Marijuana Has Gone To Pot

According to a fascinating feature in Forbes, the major legal marijuana companies are in terrible trouble — because they are growing more weed than anyone could smoke in several lifetimes.

“In just a year after Canada’s historic pot legalization, pot producers built up a massive surplus of pot. In fact, only 4% of pot produced in Canada in July has been sold!”

This has caused the business market to crash.  Aurora Cannabis is “Canada’s largest cannabis producer and one of the most popular pot stocks on earth. In fact, this stock has recently topped Apple as the favorite stock among American Millennials.” But that hasn’t saved the company stock price:

“If you look at Aurora Cannabis’s most recent financial report, you’ll see its revenue grew 52% in the last fiscal quarter, compared to the previous quarter. That sounds good… but it’s hiding a dirty secret.   Aurora Cannabis is actually dumping part of its harvest into “wholesale,” which means it is selling it for cheap… according to a line buried deep in the company’s Q4 financials.  Last fiscal quarter, the company dumped $20 million worth of pot, a 869% increase from the previous quarter. It is doing this because there’s not enough demand from consumers.”

 

The Forbes article likens this to the situation in American agriculture in the 1930s when an overabundance of product caused crops to be burned just to maintain prices at a floor level. They also suggest that the situation is likely to get worse as most large marijuana producers have invested heavily to increase production in the future.

No wonder then that in Canada, street (illegal) prices have fallen while legal dispensaries have to charge much more to meet regulatory stipulations, and thus the number of legal stores has not grown as expected and government revenues are not as they had hoped.

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