1 00:00:11,119 --> 00:00:14,240 Speaker 1: Hello, and welcome to another episode of the Oblots podcast. 2 00:00:14,320 --> 00:00:17,840 Speaker 1: I'm Joe Wise and Paul and I'll Tracy. You want 3 00:00:17,840 --> 00:00:22,440 Speaker 1: to hear something funny always? So, I think in our 4 00:00:22,480 --> 00:00:25,160 Speaker 1: work chat the other day, I don't think you were online. 5 00:00:25,960 --> 00:00:27,400 Speaker 1: I think you were off that day. But in our 6 00:00:27,400 --> 00:00:29,520 Speaker 1: work chat the other day, I was talking to some 7 00:00:29,600 --> 00:00:32,040 Speaker 1: of our colleagues and I found out that they have 8 00:00:32,120 --> 00:00:35,640 Speaker 1: a different description of me and you. They have a 9 00:00:35,680 --> 00:00:39,880 Speaker 1: different way of thinking about our roles. Oh really, okay, 10 00:00:40,040 --> 00:00:43,680 Speaker 1: have you heard this? I'm very curious. No, okay, So 11 00:00:44,520 --> 00:00:47,280 Speaker 1: you know how like I am always sort of jumping 12 00:00:47,520 --> 00:00:51,040 Speaker 1: on like whatever the hot market story is. Last year 13 00:00:51,200 --> 00:00:54,240 Speaker 1: I was talking about crypto a lot, and this year 14 00:00:54,280 --> 00:00:56,960 Speaker 1: I wrote an article about cannabis or whatever it is. 15 00:00:57,560 --> 00:01:01,680 Speaker 1: And you consistently cover of the very serious things, right, 16 00:01:01,720 --> 00:01:06,520 Speaker 1: So you're it's like credit markets and market structure, and 17 00:01:06,560 --> 00:01:09,600 Speaker 1: you basically have an understanding of the things that will 18 00:01:09,640 --> 00:01:12,600 Speaker 1: be enduring through markets for a long time, whereas I'm 19 00:01:12,640 --> 00:01:14,839 Speaker 1: much more flighty and just sort of jumped to whatever 20 00:01:14,959 --> 00:01:18,800 Speaker 1: is hot. So anyway, apparently they say that that I'm 21 00:01:18,840 --> 00:01:22,319 Speaker 1: the momentum I'm the momentum factor, and you're the value factor. 22 00:01:22,440 --> 00:01:25,800 Speaker 1: Is sort of how they see our different roles, and 23 00:01:25,920 --> 00:01:30,560 Speaker 1: that perfect. That's great. Um, I guess we need to 24 00:01:30,640 --> 00:01:34,400 Speaker 1: think about rebranding add thoughts as a momentum and value, 25 00:01:35,040 --> 00:01:37,920 Speaker 1: cause it sounds like a terrible like sitcom, but it 26 00:01:38,000 --> 00:01:41,880 Speaker 1: is a good characterization anyway. So, you know, I wrote 27 00:01:41,920 --> 00:01:44,960 Speaker 1: the story a few weeks ago for Business Week about 28 00:01:45,160 --> 00:01:48,840 Speaker 1: exactly what I'm talking about, cannabis and crypto and various 29 00:01:48,840 --> 00:01:51,840 Speaker 1: investing fads and bubbles and psychology and stuff like that. 30 00:01:52,520 --> 00:01:57,320 Speaker 1: And in doing the research for that story, I came 31 00:01:57,440 --> 00:02:02,080 Speaker 1: across what at the time was a group of anonymous 32 00:02:02,120 --> 00:02:07,559 Speaker 1: experts in marijuana investing called the Canna Lists, and they 33 00:02:07,640 --> 00:02:12,639 Speaker 1: have a podcast and a page on Reddit where they analyze, 34 00:02:12,840 --> 00:02:16,919 Speaker 1: really intensely breakdown the various businesses of all these marijuana 35 00:02:16,919 --> 00:02:19,760 Speaker 1: companies that people are investing in. And it's pretty clear 36 00:02:19,800 --> 00:02:22,200 Speaker 1: that they're very far ahead of the pack, like a 37 00:02:22,240 --> 00:02:26,480 Speaker 1: few different guys whose understanding of the granularity of the 38 00:02:26,520 --> 00:02:31,079 Speaker 1: industry are far above where most of the media and uh, 39 00:02:31,160 --> 00:02:35,399 Speaker 1: most Wall Street analysts are on this nascent area. Right. 40 00:02:35,480 --> 00:02:38,120 Speaker 1: So I remember reading a little bit about this in 41 00:02:38,320 --> 00:02:40,240 Speaker 1: that piece that you did for a Business Week, and 42 00:02:40,320 --> 00:02:42,480 Speaker 1: I thought it was really fascinating because every once in 43 00:02:42,520 --> 00:02:47,200 Speaker 1: a while you see these communities essentially spring up on Reddit, 44 00:02:47,840 --> 00:02:52,200 Speaker 1: and uh, sometimes these communities go into an insane amount 45 00:02:52,240 --> 00:02:56,240 Speaker 1: of granular detail about what they're talking about, and the 46 00:02:56,320 --> 00:02:59,520 Speaker 1: Catalysts is definitely one of those. And even though you know, 47 00:02:59,560 --> 00:03:01,840 Speaker 1: I started by saying how you and I we we 48 00:03:01,919 --> 00:03:05,400 Speaker 1: sort of have different complementary approaches. One thing that I 49 00:03:05,480 --> 00:03:08,440 Speaker 1: know both of us are very fond of is any 50 00:03:08,440 --> 00:03:12,799 Speaker 1: stories of essentially someone on the Internet becoming the ax 51 00:03:13,000 --> 00:03:14,880 Speaker 1: in a certain space. So like we both used to 52 00:03:15,400 --> 00:03:19,480 Speaker 1: like Calculated Risk Bill McBride, we had him on the podcast, 53 00:03:19,520 --> 00:03:22,519 Speaker 1: Like we both love these stories of like someone online 54 00:03:23,000 --> 00:03:26,560 Speaker 1: on their own, independent of major institution, is becoming the expert, 55 00:03:26,639 --> 00:03:30,720 Speaker 1: becoming the must read on some new area, right especially 56 00:03:30,800 --> 00:03:32,959 Speaker 1: when it's new. And that's I think the thing that's 57 00:03:32,960 --> 00:03:35,640 Speaker 1: the most interesting about cannabis stocks right now, because you're 58 00:03:35,680 --> 00:03:40,000 Speaker 1: talking about an entirely new industry potentially with a whole 59 00:03:40,000 --> 00:03:43,160 Speaker 1: new set of rules, in a whole new way of functioning, 60 00:03:43,640 --> 00:03:46,560 Speaker 1: and a lot of the people, the traditional people, the 61 00:03:46,600 --> 00:03:49,840 Speaker 1: cell side analysts on Wall Street haven't really wrapped their 62 00:03:49,880 --> 00:03:53,040 Speaker 1: heads around it just yet exactly right. So the interesting 63 00:03:53,080 --> 00:03:57,280 Speaker 1: thing is right after my article came out. The Canalysts, Uh, 64 00:03:57,320 --> 00:04:00,560 Speaker 1: they d anonymize themselves. They docks themselves in real and 65 00:04:00,960 --> 00:04:04,800 Speaker 1: revealed who they are. And we're very lucky because one 66 00:04:04,840 --> 00:04:08,400 Speaker 1: of them has agreed to come on Today's Odd Lots podcasts. 67 00:04:08,480 --> 00:04:12,040 Speaker 1: So I would like to bring in uh, Craig Wiggins. 68 00:04:12,120 --> 00:04:14,680 Speaker 1: He is one of the three Canalysts. Craig, thank you 69 00:04:14,760 --> 00:04:18,520 Speaker 1: very much for joining us. Joe Tracy pleas pleasure to 70 00:04:18,520 --> 00:04:21,159 Speaker 1: be here. It's it's nice to be a guest on 71 00:04:21,200 --> 00:04:23,599 Speaker 1: a podcast and not have to run the run the show. 72 00:04:23,800 --> 00:04:26,280 Speaker 1: I know it's really I've been whenever a few times 73 00:04:26,320 --> 00:04:28,799 Speaker 1: I've been a guest on a podcast, I always appreciate 74 00:04:28,839 --> 00:04:31,960 Speaker 1: how much easier it is. I'm glad you're with us. 75 00:04:32,360 --> 00:04:34,839 Speaker 1: Tell us, why don't you just give us the background? 76 00:04:34,880 --> 00:04:37,000 Speaker 1: Who are you? Who are the cannalysts? And why do 77 00:04:37,120 --> 00:04:42,040 Speaker 1: people read your stuff? Well? With respect to the cannalysts, 78 00:04:42,600 --> 00:04:46,960 Speaker 1: I actually found both Cytochrome Graham Jones, who's our PhD 79 00:04:47,040 --> 00:04:52,400 Speaker 1: candidate at Brock University in biotech, and Molly Time Andrew 80 00:04:52,480 --> 00:04:56,560 Speaker 1: Udell on social media forums and the social media forums. 