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Cannabis in Canada: No longer just getting started

Author(s): Michael Watts, Susan Newell, Marty Putyra

Dec 13, 2019

The legalization of the recreational or “adult-use” cannabis market in 2018 brought with it some growing pains, including initial distribution and supply chain issues, as well as the effect of the illegal market, which continues to thrive. Through 2019, provinces and territories were looking to overcome these challenges by considering changes to their age of consumption, as well as their retail licensing, distribution and wholesale models. At the federal level, Canada legalized three new classes of cannabis products: edibles, topicals and extracts. These additions are expected to change the legal cannabis landscape significantly. However, before these new classes are even available for legal sale, the market has been affected by adverse events allegedly relating to consumers vaping illicit cannabis products. These events have created some cautious attitudes towards cannabis companies’ risk profiles.

In addition, declining share prices appear to have slowed the pace of public offerings by cannabis companies in the later part of the year and may lead to increased M&A activity and market consolidation in the industry in 2020. Enterprises that were early and fast movers in the sector and that successfully executed strategic partnerships, cornerstone investments, take-privates and capital raising transactions that resulted in strong balance sheets can expect to prevail in the industry. The cannabis industry is here to stay, notwithstanding the current market climate...