Part I: Political
Our Northern Friends almost, finally did it. The Canadian Senate made history in Ottowa this past Friday. They passed the 3rd reading on Legislation on C-45. Canada’s C-45 Bill , championed by Prime Minister Justin Trudeau, proposes to legalize access to cannabis, while controlling and regulating how it is grown, distributed, and sold. The Cannabis Act will also make changes to the Controlled Substances Act, the Criminal Code, and other related acts. There were 56 “yeas”, 30 “nays” and 1 abstention in this third reading of the Bill in the House of Commons.
So, what’s next? Because Bill C-45 passed after this third reading, the bill is now making its way to the Senate for one more vote, taking into account any additional changes made so far. Dozens of amendments were recommended, but the only one that is really being taken seriously is that the Senate has called on the government to let Provinces ban home cultivation of cannabis if they want. The reason that Senators are concerned about home cultivation is some of the larger Provinces like Quebec & Manitoba realize that policing home cultivators may be very challenging. One solution is to allow Provinces to let landlords ban home cannabis cultivation. However, this is a criminal code matter, so this issue typically belongs to federal jurisdiction.
In the Canadian government, a bill can only become law once it has passed both Chambers of Parliament and then received by Royal Assent. In other words, the C-45 Bill is within breathing distance of becoming a law.
Part II: Economic
The magnitude of political support to legalize recreational cannabis is creating a force powerful enough to nudge the Canadian economy in the upward direction. Perhaps one of the biggest drivers to legalize cannabis is the desire to transfer billions of dollars worth of top line revenue from the black market into the pockets of governments and people supporting the legal, regulated one. Some people like Brad Rogers, President and COO of CannTrust, are bullish on cannabis stocks during this transitionary period. Despite only doing $7.85MM last quarter, CannTrust’s market cap is nearly $1B. Rogers believes they are undervalued because of the global $180B global opportunity and the variety of other verticals (e.g. beauty & pet products industry) that they could pursue.
The logic of this, however, is not quite air tight. CannTrust’s balance sheet at year end showed equity of $70.9MM. The company reported sales of $20.7MM last year, but a net income of just $6.89MM. Based on their 76.88MM shares outstanding and a stock price of $6.17/share, their market cap is probably closer to $474.3MM.
Others share the skepticism and are bearish because of the demand uncertainty and sales that have been shy of shareholders’ expectations. Ontario’s Progressive Conservative leader Doug Ford is wary of Canada’s existing distribution plan. At present, the C-45 Bill is written so that Provincial governments will distribute recreational cannabis through a government monopoly. Instead, Ford believes private shops should also be able to sell cannabis, and that ultimately the free market should dictate sales instead of the government.
Part III: Health
Canada is on track to becoming the first leader in the G-7 to legalize cannabis. With the adoption of its pioneering C-45 Bill, Canada has created a foundation upon which the rest of the world will learn from and, ultimately, adopt.
The international community is following suit. Some of the most influential international forces are currently in the process of re-evaluating of cannabis as a legitimate source of medicine and recreation for consumers. One example is the World Health Organization (WHO), a specialized agency within the United Nations. Their primary role is to direct international health – which they define as a state of physical, mental, and social well-being, not just the absence of disease or infirmity – within the United Nations’ system and to lead partners in global health responses.
The WHO is taking the first step forward in rescheduling cannabis. This past week, Americans for Safe Access (ASA) and the International Medical Cannabis Patients Coalition (IMCPC) delivered testimonies advocating for a change in the Schedule 1 status that cannabis currently holds. They delivered these testimonies in front of the World Health Organization’s Expert Committee on Drug Dependence (ECDD) in Geneva, Switzerland. Multiple patient advocacy groups from Argentina, France, Germany, Mexico, New Zealand, the Netherlands, Mexico, South Africa, and the U.S. were also present at the meeting.
Steph Sherer, Executive Director ASA opined, “The current international policies of cannabis are outdated” and that “these policies do not reflect the reality of over 30 countries globally that have passed medical cannabis laws”. After taking these arguments into consideration, the ECDD is now reviewing and assessing the medical uses and harms of cannabis to ultimately recommend the most appropriate classification for the international community.
“The reports posted by WHO are supportive of nations considering rescheduling or de-scheduling CBD, pure-THC, cannabis, and cannabis extracts,” said ASA Chief Science Officer, Jahan Marcu, Phd., “Hopefully, the work of the WHO will allow international leaders to expand access with policy recommendations and changes with reports showing that the public health risk of cannabis and its extracts are minimal.”