81 00:04:57,480 --> 00:05:00,880 Speaker 1: You would think in most cases you to these farms 82 00:05:01,000 --> 00:05:06,120 Speaker 1: and uh, someone characterized it as a zoo very loose dialogue, 83 00:05:06,120 --> 00:05:09,400 Speaker 1: a lot of pumpers, a lot of bashers and the like. 84 00:05:09,960 --> 00:05:13,920 Speaker 1: But both these individuals I found to be incredibly intelligent 85 00:05:13,960 --> 00:05:15,800 Speaker 1: and boy was that was that or a good call 86 00:05:15,880 --> 00:05:20,240 Speaker 1: in my base my part, So we were both All 87 00:05:20,240 --> 00:05:23,560 Speaker 1: three of us were casually introduced by myself as a 88 00:05:23,560 --> 00:05:26,200 Speaker 1: as a group, and in November of last year, we 89 00:05:26,320 --> 00:05:32,160 Speaker 1: decided to break off from another reddit, weedstocks subreddit and 90 00:05:32,240 --> 00:05:37,120 Speaker 1: formed the Cannabists because we wanted a curated place for 91 00:05:37,200 --> 00:05:43,080 Speaker 1: engaged investors that was deep, it wasn't people giving opinions 92 00:05:43,120 --> 00:05:47,440 Speaker 1: without fact. So we actually formed the Cannabists last November, 93 00:05:47,560 --> 00:05:51,480 Speaker 1: very late November early December last year, and we've had 94 00:05:51,600 --> 00:05:55,640 Speaker 1: quite quite a run of it lately. We have several platforms. 95 00:05:56,360 --> 00:06:01,200 Speaker 1: We use our quarterly earnings analysis where I complete rundowns. 96 00:06:01,240 --> 00:06:04,080 Speaker 1: I'm a credit guy by trade. I was in I've 97 00:06:04,080 --> 00:06:07,760 Speaker 1: been involved in international trade finance and supply chain management 98 00:06:07,760 --> 00:06:13,719 Speaker 1: finance for over thirty years now, Molly time Andrew was 99 00:06:13,760 --> 00:06:16,920 Speaker 1: thirty years in credit risk management and energy trading, so 100 00:06:17,000 --> 00:06:19,400 Speaker 1: he knows the equity box. I'm I'm a lender. I 101 00:06:19,480 --> 00:06:23,000 Speaker 1: like to get repaid, So I know that fundamental credit 102 00:06:23,040 --> 00:06:26,559 Speaker 1: analysis stuff. And when we added Graham to the mix, 103 00:06:27,480 --> 00:06:30,640 Speaker 1: which does he does our science side and our patent review, 104 00:06:30,720 --> 00:06:34,400 Speaker 1: we became very very three dimensional. And uh so we've 105 00:06:34,440 --> 00:06:38,920 Speaker 1: we've expanded that or ask me anything series is been phenomenal. 106 00:06:39,080 --> 00:06:42,520 Speaker 1: It is c suite. Uh we bring in the executive 107 00:06:42,560 --> 00:06:47,159 Speaker 1: suites to talk about their companies and our community asks 108 00:06:47,240 --> 00:06:50,840 Speaker 1: them any anything that that like. And uh, it's amazing 109 00:06:51,000 --> 00:06:53,880 Speaker 1: the response we've had. We've had CFOs come on and 110 00:06:54,160 --> 00:06:58,680 Speaker 1: we after two hours they give us six which is amazing. Tracy, 111 00:06:58,720 --> 00:07:01,480 Speaker 1: I was just gonna say, a credit analysts talking about 112 00:07:01,560 --> 00:07:06,320 Speaker 1: cannabis kind of the perfect guest for the two of us. Oh. Absolutely, 113 00:07:06,440 --> 00:07:09,359 Speaker 1: And I love the credit risk manager with thirty years 114 00:07:09,400 --> 00:07:13,720 Speaker 1: experience whose user name is Molly Time. That's fairly unusual. 115 00:07:14,560 --> 00:07:19,360 Speaker 1: It's named after his cat. Actually, just to take a 116 00:07:19,400 --> 00:07:23,720 Speaker 1: step back for a second, why were you all on 117 00:07:24,080 --> 00:07:27,360 Speaker 1: social media or on the Reddit forums talking about pot 118 00:07:27,440 --> 00:07:32,560 Speaker 1: stocks in the first place. What sparked your collective interest? Well, 119 00:07:32,880 --> 00:07:37,720 Speaker 1: on my side, it was about the name accounting treatment 120 00:07:37,960 --> 00:07:42,080 Speaker 1: of h I f r S international financial reporting standards, 121 00:07:42,600 --> 00:07:48,120 Speaker 1: where these companies growing cannabis at harvest we're able to 122 00:07:48,160 --> 00:07:52,600 Speaker 1: take the entire profit before sale, less the selling expense 123 00:07:52,960 --> 00:07:55,240 Speaker 1: through their income state. I found it to be very, 124 00:07:55,320 --> 00:07:59,920 Speaker 1: very misleading, so I dug into that and started commenting 125 00:08:00,040 --> 00:08:04,080 Speaker 1: about that in the industry. For Andrew Uh, it was 126 00:08:04,160 --> 00:08:09,680 Speaker 1: more about a long lifetime passion for cannabis and the 127 00:08:09,760 --> 00:08:14,600 Speaker 1: stock market quite frankly, and for our younger PhD candidate, 128 00:08:14,960 --> 00:08:18,880 Speaker 1: it was about learning the finance side and applying the 129 00:08:19,040 --> 00:08:21,560 Speaker 1: science to it. So all three of us came from 130 00:08:21,560 --> 00:08:24,280 Speaker 1: a different place where we were very fortunate to meet 131 00:08:24,320 --> 00:08:28,520 Speaker 1: each other. So for for those who haven't been following 132 00:08:28,520 --> 00:08:32,040 Speaker 1: the ins and outs of pot stocks, can you maybe 133 00:08:32,080 --> 00:08:36,240 Speaker 1: describe the state of the current cannabis industry, like where 134 00:08:36,280 --> 00:08:39,360 Speaker 1: are we in terms of legalization and where are we 135 00:08:39,400 --> 00:08:44,360 Speaker 1: in terms of companies actually getting started and producing and 136 00:08:44,559 --> 00:08:49,480 Speaker 1: selling cannabis. Well, next week, October seventeen, Canada will become 137 00:08:49,520 --> 00:08:53,920 Speaker 1: the first G seven country to legalize adult use cannabis. 138 00:08:54,600 --> 00:08:57,720 Speaker 1: We've had medical cannabis for a decade and Uh under 139 00:08:57,800 --> 00:09:00,439 Speaker 1: various regimes and the last four year is under a 140 00:09:00,480 --> 00:09:04,960 Speaker 1: pretty steady regime. And when Trudeau was elected, part of 141 00:09:04,960 --> 00:09:08,319 Speaker 1: his platform was I'm going to legalize adult use cannabis. 142 00:09:08,760 --> 00:09:11,920 Speaker 1: So we're we're a week away. It isn't going to 143 00:09:12,040 --> 00:09:17,199 Speaker 1: go smoothly in Canada. It's not California, it's it's not Colorado. 144 00:09:17,840 --> 00:09:21,880 Speaker 1: We have government's provincial governments that have inserted themselves into 145 00:09:21,920 --> 00:09:25,280 Speaker 1: the supply chain and are acting like central warehousers and 146 00:09:25,320 --> 00:09:29,200 Speaker 1: they're gonna handle all the online sales. So that's a 147 00:09:29,200 --> 00:09:32,880 Speaker 1: little different. But right now the market extremely froth. You've 148 00:09:32,880 --> 00:09:36,479 Speaker 1: got to be very careful jumping into this market because 149 00:09:36,760 --> 00:09:40,120 Speaker 1: as an investor, if you're a trader, you love the volatility. 150 00:09:40,160 --> 00:09:42,040 Speaker 1: But as an investor, and I'm an investor, I'm not 151 00:09:42,080 --> 00:09:45,960 Speaker 1: a trader. Andrews the trader in our midst like, I 152 00:09:46,040 --> 00:09:49,120 Speaker 1: look at it and the fundamentals. These companies are so 153 00:09:49,200 --> 00:09:53,400 Speaker 1: far out over their skis right now on valuations versus fundamentals, 154 00:09:53,440 --> 00:09:57,120 Speaker 1: and I think there's gonna be some massive failures within 155 00:09:57,160 --> 00:10:00,640 Speaker 1: the industry, and you've got to be very choosy about 156 00:10:00,720 --> 00:10:02,920 Speaker 1: what you're investing in. I'm fifty two years old. I 157 00:10:02,960 --> 00:10:04,680 Speaker 1: don't have a lot of time to recover if I 158 00:10:04,720 --> 00:10:07,240 Speaker 1: screw up, So I'm a little different than the thirty 159 00:10:07,280 --> 00:10:09,080 Speaker 1: year olds. In the twenty year olds, Well, let's talk 160 00:10:09,120 --> 00:10:13,120 Speaker 1: about this because I think the only two things that 161 00:10:13,200 --> 00:10:15,280 Speaker 1: most people would know when they come to it is 162 00:10:15,320 --> 00:10:18,800 Speaker 1: that the legal cannabis market is still fairly small around 163 00:10:18,840 --> 00:10:22,040 Speaker 1: the world, certainly in the US, but there is pretty 164 00:10:22,040 --> 00:10:26,200 Speaker 1: big potential for it to get much bigger as legalization expand. 