Winners were announced on Saturday, and many large corporations are pursuing these winners… especially retailers with larger operations outside of the province and a yearning to enter Ontario. Most of these large producers were shut out of the opportunity to apply in general, leaving the licenses to be awarded randomly, and the real professionals grinding at the teeth. There were over 17,300 expressions of interest in the draw, but shockingly 64% were from sole proprietors. So why were the odds stacked against the established retailers?
It seems the system was set this way because of the government’s waiving uncertainty around the supply issues that may arise. We continue to hear them say “the lottery process was the best way to ensure fairness for applicants”… Let that one soak in for a little bit. As we stated before, why would any process that gives equal application weight to an individual citizen, over the heavily invested corporations of the sector, be a good thing for the growing economy?
We are told that large retail operators, such as Western Canada based, “Starbuds” and a few other offshore investors as far as Amsterdam, are offering nothing short of lucrative franchise agreements/investments to any license winners willing to step up to the plate. It has been reported that multiple winners have already received offers north of $5,000,000. There has also been much interest from National Access Cannabis (TSXV: META), with plans to open hundreds of retail cannabis chains with their partners over at Second Cup. Tilray (NASDAQ: TLRY) CEO Brendan Kennedy has confirmed his company has been in touch with Ontario lottery winners as well. This just seems like more of a mess in an already cluttered system, and more expenses for the already struggling and growing cannabis companies as well as a major risk of fines starting at $12,500 for any of the sole proprietors who won a license but can’t get the doors open by April 1st. Fines could rise as high as $50,000 if the retail store isn’t opened by April 30th. This is not the way to establish a successful retail industry; forcing larger corporations to give lucrative deals to sole proprietors, whom may have little to no experience in this type of operating field of retail, thus diluting the larger corporations interests in making the business a success. Looks like the Ford administration enjoys keeping us on our toes.
Currently, the price of a gram is hovering at $9.50 – $9.75, while the illicit black market is said to be as low as $6.51 according to stats Canada. This doesn’t worry us much, because we feel very certain of two overlying factors in today’s market. The first is the consumer’s fear of shopping the black market for risk of obtaining a criminal record if caught. This is especially not worth a couple dollars per gram that they would be saving, while possibly putting their life and career at risk for something that is virtually legal in all forms (or soon to be as of this fall’s edible rush.) Secondly, the Cannabis entrepreneurial spirit is unwavering. We won’t let government’s mismanagement stand in our way. From owners and operators to investors and consumers, most if not all believe in their products, believe in the benefits of Cannabis in today’s society, and will continue to push forward, raise more capital if needed, and eventually grow what will be the foundational support of an entire Canadian made industry.
Remember to keep your eyes open for any of the lottery winners and feel free to connect them with the Cannabis Investor for an exclusive interview.
Keep following the story, and Happy Investing!
6 years experience in Capital Markets with a degree of Entrepreneurship and finance Ryerson University. You can find Alex on his free time, pursuing his multiple business endeavours, with his family, or playing music around the city. Feel free to follow him @alexxsimonelli
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