tale Of 2 Cities
“We’ve thrown a real curve ball,” he commenced. “[A couple of months ago], I think everybody believed Hillary [Clinton] was going to get elected. That didn’t pan out and there's some big implications.”
However, he added, state elections “couldn’t have gone any better. Florida voted to go legal for medical reasons [getting a] 71-and-a-half percent margin of victory. And, of the five states that were going just legal, only Arizona failed. So, we got Massachusetts, which is the first big East coast state. Maine just squeaked by, so, another East coast state. The biggest of all, California, [was also seen] going legal; and then, Nevada as well. So, it was kind of a tale of two cities: best times, worst of times. The best times, all the states going legal; worst of times, very uncertain about what's going to happen going forward, and this is something that really hurt the market.”
“I don't think there's a problem with Donald Trump per se,” he supplemented. “It's not a big issue of his, and one of the first things he did was a point Jeff Sessions his attorney general, and I don't think you can pick a bigger hater than that guy.”
The Canadian Market
With such high uncertainty in the United States, should investors turn to the Canadian market?
“This market had just an incredible year,” Brochstein pointed out. “I have been very bullish on the sector, and it was like a light bulb went off a year ago when Justin Trudeau got elected; it was obvious that this is going to a game changer.”
“For those that aren't familiar, Canada has the only federally legal medical cannabis program in the world right now, or at least, you know, in a large country, and Germany may be joining them next year,” he explained. “But they're moving towards full legalization, which is a really tricky thing because that's really against the United Nations treaties, so we'll see how that plays out. But, Canada's in this very interesting position where you have a limited number of producers [...] there's now 37 licenses that have been handed out.”
Brochstein recently published an article titled "Why Cannabis Investors Prefer Canada," in which he explicated why “it’s just so much easier to operate when you're federally legal and I pointed some tax issues as being a really important part of it [same as the access to capital].”
“These companies raised over 500 million Canadian [dollars] through equity and equity warrant offerings, and that doesn't even include some of the warrant exercises. So, in the United States, [we saw] about 375 million dollars' worth of capital raised.” Canada’s medical program “is zooming.”
In part two of this interview, Brochstein discusses Canadian stocks to watch and the anticipated licensing explosion.
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