165 00:10:26,280 --> 00:10:30,360 Speaker 1: So everybody by now essentially knows that that's the story 166 00:10:30,440 --> 00:10:33,120 Speaker 1: or that's the theme. But then you mentioned there's gonna 167 00:10:33,120 --> 00:10:34,840 Speaker 1: be a lot of failures. A lot of these companies 168 00:10:34,880 --> 00:10:37,640 Speaker 1: are out over the skis, out over their skis. So 169 00:10:37,720 --> 00:10:41,959 Speaker 1: if you're deciding among stocks, what is the first thing 170 00:10:42,000 --> 00:10:45,880 Speaker 1: you do to actually sort of ascertain who's really going 171 00:10:45,960 --> 00:10:50,560 Speaker 1: to be able to profitably exploit this market? Well, I'm 172 00:10:50,600 --> 00:10:53,679 Speaker 1: going to start with something that's probably the hardest thing 173 00:10:53,679 --> 00:10:58,360 Speaker 1: to evaluate, and that's management. Um management is everyone can 174 00:10:58,440 --> 00:11:01,000 Speaker 1: print off a very nice looking TV that that looks 175 00:11:01,040 --> 00:11:04,800 Speaker 1: really good. A lot of companies, uh those cvs. The 176 00:11:04,840 --> 00:11:09,360 Speaker 1: back stories for management look very very good. But making 177 00:11:09,400 --> 00:11:13,120 Speaker 1: sure you map what management says to what they actually 178 00:11:13,160 --> 00:11:16,960 Speaker 1: do to me is very very important, especially in the 179 00:11:17,000 --> 00:11:20,480 Speaker 1: new industry. Like I'm a big believer in jockey before 180 00:11:20,559 --> 00:11:23,920 Speaker 1: horse and hope that the trainer gets the horse up 181 00:11:23,960 --> 00:11:26,520 Speaker 1: to speed and and that's how I've approached it. And 182 00:11:26,559 --> 00:11:29,160 Speaker 1: I'm again I'm a lot more cautious. I'm a little older. 183 00:11:29,600 --> 00:11:31,560 Speaker 1: I'm not going for the I'm not looking for the 184 00:11:31,600 --> 00:11:34,679 Speaker 1: biggest company. I'm looking for the most profitable company. Can 185 00:11:34,720 --> 00:11:37,760 Speaker 1: I ask you, know you mentioned management just then? How 186 00:11:38,400 --> 00:11:44,600 Speaker 1: standardized are corporate practices of cannabis companies at this point? 187 00:11:44,960 --> 00:11:48,280 Speaker 1: You talked about I f r S accounting rules. There's 188 00:11:48,280 --> 00:11:51,240 Speaker 1: certain guidance that comes with being a public company, but 189 00:11:51,720 --> 00:11:54,720 Speaker 1: the vast majority of cannabis companies at the moment aren't 190 00:11:54,800 --> 00:11:59,560 Speaker 1: actually public. So what are the disclosures like? What what 191 00:11:59,720 --> 00:12:03,720 Speaker 1: is the financial um or corporate governance like the corporate 192 00:12:03,760 --> 00:12:06,640 Speaker 1: government needs a lot of work in my mind. There 193 00:12:06,679 --> 00:12:11,520 Speaker 1: are some more professional companies like Constellation coming into Canopy 194 00:12:11,600 --> 00:12:14,800 Speaker 1: I I think was hugely important for them. I think 195 00:12:14,880 --> 00:12:17,840 Speaker 1: it provides a lot more rigor to their operations, which 196 00:12:17,840 --> 00:12:22,560 Speaker 1: I haven't been fond of. Quite frankly, Constellations with with 197 00:12:22,640 --> 00:12:26,200 Speaker 1: four or seven board members, they're professionalizing that firm. And 198 00:12:26,360 --> 00:12:28,880 Speaker 1: I think till Raise another good example. Till Ray, by 199 00:12:28,880 --> 00:12:31,240 Speaker 1: the way, is the only one that does not report 200 00:12:31,360 --> 00:12:33,960 Speaker 1: in under I f r S because they went right 201 00:12:34,000 --> 00:12:36,439 Speaker 1: to the US markets with NASDAC and they're using good 202 00:12:36,440 --> 00:12:39,280 Speaker 1: old U S gaps. So I love chatting with those guys. 203 00:12:39,559 --> 00:12:42,480 Speaker 1: It makes it a lot easier to look through their company. 204 00:12:42,760 --> 00:12:47,920 Speaker 1: Afreya is a very solid company. Aurora interesting company, they 205 00:12:48,040 --> 00:12:50,920 Speaker 1: have a lot of They've done so much vertical integration. 206 00:12:51,400 --> 00:12:54,280 Speaker 1: And you know, it's really fascinating about the industry is 207 00:12:54,360 --> 00:12:59,200 Speaker 1: there's so many different races being run and I'm amazed 208 00:12:59,240 --> 00:13:01,079 Speaker 1: at the different race as they are being run. Who 209 00:13:01,080 --> 00:13:05,439 Speaker 1: knows who wins? But on a corporate governance seriously lacking 210 00:13:05,559 --> 00:13:08,320 Speaker 1: in the in the mid caps and small caps there 211 00:13:08,360 --> 00:13:11,480 Speaker 1: that there's some questionable stuff out there. Well, explain that. 212 00:13:11,559 --> 00:13:14,600 Speaker 1: What do you say multiple races being run? Let's get 213 00:13:14,600 --> 00:13:19,000 Speaker 1: a little more granular. What are the different specific opportunities 214 00:13:19,040 --> 00:13:22,440 Speaker 1: that people are competing for here? Well, let's look at 215 00:13:22,480 --> 00:13:25,480 Speaker 1: the three let's say main players, although till race market 216 00:13:25,520 --> 00:13:27,679 Speaker 1: cap would put them in a main player. Let's look 217 00:13:27,679 --> 00:13:31,920 Speaker 1: at Canopy, Aurora and Afria. Canopy wanted to be the biggest. 218 00:13:32,880 --> 00:13:34,680 Speaker 1: They were first to do a lot of things. First 219 00:13:34,679 --> 00:13:37,640 Speaker 1: to go public, first to acquire a new company, first 220 00:13:37,760 --> 00:13:41,520 Speaker 1: expand into Europe, first to get on the New York 221 00:13:41,559 --> 00:13:46,000 Speaker 1: Stock Exchange or US listing. So Cannopy was about getting big, 222 00:13:46,240 --> 00:13:49,760 Speaker 1: and it's big on both the adult youth side in Canada. 223 00:13:49,800 --> 00:13:52,839 Speaker 1: But medical medical globally is gonna be huge, and I 224 00:13:52,840 --> 00:13:55,280 Speaker 1: don't think a lot of people appreciate that. And all 225 00:13:55,400 --> 00:13:58,240 Speaker 1: these companies are looking at medical globally. Aurora, on the 226 00:13:58,280 --> 00:14:02,040 Speaker 1: other hand, uh one very massive facility that they've they've 227 00:14:02,080 --> 00:14:05,720 Speaker 1: completed as guy in Edmonton. They have some smaller facilities 228 00:14:06,040 --> 00:14:09,200 Speaker 1: and they've acquired a bunch of companies. They acquired Seemed, 229 00:14:09,840 --> 00:14:12,439 Speaker 1: they acquired med Relief, and both of those are I 230 00:14:12,480 --> 00:14:14,920 Speaker 1: think Semed was a billion plus. Med Relief was three 231 00:14:14,920 --> 00:14:19,160 Speaker 1: and a half billion dollars for companies with ten million 232 00:14:19,200 --> 00:14:22,400 Speaker 1: and quarterly sales fifteen million and quarterly sales, which is nuts. 233 00:14:23,040 --> 00:14:27,880 Speaker 1: Then you have Aura, who have largely until this year 234 00:14:28,000 --> 00:14:32,240 Speaker 1: really built to scale, and all they cared about was 235 00:14:32,680 --> 00:14:36,120 Speaker 1: we're gonna build our own facilities in Leamington, Ontario, the 236 00:14:36,120 --> 00:14:39,280 Speaker 1: greenhouse capital of Canada. We're gonna build them to scale. 237 00:14:39,760 --> 00:14:43,640 Speaker 1: We care about EBITDA and as a traditional credit guy, 238 00:14:43,720 --> 00:14:47,080 Speaker 1: EBA does my drug of choice. UM. I really like 239 00:14:47,160 --> 00:14:49,960 Speaker 1: their management and that's where I put a lot of 240 00:14:50,080 --> 00:14:53,560 Speaker 1: my capital in. And I've revolved it around, but they 241 00:14:53,560 --> 00:14:56,680 Speaker 1: still aren my largest holding. And what I like about 242 00:14:56,720 --> 00:14:58,760 Speaker 1: them they are a bit of the tortoise versus the 243 00:14:58,800 --> 00:15:03,200 Speaker 1: hair with canopy, But I care about building scalable businesses. 244 00:15:03,640 --> 00:15:05,840 Speaker 1: To me, there's a lot of hints that you can 245 00:15:05,840 --> 00:15:10,520 Speaker 1: get from from management, even in even when revenue hasn't scaled. 246 00:15:10,880 --> 00:15:12,520 Speaker 1: There's a lot of things you can pick up, and 247 00:15:13,440 --> 00:15:16,160 Speaker 1: I just like the executive over there a little bit better. 