How do you see the 2020 election playing out for the cannabis industry?
“I believe that if Trump serves a second term, we will see a federal legalization of cannabis, perhaps, though, at the end of his second term. Even if he is not re-elected, I believe that he will sign off on it before leaving office. Trump is going to make it happen because it makes financial sense. It creates jobs, and it brings more money to local residents and local community while being done safe and responsibly.
In terms of Biden, he was always opposed to the full legalization of marijuana during the Obama and post-Obama administration. He is now looking to possibly decriminalize cannabis and expunge some cannabis-related records, giving states more opportunities for more research. The only thing he did help to create during that administration was the Cole Memorandum, which protects marijuana-legal states from federal prosecution. During the Obama era, they agreed to disagree with the states on a federal level but let them make their own decision regarding the legalization of cannabis. If he were to become president, I don’t know that he would do anything differently.”
Cannabis and the stock market. 2019 saw a plunge in cannabis stocks, why did it happen and what’s ahead.
“Like anything else, cannabis stocks came out of left field. Those are not standard issued stocks like we would use to describe AT&T, IBM, Google, or even Tesla. Cannabis stocks were running on sheer excitement and enthusiasm. Oftentimes, when something like that happens, stocks become overvalued. The consumer was buying them, not because they made sense as a business at that time, but rather because a). They loved the idea- it was a topic of conversation and b). they were afraid not to make it in time- in the sense that the stock prices would start to go through the roof. Cannabis has been in the media for the past three or four years as the talk of the town, so more and more people were familiar with both the concept and the product.
Speaking from an investor standpoint, last year we went through the excitement, the plateau and then the reality of Wall Street which says we only run companies that actually present value as a business. Since the profits weren’t there, I believe that is what caused stocks to be depressed and sold out. As an active investor, you have to pay attention to the people who were selling them at the end of 2019. Running them from the heights of 45-50 stocks to 18 down 75 cents. When you start to see the rapid motion of stocks, this is an extreme.
Originally they were being run up, now, they are running them down because they start to think it’s never going to happen, there are too many regulations, it’s not going anywhere, let me cut my losses and move on. Both of these extremes present value to the active investor. My advice would be to be careful, review the major players, and see how their value is related to their extended history. Today, it’s a more favorable stock for investor dollars because they can get some bargains and we have a little more history within a specific company to show what can happen with upswings and downswings, what’s happening with their management, are they utilizing their capital, etc..”
What might we see from the cannabis industry in 2020 in terms of product and technology?
“I think we will see more consolidation. More products coming into the market. Larger companies taking out the smaller ones. More competition, thus bringing the price of cannabis lower in the wholesale side and hopefully in the consumer market. Specific technology in terms of the fast acting, easily delivered, non-smoking experiences will become a bigger piece of the pot market. Consumers are getting more educated and are demanding quality, price, and consistency. The consumer wants to feel something sooner- like within three to five minutes. They don’t want to pay a high retail price. And slowly but surely, on the industry level, we are becoming more developed. Quality of packaging, quality of the materials, quality of the manufacturers- all of that is improving. So that’s a win-win for the consumer.”
How about in five years?
“I see cannabinoids being more widely incorporated in day-to-day food. We might be able to see hemp derivatives be a part of the diet. I believe that smoking in the general sense will become less of an item. The consumer will treat smoking cannabis similar to that of smoking tobacco- they are looking for different alternatives to smoking with the same benefits but limited downsides.”
How has the average cannabis consumer changed over the last couple of years and how does the industry/companies need to adapt?
“Today’s cannabis consumer knows two numbers: The content of THC and the price. Originally, the consumer only wanted to know one thing: Is it available? There was no interest in the potency, varietals, it was more about the availability at the local level. So the consumer has become a little bit more educated and right now is trying to treat cannabis flower as a commodity. They are looking to find a bargain, they are learning about new consumption methods, forming their opinions by trying different delivery mechanisms, and finding their favorites. There is more tendency for the consumer to want to be slightly elevated during exercise and/or working hours. Consumers are trying to consume better and for less money.
We are going to start seeing industry leaders become more consistent in their offerings, acquiring smaller companies, consolidating their resources, and trying to maintain the pricing along with new offerings.”
States with pending legalization, where might it pass and what are the hurdles for those where it likely won’t?
“This is pure speculation on my part- approving anything new in states like New Jersey will come down to the attitudes of the state or its special operations, who is going to receive the licenses, and who is going to be awarded the stuff. This state is going to be a challenge as will New York for it, too, is a big politics state. It is more about deciding who is going to grow it, where are we going to grow it, who will make the money and when.
South Dakota’s legalization should go through easily. They experience such tough winters and they are in a distant location from normal sources of legal cannabis. Arizona, Missouri and Alaska all have medical programs so there should be a smooth transition into legalization in 2020.
The decision is not to decide whether to legalize cannabis or not. It’s more about trying to decide who’s going to do it, who’s going to make the money, who knows who and when will they be ready to supply one of the largest markets in the nation. I am reasonably optimistic about what will play out in 2020.”
How is the industry doing in the more recently legalized states
“It’s a new market with newly legalized states, which typically brings new excitement, higher prices, small offerings. As the market develops a little bit more, capitalism comes in to play. Regarding the licensing of cannabis- any new market right now is great if you’re in and a challenge if you’re out.”
About Serge Chistov and Honest Marijuana Co.:
Serge Chistov is Chief Financial Partner for the Honest Marijuana Co. and an industry expert. Honest Marijuana has been a leader in cannabis innovation since it’s inception with an organic approach to the growth, production and packaging of cannabis, the launch of the first-ever organic hemp wrapped the machine rolled blunts, the invention of the now patented Nanobidiol Technology, and the first company to bring THC-O-Acetate technology and products to market. Learn more at https://honestmarijuana.com or @honestmarijuanaco.