248 00:15:16,800 --> 00:15:20,680 Speaker 1: So when you look at the cannabis industry, is there 249 00:15:20,680 --> 00:15:26,200 Speaker 1: a parallel conventional industry that you think it's most similar to. 250 00:15:26,480 --> 00:15:30,880 Speaker 1: Is it, you know, maybe drug developments like the pharma industry, 251 00:15:31,000 --> 00:15:37,480 Speaker 1: or is it potentially something more recreational. It is agricultural, 252 00:15:37,960 --> 00:15:41,480 Speaker 1: it is pharma, it's consumer package goods. It's unlike anything 253 00:15:41,480 --> 00:15:44,880 Speaker 1: I've seen, quite frankly, because you're gonna be producing for 254 00:15:45,040 --> 00:15:49,360 Speaker 1: a recreational market as you try to develop patentable strains 255 00:15:49,400 --> 00:15:53,880 Speaker 1: and drugs for for medical avenues. And to me, again, 256 00:15:53,920 --> 00:15:57,720 Speaker 1: the medical side of this is the big plus. And 257 00:15:58,120 --> 00:16:01,200 Speaker 1: once the US takes the wrap so often, let's farm. 258 00:16:01,200 --> 00:16:05,360 Speaker 1: I really dig in and analyze the plant and analyze 259 00:16:05,400 --> 00:16:09,360 Speaker 1: the hundred plus minor cannabinoids and what each one of 260 00:16:09,400 --> 00:16:12,800 Speaker 1: those is capable of. I think that's the big story. 261 00:16:13,040 --> 00:16:16,640 Speaker 1: It wreck is flashy, wreck is fun, It's it's the 262 00:16:16,680 --> 00:16:20,960 Speaker 1: party cruise. Medical is a longer tunnel, but uh, in 263 00:16:21,040 --> 00:16:23,920 Speaker 1: the endgame, health science and wellness is can be huge 264 00:16:23,920 --> 00:16:27,920 Speaker 1: in this industry. Speaking of recreational marijuana, here's something that 265 00:16:27,920 --> 00:16:30,840 Speaker 1: I've been curious about for a while. So right now, 266 00:16:30,920 --> 00:16:35,200 Speaker 1: when it comes to alcohol or tobacco, people have some 267 00:16:35,360 --> 00:16:39,320 Speaker 1: conception of brands that they like. Maybe I have a 268 00:16:39,360 --> 00:16:41,680 Speaker 1: favorite beer and I drink at the most, but I 269 00:16:41,720 --> 00:16:44,640 Speaker 1: certainly don't drink it every single time I drink beer. 270 00:16:45,120 --> 00:16:50,040 Speaker 1: I'm curious what the expectation is on cannabis. Are people 271 00:16:50,080 --> 00:16:53,080 Speaker 1: going to have brands that they really like, that they 272 00:16:53,120 --> 00:16:55,760 Speaker 1: identify with something that they are going to use all 273 00:16:55,760 --> 00:16:58,200 Speaker 1: the time that will be difficult for smaller brands to 274 00:16:58,360 --> 00:17:03,280 Speaker 1: enter or or consume. Were expected to be more promiscuous, 275 00:17:03,280 --> 00:17:07,600 Speaker 1: so to speak, and making it difficult for the various 276 00:17:07,640 --> 00:17:13,080 Speaker 1: sellers to really establish large moats around their strand that's 277 00:17:13,200 --> 00:17:17,760 Speaker 1: that's a great question. Um. Buying cannabis isn't like entering 278 00:17:17,800 --> 00:17:20,080 Speaker 1: into a cell phone contract. You're not locked in for 279 00:17:20,160 --> 00:17:23,360 Speaker 1: an extended period of time. So I expect a lot 280 00:17:23,400 --> 00:17:26,560 Speaker 1: of brand hopping at the beginning. Uh, people settling in, 281 00:17:26,640 --> 00:17:29,320 Speaker 1: they'll they'll be the cores light of cannabis out there, 282 00:17:29,520 --> 00:17:31,919 Speaker 1: and there also will be the Johnny Walker Blue label. 283 00:17:32,440 --> 00:17:36,840 Speaker 1: We recently toured Broken Coast Cannabis, which after you've purchased 284 00:17:36,840 --> 00:17:39,199 Speaker 1: for almost a quarter billion dollars earlier this year, and 285 00:17:39,359 --> 00:17:41,720 Speaker 1: we have a video out on it, and they're by 286 00:17:41,760 --> 00:17:45,639 Speaker 1: far the highest quality LP that we've ever toured, and 287 00:17:45,680 --> 00:17:49,040 Speaker 1: we've toured quite a few. I think they given their 288 00:17:49,160 --> 00:17:55,280 Speaker 1: their history and uh, their medical side, patients just love them. 289 00:17:55,600 --> 00:17:58,960 Speaker 1: I think that's going to be that's getting Broken Coast 290 00:17:58,960 --> 00:18:01,320 Speaker 1: Cannabs because it's not big facility is gonna be like 291 00:18:01,359 --> 00:18:04,679 Speaker 1: getting Hamilton's tickets on Broadway. So good luck to everybody 292 00:18:04,680 --> 00:18:06,879 Speaker 1: who can actually get their hands on some of that stuff. 293 00:18:07,119 --> 00:18:09,600 Speaker 1: But there's gonna be the cores light. There's gonna vape 294 00:18:09,640 --> 00:18:12,200 Speaker 1: pens aren't going to be legal in Canada for another year. 295 00:18:12,280 --> 00:18:14,880 Speaker 1: Edibles won't be legal in Canada for another year. All 296 00:18:14,920 --> 00:18:19,199 Speaker 1: we're going on for the first year for consumables is 297 00:18:19,440 --> 00:18:22,080 Speaker 1: flour and oil, and it's not the oil that you're 298 00:18:22,160 --> 00:18:23,840 Speaker 1: used to it where you can vape in the States. 299 00:18:23,880 --> 00:18:28,400 Speaker 1: It's it's diluted oil in a carrier oil form, so 300 00:18:28,680 --> 00:18:30,560 Speaker 1: you can use it in baking and stuff like that, 301 00:18:30,640 --> 00:18:33,199 Speaker 1: but it isn't what you fill your vappens with in 302 00:18:33,240 --> 00:18:35,960 Speaker 1: the US, and and vape off vapens are gonna be 303 00:18:36,119 --> 00:18:39,240 Speaker 1: enormous and that's why all the greenhouse capacity is coming online. 304 00:18:40,040 --> 00:18:44,280 Speaker 1: So I have a related question, which is about the 305 00:18:44,320 --> 00:18:46,680 Speaker 1: notion that one of the defining things about weed at 306 00:18:46,680 --> 00:18:50,320 Speaker 1: the moment is just the sheer number of strains that 307 00:18:50,359 --> 00:18:54,400 Speaker 1: are out there, and there are always new ones being created, 308 00:18:54,560 --> 00:18:58,240 Speaker 1: Like that's pretty much what growers do is constantly cross 309 00:18:58,280 --> 00:19:01,320 Speaker 1: breeding different strains. And at the moment, if you're at 310 00:19:01,400 --> 00:19:06,480 Speaker 1: least a recreational consumer, you probably base your choice on 311 00:19:06,760 --> 00:19:09,600 Speaker 1: you know, I like sour diesel or I like Girl 312 00:19:09,640 --> 00:19:13,600 Speaker 1: Scout cookies, and your options are probably limited to whatever 313 00:19:13,640 --> 00:19:17,800 Speaker 1: your dealer happens to have available. So how does the 314 00:19:17,880 --> 00:19:22,520 Speaker 1: sheer number of strains interplay with this brand loyalty that 315 00:19:22,560 --> 00:19:25,880 Speaker 1: we were just talking about. Well, you know, I think 316 00:19:26,560 --> 00:19:29,119 Speaker 1: the strain, the sheer number strains is gonna be a 317 00:19:29,160 --> 00:19:31,840 Speaker 1: lot different in California than it's gonna be in Canada, 318 00:19:32,320 --> 00:19:35,560 Speaker 1: because we're going to have these ten provincial buying authorities 319 00:19:36,160 --> 00:19:39,800 Speaker 1: that are purchasing, and you have to have enough volume 320 00:19:39,880 --> 00:19:44,560 Speaker 1: to fill your skews with them. So I like for 321 00:19:44,800 --> 00:19:46,800 Speaker 1: to give you an example, Broken Coast is only going 322 00:19:46,880 --> 00:19:50,880 Speaker 1: to have five strains. That's it the skew level though 323 00:19:50,920 --> 00:19:53,359 Speaker 1: I've been to Organagram and I think that their skew 324 00:19:53,440 --> 00:19:56,720 Speaker 1: level is somewhere around forty two to fifty two. Excuse 325 00:19:56,760 --> 00:20:01,200 Speaker 1: to one province, but that skew level because there's loose 326 00:20:01,320 --> 00:20:05,080 Speaker 1: roll single loose rolls probably in half gram and gram size. 327 00:20:05,600 --> 00:20:09,040 Speaker 1: There's a a flower in a graham probably an eighth 328 00:20:09,080 --> 00:20:12,200 Speaker 1: and a quarter uh. There might be a complementary oil 329 00:20:12,280 --> 00:20:15,399 Speaker 1: to that strain. So you're not going to get the 330 00:20:15,440 --> 00:20:18,440 Speaker 1: strain selection that that you see, I think in California, 331 00:20:18,520 --> 00:20:20,639 Speaker 1: because you have to fill the pipe and then you 332 00:20:20,680 --> 00:20:23,880 Speaker 1: have to continually fill the pipe. And the problem is 333 00:20:24,040 --> 00:20:27,880 Speaker 1: like from genetics to to product, you're probably looking at 334 00:20:27,920 --> 00:20:31,359 Speaker 1: a year uh if they find something good, and we 335 00:20:31,480 --> 00:20:34,240 Speaker 1: found that finding something good in genetics is one in 336 00:20:34,440 --> 00:20:36,880 Speaker 1: a hundred and one in a thousand chants, you get 337 00:20:36,920 --> 00:20:41,760 Speaker 1: something very unique. So I think the strain selection unfortunately 338 00:20:41,800 --> 00:20:43,480 Speaker 1: is gonna be limited until we see some of the 339 00:20:43,560 --> 00:20:48,080 Speaker 1: craft producers, which is the next round of reg's allowing 340 00:20:48,160 --> 00:20:51,240 Speaker 1: the small batchcraft guys into the market, and then it 341 00:20:51,320 --> 00:20:55,840 Speaker 1: might fracture a little bit. But still these monolith uh 342 00:20:56,400 --> 00:20:59,840 Speaker 1: provincial buying authorities, they think different. They think I think 343 00:21:00,040 --> 00:21:03,119 Speaker 1: alcohol and uh and will they have will we have 344 00:21:03,200 --> 00:21:06,760 Speaker 1: hit records of strains for the summer? I sure hope. 345 00:21:06,760 --> 00:21:09,239 Speaker 1: So I think that would be fun. But you need 346 00:21:09,280 --> 00:21:13,240 Speaker 1: a market that can react quickly, and then I don't 347 00:21:13,240 --> 00:21:15,879 Speaker 1: think Canada is going to be that market because of 348 00:21:15,920 --> 00:21:20,879 Speaker 1: those monolithic buying entities that are between the the grower 349 00:21:20,880 --> 00:21:25,600 Speaker 1: and the consumer. God. I have so many questions right 350 00:21:25,640 --> 00:21:27,440 Speaker 1: now and I don't even I'm trying to think which 351 00:21:27,440 --> 00:21:30,359 Speaker 1: way to go. But I really want to drill down 352 00:21:30,359 --> 00:21:32,119 Speaker 1: on that last thing you said, because I think this 353 00:21:32,200 --> 00:21:36,000 Speaker 1: is really crucial for people understanding the market structure of 354 00:21:36,080 --> 00:21:39,440 Speaker 1: Canadian cannabis. So they're gonna be the LPs, the licensed 355 00:21:39,440 --> 00:21:41,879 Speaker 1: producers who grow the stuff you mentioned a few of 356 00:21:41,880 --> 00:21:45,600 Speaker 1: their names. They're going to be private retail outlets who 357 00:21:45,640 --> 00:21:48,280 Speaker 1: sell the stuff out on the street to people. But 358 00:21:48,359 --> 00:21:53,119 Speaker 1: then in between them there are these state run or 359 00:21:53,240 --> 00:21:57,119 Speaker 1: provincial run warehouses that ultimately are where the buyer and 360 00:21:57,160 --> 00:22:02,480 Speaker 1: seller meet, Can you explain how that works? I get 361 00:22:02,560 --> 00:22:05,440 Speaker 1: asked this a lot, and I always tell people, do 362 00:22:05,520 --> 00:22:09,320 Speaker 1: not think like a retailer, Do not think like a consumer. 363 00:22:09,480 --> 00:22:13,520 Speaker 1: Do not think like the company selling cannabis and growing it. 364 00:22:13,880 --> 00:22:17,320 Speaker 1: You have to think like a greedy finance minister and 365 00:22:17,440 --> 00:22:20,959 Speaker 1: a greedy provincial finance minister. And if you think like 366 00:22:21,000 --> 00:22:23,560 Speaker 1: a greedy provincial finance minister, a lot of this makes 367 00:22:23,560 --> 00:22:27,480 Speaker 1: sense because if the LPs don't grow in your province 368 00:22:27,520 --> 00:22:29,119 Speaker 1: and all the profits are going to land in the 369 00:22:29,240 --> 00:22:32,919 Speaker 1: LPs laps and other provinces, how do you really relocate 370 00:22:32,960 --> 00:22:36,280 Speaker 1: profits while you insist on being a nanny state and 371 00:22:36,480 --> 00:22:41,360 Speaker 1: uh and centrally warehousing the product such that you can 372 00:22:41,400 --> 00:22:44,800 Speaker 1: dispense it within your rights in province, because every every 373 00:22:44,800 --> 00:22:49,000 Speaker 1: province has different regulations on this. Not only that, these 374 00:22:49,000 --> 00:22:52,800 Speaker 1: greedy finance ministers are also taking on the all the 375 00:22:52,920 --> 00:22:57,000 Speaker 1: online sales. So if you're a retailer like Medmen, which 376 00:22:57,040 --> 00:22:59,520 Speaker 1: you're probably familiar within the States and Canada, the model 377 00:22:59,560 --> 00:23:02,720 Speaker 1: is gonna be very very different. You're going to buy 378 00:23:02,880 --> 00:23:05,679 Speaker 1: from just one source, so you don't get to compete 379 00:23:05,720 --> 00:23:08,680 Speaker 1: out all your sources in order to drive down your prices. 380 00:23:09,200 --> 00:23:11,719 Speaker 1: Then that that source that's selling to you is going 381 00:23:11,760 --> 00:23:15,280 Speaker 1: to compete against you online. To me, you've got to 382 00:23:15,320 --> 00:23:18,400 Speaker 1: be very careful entering the retail space in Canada. There's 383 00:23:18,400 --> 00:23:21,040 Speaker 1: a lot of people very anxious to do it. I'd 384 00:23:21,080 --> 00:23:23,080 Speaker 1: be very cautious to do it because I think this 385 00:23:23,160 --> 00:23:25,399 Speaker 1: is gonna be You're gonna have to have a high volume, 386 00:23:25,480 --> 00:23:28,879 Speaker 1: low margin business. Maybe it changes when edibles and the 387 00:23:29,440 --> 00:23:33,600 Speaker 1: secondary products come in, but I really worry for for 388 00:23:33,640 --> 00:23:36,760 Speaker 1: those companies that I think they're going to do really well. 389 00:23:36,800 --> 00:23:39,639 Speaker 1: And what we call it, we've been calling it is 390 00:23:39,720 --> 00:23:42,959 Speaker 1: boxed in retail because you're boxed in by the seller 391 00:23:43,040 --> 00:23:46,040 Speaker 1: to you, who's competing against you. It's it's an odd 392 00:23:46,040 --> 00:23:50,720 Speaker 1: Canadian phenomenon. So just to be clear, when people are 393 00:23:50,720 --> 00:23:53,000 Speaker 1: trying to wrap their heads around who's going to make 394 00:23:53,040 --> 00:23:57,200 Speaker 1: the profit, it's really important to realize that the provinces 395 00:23:57,240 --> 00:24:02,880 Speaker 1: have inserted themselves as essentially monopsony buyers of the product 396 00:24:03,040 --> 00:24:07,359 Speaker 1: from the growers and monopoly sellers to the product to 397 00:24:07,480 --> 00:24:10,320 Speaker 1: the retailers. So just from a pure echo one on 398 00:24:10,440 --> 00:24:13,399 Speaker 1: one standpoint, you could sort of figure out who's going 399 00:24:13,440 --> 00:24:15,840 Speaker 1: to take a huge slice of the profits in the 400 00:24:15,880 --> 00:24:18,919 Speaker 1: whole thing. Plus they're they're layering on an excise tax 401 00:24:19,000 --> 00:24:21,800 Speaker 1: and in a sales tax, so yeah, you could figure 402 00:24:21,800 --> 00:24:24,399 Speaker 1: out who's who's making the problems. And I love the 403 00:24:24,440 --> 00:24:26,640 Speaker 1: folks in the States too. I find them far more 404 00:24:26,720 --> 00:24:31,280 Speaker 1: honest about why cannabis is going to be allowed. Eventually, 405 00:24:31,320 --> 00:24:34,560 Speaker 1: it's about jobs, it's about taxation. In Canada, we've been 406 00:24:34,560 --> 00:24:37,600 Speaker 1: saying it's about saving little Timmy from from getting his 407 00:24:37,640 --> 00:24:40,000 Speaker 1: hands on cannabis at the local high school. We're gonna 408 00:24:40,040 --> 00:24:42,760 Speaker 1: regulate it. It's it's been very health driven, which is 409 00:24:42,760 --> 00:24:46,600 Speaker 1: a nice liberal message that that resonates a lot more. 410 00:24:46,640 --> 00:24:48,959 Speaker 1: And I can see why it works better in Canada 411 00:24:49,040 --> 00:24:51,720 Speaker 1: quite frankly, But at the end of the day, I'm 412 00:24:51,720 --> 00:24:56,639 Speaker 1: a capitalistic nature and I find uh taxes and jobs 413 00:24:56,680 --> 00:24:59,439 Speaker 1: really speak more to me than the health benefits. But 414 00:24:59,480 --> 00:25:05,760 Speaker 1: they're they're are there. There's demonstrated drops in youth use 415 00:25:06,280 --> 00:25:10,920 Speaker 1: when it becomes regulated, so we'll see. But yeah, they 416 00:25:11,040 --> 00:25:15,760 Speaker 1: don't mistake Canada for the US. So when it comes 417 00:25:15,800 --> 00:25:21,840 Speaker 1: to selecting a successful Canadian cannabis company, is the thing 418 00:25:21,880 --> 00:25:24,480 Speaker 1: you want to look out for then just first move 419 00:25:24,560 --> 00:25:29,560 Speaker 1: or advantage and economies of scale and efficiency. I think 420 00:25:29,600 --> 00:25:31,600 Speaker 1: it's low cost production. I think it is can be 421 00:25:31,680 --> 00:25:35,359 Speaker 1: very key. Uh, this is gonna be commoditized. It was 422 00:25:35,480 --> 00:25:38,920 Speaker 1: very sexy when people were like these LPs with very 423 00:25:38,960 --> 00:25:42,639 Speaker 1: little competition. We're selling medically because on the medical stream, 424 00:25:42,800 --> 00:25:47,199 Speaker 1: just just to make the point, medical is still federally regulated. 425 00:25:47,320 --> 00:25:51,639 Speaker 1: Medical only is sold from an LP online to a 426 00:25:51,680 --> 00:25:55,800 Speaker 1: medical recipient who has a script, so that's not going 427 00:25:55,840 --> 00:25:58,439 Speaker 1: to change when adult use comes up. That medical system, 428 00:25:58,560 --> 00:26:02,159 Speaker 1: the direct delivery medical marijuana. We're not in pharmacies yet. 429 00:26:02,520 --> 00:26:06,439 Speaker 1: Strapper's Drug Marder largest pharmacy chain, has a license, but 430 00:26:06,520 --> 00:26:09,320 Speaker 1: they're gonna act like a central warehouser as well and 431 00:26:09,400 --> 00:26:13,880 Speaker 1: ship to all their their customers of the pharmacy. So 432 00:26:14,040 --> 00:26:17,600 Speaker 1: it was really nice selling things at nine dollars a 433 00:26:17,680 --> 00:26:20,280 Speaker 1: graham that we're costing three dollars a graham. That's a 434 00:26:20,320 --> 00:26:23,439 Speaker 1: heck of a margin. But when the provinces come in 435 00:26:23,520 --> 00:26:27,000 Speaker 1: and compress that margin, that sales price down to four 436 00:26:27,160 --> 00:26:32,240 Speaker 1: fifty three fifty a graham. You better be selling producing 437 00:26:32,359 --> 00:26:36,359 Speaker 1: sub dollar in order to compete. So even if you 438 00:26:36,880 --> 00:26:40,119 Speaker 1: if you want to farm it out and compete. So 439 00:26:40,160 --> 00:26:44,400 Speaker 1: these first movers are all scaling large sets of production. 440 00:26:44,960 --> 00:26:48,840 Speaker 1: But their cost structures are wildly different. And so even 441 00:26:48,920 --> 00:26:51,960 Speaker 1: with these large greenhouses coming online, it's gonna skew the 442 00:26:52,359 --> 00:26:56,000 Speaker 1: cost program of all these companies. But even if you 443 00:26:56,040 --> 00:26:58,119 Speaker 1: don't want to grow it yourself, if you want to 444 00:26:58,119 --> 00:27:02,880 Speaker 1: be big, you need acts as to enough and enough 445 00:27:02,920 --> 00:27:06,640 Speaker 1: I'll put in really hard quotes there, low cost, good supply. 446 00:27:06,920 --> 00:27:10,680 Speaker 1: So this is going to eventually be a branding game 447 00:27:10,800 --> 00:27:13,520 Speaker 1: when it gets to edibles and vapes and and and 448 00:27:13,760 --> 00:27:18,520 Speaker 1: the medical products. But you need access to the supply, 449 00:27:18,760 --> 00:27:23,040 Speaker 1: good premium, good quality supply at a good cost. And 450 00:27:23,280 --> 00:27:26,480 Speaker 1: so first movers are important because they've scaled the most, 451 00:27:26,480 --> 00:27:29,920 Speaker 1: they've got access to all that capital, and they've built out. 452 00:27:30,000 --> 00:27:32,600 Speaker 1: They've had a longer runway to build out. I'm very 453 00:27:32,640 --> 00:27:35,760 Speaker 1: cautious about it, all the new entries, new entries in Canada, 454 00:27:36,440 --> 00:27:39,639 Speaker 1: extremely cautious about all. Right, So we've sort of danced 455 00:27:39,680 --> 00:27:43,600 Speaker 1: around this in the beginning and during this conversation, but 456 00:27:43,720 --> 00:27:46,520 Speaker 1: we need to talk about the accounting treatment of gain 457 00:27:46,640 --> 00:27:49,199 Speaker 1: on biologicals because this is the first time that I 458 00:27:49,200 --> 00:27:51,920 Speaker 1: actually tried to really work through the P and L 459 00:27:52,040 --> 00:27:55,760 Speaker 1: statement of a cannabis company. And I forget which one 460 00:27:55,760 --> 00:27:58,520 Speaker 1: I was looking at maybe Chronos or something right up 461 00:27:58,560 --> 00:28:02,560 Speaker 1: at the top of the income statement. I ran into 462 00:28:02,640 --> 00:28:06,680 Speaker 1: this thing. I didn't understand this profit from gain on biologicals. 463 00:28:07,080 --> 00:28:08,840 Speaker 1: And then you and I went back and forth and 464 00:28:08,960 --> 00:28:11,200 Speaker 1: DM for like thirty minutes, and you try to explain 465 00:28:11,280 --> 00:28:14,440 Speaker 1: it to me. But for anyone in the US investing 466 00:28:14,600 --> 00:28:16,960 Speaker 1: in a Canadian company that doesn't use a GAP, but 467 00:28:17,080 --> 00:28:20,240 Speaker 1: I f R S explain what this line is and 468 00:28:20,280 --> 00:28:23,879 Speaker 1: how crucial it is to understanding this line in order 469 00:28:23,920 --> 00:28:28,200 Speaker 1: to sort of judge the true profitability of the company. Yeah, 470 00:28:28,280 --> 00:28:31,000 Speaker 1: first of all, it's ludicrous. It's uh, it's meant for 471 00:28:31,480 --> 00:28:34,560 Speaker 1: think of a tequila producer where they're at gave A 472 00:28:34,680 --> 00:28:39,120 Speaker 1: takes years and years to grow. Cannabis grows in at 473 00:28:39,240 --> 00:28:42,560 Speaker 1: twelve into fourteen a week cycle. So this is an 474 00:28:42,600 --> 00:28:46,840 Speaker 1: agricultural phenomenon and it's also in livestock as well. And 475 00:28:47,040 --> 00:28:51,240 Speaker 1: what it allows the the producer to do is and 476 00:28:51,320 --> 00:28:54,320 Speaker 1: I'll just talk about at harvest because it also impacts 477 00:28:54,360 --> 00:28:57,280 Speaker 1: the growing plants, but the at harvest is the big dollars. 478 00:28:57,320 --> 00:29:00,000 Speaker 1: So at harvest they get to treat it like they 479 00:29:00,040 --> 00:29:03,280 Speaker 1: hold it and they get to capture the profit less 480 00:29:03,320 --> 00:29:06,920 Speaker 1: any selling expense, So that would be like going into 481 00:29:07,640 --> 00:29:11,479 Speaker 1: a ACE Hardware in the States, and ACE Hardware has 482 00:29:11,480 --> 00:29:14,280 Speaker 1: already taken profit for everything that sits on their shelves 483 00:29:14,720 --> 00:29:18,960 Speaker 1: less the selling expense. That's ludicrous. So there's two items 484 00:29:18,960 --> 00:29:21,160 Speaker 1: that you have to look for, and I always use 485 00:29:21,240 --> 00:29:24,760 Speaker 1: gross margin when I do my trend analysis. In my 486 00:29:24,840 --> 00:29:28,000 Speaker 1: line analysis, I use gross margin before I f R 487 00:29:28,080 --> 00:29:30,680 Speaker 1: as voodoo as I call it, because there's two items. 488 00:29:30,720 --> 00:29:34,400 Speaker 1: There's the gain on biologicals, so that's all the growth 489 00:29:34,480 --> 00:29:38,560 Speaker 1: in the the plant material the unharvested plants which is 490 00:29:38,600 --> 00:29:43,080 Speaker 1: smaller than the harvested plants, um so they're taking profit 491 00:29:43,320 --> 00:29:45,840 Speaker 1: as they grow, not as they sell. And you only 492 00:29:45,840 --> 00:29:47,880 Speaker 1: get to take profit once you don't get to take 493 00:29:47,920 --> 00:29:51,520 Speaker 1: it multiple times. Then the other line item is fair 494 00:29:51,640 --> 00:29:54,959 Speaker 1: value increment on good sold in that quarter, and what 495 00:29:55,120 --> 00:29:59,280 Speaker 1: that is is showing you how much profit they took 496 00:30:00,000 --> 00:30:03,320 Speaker 1: when they actually harvested it versus when they sold it. 497 00:30:03,440 --> 00:30:07,240 Speaker 1: So I'm always looking at management. And we talked about 498 00:30:07,240 --> 00:30:11,880 Speaker 1: management earlier. If their production costs plus their fair value 499 00:30:11,960 --> 00:30:15,640 Speaker 1: increment is greater than their quarterly sales, it means they 500 00:30:15,640 --> 00:30:17,720 Speaker 1: were far too aggressive when they took the gain on 501 00:30:17,800 --> 00:30:21,360 Speaker 1: biologicals in the first place, and it tells you a 502 00:30:21,400 --> 00:30:23,200 Speaker 1: little bit about the company if they're gonna be that 503 00:30:23,240 --> 00:30:28,320 Speaker 1: aggressive taking all the profit at harvest. You look at canopies, 504 00:30:28,360 --> 00:30:32,120 Speaker 1: Vault Canopy has a hundred million plus in cannabis, all 505 00:30:32,120 --> 00:30:35,200 Speaker 1: the profits gone. So everyone who thinks, oh, they're gonna 506 00:30:35,200 --> 00:30:38,000 Speaker 1: sell the all that cannabis in the quarter one and 507 00:30:38,080 --> 00:30:41,600 Speaker 1: quarter two of recreational and they're gonna make gobs of money. No, no, no, 508 00:30:41,640 --> 00:30:44,480 Speaker 1: they already took all that profit. So it's very important 509 00:30:44,600 --> 00:30:47,560 Speaker 1: when you're looking at this. I always use adjusted even 510 00:30:47,640 --> 00:30:50,160 Speaker 1: that that is my drug of choice. It takes a 511 00:30:50,160 --> 00:30:53,280 Speaker 1: lot of noise out of the equation, including gain on 512 00:30:53,320 --> 00:30:57,600 Speaker 1: biologicals and fair value increment. But it's insane to actually 513 00:30:57,640 --> 00:31:01,840 Speaker 1: accept even when it was just medical. The product gets harvested, 514 00:31:01,920 --> 00:31:04,760 Speaker 1: it has to still pass q a QC quality Assurance, 515 00:31:04,840 --> 00:31:07,360 Speaker 1: Quality control, and that takes four to five weeks. And 516 00:31:08,000 --> 00:31:11,600 Speaker 1: unlike other agricultural goods, there's no futures market, so how 517 00:31:11,640 --> 00:31:15,440 Speaker 1: do you actually figure out what the selling prices? So 518 00:31:15,480 --> 00:31:18,120 Speaker 1: that was all left to management and it was all 519 00:31:18,160 --> 00:31:21,760 Speaker 1: over the place, and UH to me that that there's 520 00:31:21,800 --> 00:31:24,640 Speaker 1: a way too much noise in that to UH not 521 00:31:24,760 --> 00:31:28,280 Speaker 1: back it out when you're doing your analysis. So I 522 00:31:28,320 --> 00:31:31,080 Speaker 1: wanted to ask you about how the cannabis industry fits 523 00:31:31,120 --> 00:31:35,880 Speaker 1: into the existing financial infrastructure. You mentioned there's no futures 524 00:31:35,920 --> 00:31:38,800 Speaker 1: market at the moment. There also isn't a lot of 525 00:31:39,240 --> 00:31:43,760 Speaker 1: analysts discussing the cannabis industry at the moment. UH and 526 00:31:43,880 --> 00:31:46,120 Speaker 1: Joe alluded to this in our intro. But that's one 527 00:31:46,120 --> 00:31:50,040 Speaker 1: of the reasons why the Canalysts is so interesting, because 528 00:31:50,640 --> 00:31:55,000 Speaker 1: you guys are doing this analysis in a lot of detail, 529 00:31:55,080 --> 00:31:57,360 Speaker 1: in a way in which Wall Street just isn't at 530 00:31:57,360 --> 00:32:01,320 Speaker 1: the moment. Why do you think Wall Street is sort 531 00:32:01,320 --> 00:32:04,880 Speaker 1: of behind on this one? Is it purely a question 532 00:32:04,920 --> 00:32:08,080 Speaker 1: of the legality of the industry. I think they just 533 00:32:08,120 --> 00:32:13,800 Speaker 1: found religion until Canopy and UH and Chronos listed in 534 00:32:13,840 --> 00:32:17,200 Speaker 1: the US Canada was an afterthought. And so you get 535 00:32:17,240 --> 00:32:22,040 Speaker 1: Canopy listing and UH and Jim Kramer UH talking it up. 536 00:32:22,080 --> 00:32:24,240 Speaker 1: Then you get Chronos and then you get Till Ray 537 00:32:24,320 --> 00:32:26,160 Speaker 1: and my, my, my mind, what a story that was. 538 00:32:26,800 --> 00:32:29,800 Speaker 1: And you know how, I'm flattered that you think we're 539 00:32:29,800 --> 00:32:32,720 Speaker 1: doing it well, because I gotta tell you, the people 540 00:32:32,720 --> 00:32:35,320 Speaker 1: that I'm watching on the business shows in the States 541 00:32:35,320 --> 00:32:38,800 Speaker 1: are doing it so poorly. They are uh, not talking 542 00:32:38,840 --> 00:32:42,800 Speaker 1: about fundamentals. They're they're they're not talking about the fact 543 00:32:42,840 --> 00:32:46,320 Speaker 1: that like till Ray, for example, the last quarter they 544 00:32:46,440 --> 00:32:48,880 Speaker 1: ended the quarter with a finished goods inventory of eighty 545 00:32:48,960 --> 00:32:53,080 Speaker 1: nine thousand dollars in flour and four and sixteen thousand 546 00:32:53,160 --> 00:32:58,600 Speaker 1: dollars in oil extracts. No one's mentioned that. But if 547 00:32:58,600 --> 00:33:00,680 Speaker 1: you're about to ramp up for ACT and it takes 548 00:33:00,720 --> 00:33:03,040 Speaker 1: you four to five weeks after your harvest and you're 549 00:33:03,080 --> 00:33:05,640 Speaker 1: sitting on under a day's worth of sales of finished goods, 550 00:33:06,400 --> 00:33:09,960 Speaker 1: you've got some issues. And I love the til Reay guys, 551 00:33:09,960 --> 00:33:12,760 Speaker 1: and they'll they'll get it figured out. They're very professional 552 00:33:12,760 --> 00:33:17,240 Speaker 1: and executive. Their executive is fabulous. But not one mention 553 00:33:17,320 --> 00:33:20,160 Speaker 1: of something like that, Not one mentioned in the media 554 00:33:20,160 --> 00:33:24,840 Speaker 1: about waste. Even the Canadian media has been sadly lacking. 555 00:33:25,360 --> 00:33:29,240 Speaker 1: Like I said, you can measure management without the financials 556 00:33:29,240 --> 00:33:32,480 Speaker 1: in certain aspects. If you follow waste and you track 557 00:33:32,800 --> 00:33:35,960 Speaker 1: through and dig through the m d na's management discussion 558 00:33:35,960 --> 00:33:39,040 Speaker 1: analysis and the financial notes like we do, you can 559 00:33:39,160 --> 00:33:42,600 Speaker 1: sometimes pinpoint how much waste these companies have and uh, 560 00:33:42,640 --> 00:33:45,080 Speaker 1: some of them are over twenty six that's that's a 561 00:33:45,080 --> 00:33:46,760 Speaker 1: little high if you're going to be at a consumer 562 00:33:46,840 --> 00:33:51,280 Speaker 1: packaged goods industry. So I really think the listings in 563 00:33:51,320 --> 00:33:55,240 Speaker 1: the US created the interest. I think the talking heads 564 00:33:55,680 --> 00:33:59,200 Speaker 1: are talking heads. They they really don't know what they're 565 00:33:59,240 --> 00:34:03,280 Speaker 1: looking at. They're fueling hype. And I got into this 566 00:34:03,320 --> 00:34:06,719 Speaker 1: industry because, um, I didn't want to see Joe retail 567 00:34:06,760 --> 00:34:08,840 Speaker 1: get taken advantage of. And that I have for or 568 00:34:08,880 --> 00:34:12,480 Speaker 1: asked me was people getting taken advantage of. And so 569 00:34:12,520 --> 00:34:15,040 Speaker 1: some of the the the cheering that's going on to 570 00:34:15,160 --> 00:34:19,319 Speaker 1: me is a little irresponsible. It's bringing people into the 571 00:34:19,360 --> 00:34:23,839 Speaker 1: market because it's hot and topical, not because it might 572 00:34:23,880 --> 00:34:27,840 Speaker 1: be a good investment for their portfolio. Alright, So quick 573 00:34:27,840 --> 00:34:31,080 Speaker 1: comment and then two very quick questions. First of all, 574 00:34:31,120 --> 00:34:34,000 Speaker 1: I take that as a personal challenge as a as 575 00:34:34,040 --> 00:34:37,040 Speaker 1: a business TV show co host to not be one 576 00:34:37,040 --> 00:34:39,759 Speaker 1: of the talking heads and to actually live up to 577 00:34:40,160 --> 00:34:43,239 Speaker 1: your standards. So I appreciate that comment. I'm it's something 578 00:34:43,320 --> 00:34:47,719 Speaker 1: to strive towards. As for the two questions, one is 579 00:34:47,840 --> 00:34:51,440 Speaker 1: a what is the future of the catalysts and where 580 00:34:51,440 --> 00:34:53,440 Speaker 1: are you going to take it next? And be I 581 00:34:53,480 --> 00:34:55,239 Speaker 1: just have to go back. You were talking about like 582 00:34:55,480 --> 00:34:58,279 Speaker 1: what's going to be the hit strains, So like, is 583 00:34:58,320 --> 00:35:02,560 Speaker 1: there a career where people can smoke pot and say, Okay, 584 00:35:02,600 --> 00:35:08,320 Speaker 1: this is really fantastic stuff. Wow. I'll answer the first first. 585 00:35:08,440 --> 00:35:11,719 Speaker 1: First of all, I hope you you dig deeper at 586 00:35:11,760 --> 00:35:15,720 Speaker 1: the end of the day until it's until it's about 587 00:35:15,840 --> 00:35:19,200 Speaker 1: the investor and not about the hits and the clicks. 588 00:35:19,840 --> 00:35:23,279 Speaker 1: I think there it behooves us to to educate the 589 00:35:23,280 --> 00:35:27,800 Speaker 1: investor because they're at such a disadvantage compared to the institutionals. 590 00:35:28,800 --> 00:35:32,120 Speaker 1: Now I'll deal with your second one. It would be 591 00:35:32,200 --> 00:35:34,719 Speaker 1: great and I think there's a lot of gamers out 592 00:35:34,760 --> 00:35:36,560 Speaker 1: there that that would say, hey, it would be a 593 00:35:36,640 --> 00:35:40,160 Speaker 1: nice adjunct to gaming if I can also comment on 594 00:35:40,280 --> 00:35:43,000 Speaker 1: strains UH, and there is some strain review out there. 595 00:35:43,080 --> 00:35:45,600 Speaker 1: What I can't wait for is for the myths to 596 00:35:45,640 --> 00:35:49,680 Speaker 1: get busted and there there be actual like pepsi coke 597 00:35:49,840 --> 00:35:54,640 Speaker 1: challenges where it isn't just preconceived notions. I can't wait 598 00:35:54,680 --> 00:35:57,879 Speaker 1: for that. I think that's gonna be very interesting as 599 00:35:57,920 --> 00:36:00,600 Speaker 1: to the future of the cannabis UH. In a year, 600 00:36:01,040 --> 00:36:04,760 Speaker 1: we actually have a trade conference that we're doing in Leamington, Ontario, 601 00:36:04,840 --> 00:36:09,080 Speaker 1: which is a small Hamlet just outside of Windsor, Ontario, 602 00:36:09,120 --> 00:36:11,719 Speaker 1: which is about forty five minutes from Detroit, and we're 603 00:36:11,719 --> 00:36:14,879 Speaker 1: actually doing a trade conference there with Grant Thornton. Uh 604 00:36:14,920 --> 00:36:17,279 Speaker 1: this is within a year. Like we just released a 605 00:36:17,400 --> 00:36:19,840 Speaker 1: video last week. And I can tell you if I 606 00:36:19,880 --> 00:36:23,239 Speaker 1: told my partners back in last November, Hey, by the 607 00:36:23,320 --> 00:36:27,040 Speaker 1: end of the year we'll have videos released and we'll 608 00:36:27,080 --> 00:36:29,000 Speaker 1: be doing a trade conference, they would have hung up 609 00:36:29,000 --> 00:36:33,040 Speaker 1: on me. So we're gonna go as far as our 610 00:36:33,080 --> 00:36:35,960 Speaker 1: imaginations can take us and as far as our community 611 00:36:36,040 --> 00:36:39,200 Speaker 1: will allow us to go. We're we're really focused on 612 00:36:39,880 --> 00:36:44,080 Speaker 1: providing content to our community and making sure that they 613 00:36:44,120 --> 00:36:47,319 Speaker 1: like what we do. And uh So, I don't know 614 00:36:47,360 --> 00:36:51,320 Speaker 1: where we're going next. Quite frankly, it's it's very flattering 615 00:36:51,360 --> 00:36:54,319 Speaker 1: that people like you, Joe, that that listen to me. 616 00:36:54,400 --> 00:36:56,040 Speaker 1: My wife and my kids don't listen to me. But 617 00:36:56,600 --> 00:36:59,200 Speaker 1: it's nice to know that there are some people out 618 00:36:59,200 --> 00:37:01,920 Speaker 1: there that that find what I say and what Andrew 619 00:37:01,960 --> 00:37:06,399 Speaker 1: and what Graham says as valuable in their investment decisions. Well, 620 00:37:06,760 --> 00:37:09,400 Speaker 1: we wish you luck and I really appreciate you coming 621 00:37:09,400 --> 00:37:11,279 Speaker 1: on and I, like I said, I do think it's 622 00:37:11,280 --> 00:37:14,920 Speaker 1: important that the media moves beyond the hype and actually 623 00:37:15,239 --> 00:37:18,000 Speaker 1: helps to educate people about what these companies are. So 624 00:37:18,280 --> 00:37:22,440 Speaker 1: really appreciate your explanation. Freig Wiggins, thanks for coming up. 625 00:37:23,200 --> 00:37:38,880 Speaker 1: Thank you very much for having me. It's been a pleasure, Trazy. 626 00:37:38,920 --> 00:37:42,040 Speaker 1: I thought that really was like the perfect blend of 627 00:37:42,920 --> 00:37:46,719 Speaker 1: my and your interests. You know what, I was really 628 00:37:46,760 --> 00:37:50,799 Speaker 1: surprised about. We managed to go through that entire podcast 629 00:37:50,920 --> 00:37:56,040 Speaker 1: without I think making a single uh marijuana pun. You 630 00:37:56,080 --> 00:37:58,479 Speaker 1: know what. I'm so I'm so proud of us because 631 00:37:58,520 --> 00:38:02,160 Speaker 1: I'm so tired of marijuana punt and I think it 632 00:38:02,239 --> 00:38:06,160 Speaker 1: speaks to the uh, the degree of seriousness which with 633 00:38:06,200 --> 00:38:09,200 Speaker 1: which we take it, and the maturation of the industry. 634 00:38:09,280 --> 00:38:12,240 Speaker 1: And I I just I'm trying to kill marijuana punts 635 00:38:12,239 --> 00:38:16,120 Speaker 1: every time I see them entitled or articles or so 636 00:38:16,960 --> 00:38:19,560 Speaker 1: now they're they're bad. So I think that really does 637 00:38:19,600 --> 00:38:22,080 Speaker 1: speak well of us that at no point in the 638 00:38:22,120 --> 00:38:25,120 Speaker 1: conversation did occur to me to make one. Right, Um, 639 00:38:25,160 --> 00:38:27,920 Speaker 1: There's one other thing that I was thinking throughout that discussion. 640 00:38:27,960 --> 00:38:31,240 Speaker 1: Obviously we were focused on the financial and the business 641 00:38:31,320 --> 00:38:34,799 Speaker 1: aspects of an entirely new industry, but if if you 642 00:38:34,840 --> 00:38:37,840 Speaker 1: take a step back, it's also just really interesting to 643 00:38:37,960 --> 00:38:43,920 Speaker 1: watch cultural and societal norms basically changing in our own time. 644 00:38:44,840 --> 00:38:47,640 Speaker 1: You know, think back to twenty or thirty or forty 645 00:38:47,719 --> 00:38:50,160 Speaker 1: or fifty years ago and the way people talked about 646 00:38:50,200 --> 00:38:54,919 Speaker 1: pot marijuana, you know, reefer madness. People honestly thought that 647 00:38:55,560 --> 00:38:59,600 Speaker 1: marijuana was something that was going to destroy entire societies. 648 00:39:00,160 --> 00:39:03,040 Speaker 1: And now we're talking about the degree to which it 649 00:39:03,080 --> 00:39:08,400 Speaker 1: should be legalized and basically incorporated into some people's daily lives. 650 00:39:08,480 --> 00:39:12,560 Speaker 1: It's pretty amazing. Well, literally, n y C listing for 651 00:39:12,680 --> 00:39:17,320 Speaker 1: a marijuana dealer is like about the pinnacle of cultural acceptance. 652 00:39:17,360 --> 00:39:20,160 Speaker 1: I would say, so you think of like, nothing could 653 00:39:20,160 --> 00:39:26,040 Speaker 1: be more normally and conservative than NYC NYC listing, And 654 00:39:26,080 --> 00:39:28,880 Speaker 1: so I think there's something even though it's not fully legal, 655 00:39:29,760 --> 00:39:32,440 Speaker 1: we're not legal across the United States, yet it's almost 656 00:39:32,480 --> 00:39:36,080 Speaker 1: like that's even more striking. It's it's fully arrived by 657 00:39:36,120 --> 00:39:42,720 Speaker 1: that point, right, or quality control for a Canadian provincial government, Yeah, 658 00:39:42,920 --> 00:39:46,839 Speaker 1: or like I f r S treatment of how you 659 00:39:46,920 --> 00:39:51,040 Speaker 1: account for from when you plant the marijuana to when 660 00:39:51,080 --> 00:39:55,520 Speaker 1: it's sitting his inventory, it's pretty uh, it's pretty entrenched. 661 00:39:55,600 --> 00:40:00,080 Speaker 1: It's here. Yeah, all right, Well this has been in 662 00:40:00,320 --> 00:40:03,960 Speaker 1: another episode of the Odd Thoughts podcast. I'm Tracy Alloway. 663 00:40:04,080 --> 00:40:07,440 Speaker 1: You can follow me on Twitter at Tracy Alloway, and 664 00:40:07,480 --> 00:40:09,840 Speaker 1: I'm Joe Wise though. You can follow me on Twitter 665 00:40:10,000 --> 00:40:12,760 Speaker 1: at the Stalwart, and you can follow our guest Craig 666 00:40:12,760 --> 00:40:16,520 Speaker 1: Wiggins on Twitter. He is at Go Blue c d N. 667 00:40:17,200 --> 00:40:20,919 Speaker 1: And you should follow our producer top for Foreheads at 668 00:40:21,000 --> 00:40:24,480 Speaker 1: Foreheads T, as well as the Bloomberg head of podcast, 669 00:40:24,560 --> 00:40:28,600 Speaker 1: Francesco Leaving at Francesco Today. Thanks for listening.