In this week's "Rising High," The Fly's recurring series focused on cannabis stock news, The Fly takes a look at 2021 industry predictions.
M&A TO PLAY HUGE ROLE: Kyle Detwiler, chief executive officer for Clever Leaves said he expects the market will perform increasingly well in 2021. The multinational company with operations and investments in Canada, Colombia, Germany, Portugal and the U.S. expects to close a deal with Schultze Special Purpose Acquisition Corp. (SAMA) this month and become publicly traded on the Nasdaq. “As the pandemic lingers, we still see the medical cannabis market performing well,” Detwiler said in a statement. “While a great deal of cannabis companies are still strapped for cash, we were able to raise the necessary capital to withstand the market headwinds in these extremely challenging times and we believe this will help us achieve our ultimate goal of transforming the cannabis supply chain on an international scale.” The CEO said the company has established significant competitive advantages citing its Colombian cultivation and extraction operations, its Portuguese cultivation facilities and its global distribution infrastructure headquartered in Germany. “With a low-cost operating model, significant asset base and solid leadership, investors believe our company is well-positioned for substantial revenue and is expected to achieve positive free cash flow by the fourth quarter of 2021,” he said.
Detwiler added mergers and acquisitions will be an ongoing theme for the cannabis industry in 2021. “As we are about to close our definitive agreement with Schultze Special Purpose Acquisition Corp. we will become a NASDAQ-listed public company and that will be a significant opportunity for strategic acquisitions,” he said. “Clever Leaves’ global sales and distribution capabilities can be meaningfully expanded through strategic decision-making and thoughtful capital deployment, including through disciplined M&A.”
CONTINUING MATURATION: Newlake Capital CEO Anthony Coniglio said he believes the space will continue to mature in financial performance, investor acceptance and legalization. Newlake, a cannabis real-estate investment vehicle with tenants across the supply chain, owns 20 properties across eight U.S. states. “Good 2020 financial performance will improve in 2021, more investors will support the industry and legislative action is only a matter of time,” Coniglio said in a statement. “The election sealed the fate for the cannabis industry declaring it a clear winner in the years to come…Each state with ballot initiatives has moved forward to legalize cannabis for medicinal or adult-use, further solidifying the inevitability of federal legalization and positioning the industry for sustainable long-term growth in 2021.” The CEO said Newlake thinks approval of adult-use sales in New Jersey will create a domino effect in the Northeast and the state will see $1B of sales during 2022. “We think approval by NJ voters will be a catalyst for coordination with New York, Connecticut and Pennsylvania creating an adult-use region with a population of nearly 45 million people,” he said. Coniglio noted he also expects increased demand for retail, cultivation and manufacturing properties in the Northeast. “We could see over 5 million square feet of real estate reallocated to the cannabis industry in the coming years,” he said. “NewLake is positioning to be a provider of choice for the real estate capital needs of the industry.” Newlake expects legal cannabis sales in the U.S. to exceed $35B by 2025.
CANNABIS 2.0 DOMINATION: Everett Knight, executive vice president, corporate development and capital markets at The Valens Company (VLNCF) said he sees cannabis 2.0 products dominating the Canadian market in 2021 as 3.0 products gain market share. Valens, a Canadian company which focuses on end-to-end development and manufacturing of cannabinoid-based products, provides services including extraction, analytical testing, formulation, product development and custom manufacturing. “Similar to the U.S., we will see 2.0 products take more market share and next generation products such as cannabis/CBD infused bath bombs, lip balms or CBD-infused honey will start to gain market share in 2021,” Knight said in a statement. “We’ll also see an explosion of stores in Ontario and the beverage market in Quebec will gain massive steam compared to the rest of Canada because of the restrictions on other products.”
The EVP added he expects the FDA to pass more regulations in 2021 as more legal markets in the U.S. come into play. “Expect to see increased safety requirements and product recall processes instituted in the U.S. market,” he said. “U.S. MSOs will have to transition to GMP and food safe regulations imposed on Canadian LPs.” Knight also believes the international market will expand in 2021 as medical legalization paves the way for adult-use. “Mexico and Israel are close to legalization,” he said. “These markets will open up a landslide of opportunities for established companies in the U.S. and Canada looking to capture global market share.”
NEW MARKETS: 4Front Ventures (FFNTF) president Kris Krane said he expects cannabis to be an even better market in 2021 as new states like New Jersey and Arizona are poised to come online for adult use and markets like Illinois, Michigan and Massachusetts are set to expand and mature. 4Front Ventures, a national multi-state cannabis operator and retailer, manufactures and distributes a portfolio of over 25 cannabis brands. “A Biden administration is likely to be friendlier towards this industry than the current administration,” Krane said in a statement. “But most importantly, the larger companies in the space are now focused on operations and execution, resulting in better overall performance, revenue, and EBITDA.” More consolidation in the industry will also take place in 2021, according to the president, who said companies will use their new profits to acquire businesses and market share. “2021 will likely see a continued focus on operations and execution, separating out the major players from those that were always built on hype and smoke and mirrors,” he said. “We may see some name brands go under in 2021, but the cream will rise to the top and the likely eventual big winners in the market will start to emerge.”
LATIN AMERICAN CANNABIS: Fotmer Life Sciences CEO Jordan Lewis said he believes cannabis companies will shift their focus to generating positive cash flow and exhibiting viable business models to investors in 2021. Fotmer Life Sciences is a global cannabis cultivator and extractor that is fully-licensed in Uruguay to produce medical-grade cannabis flower, extracts and manufactured products for the international market. “The market no longer rewards aggressive expansion but is now looking for material profitability,” Lewis said in a statement. “Companies who can articulate a near-term path to profitability will be able to witness an industry kick and have a higher probability of becoming highly profitable.” The CEO said he also expects international markets to develop at a rapid pace and cannabis to become normalized at an even greater pace than years prior. “Brazil appears to have also become an attractive market as more companies are able to introduce their products and as local pharmaceutical companies develop and register more products,” he said. “Uruguay is gaining a new momentum as the government provides support to help develop an efficient industry, particularly in accelerating the export process. Uruguay’s latest milestones achieved by the industry have positioned the country as one of the largest exporters of dry flower in the world and a logistics hub.”
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Auxly Cannabis (CBWTF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos Group (CRON), CV Sciences (CVSI), CURE Pharmaceutical (CURR), Delta 9 (VRNDF), Driven Deliveries (DRVD), Emerald Health (EMHTF), FluroTech (FLURF), General Cannabis (CANN), Greenlane (GNLN), Green Thumb Industries (GTBIF), GrowGeneration (GRWG), Harborside (HBORF), Hemp Inc. (HEMP), HEXO (HEXO), India Globalization Capital (IGC), Indiva (NDVAF), Indus Holdings (INDXF), Inner Spirit (INSHF), Innovative Industrial Properties (IIPR), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen Enterprises (MMNFF), Mjardin (MJARF), Neptune Wellness (NEPT), Omnicanna (ENDO), Organigram (OGI), Planet 13 (PLNHF), Sproutly (SRUTF), Stem Holding (STMH), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Valens (VLNCF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Village Farms (VFF), Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Wildflower Brands (WLDFF), YSS Corp. (YSSCF), and Zynerba (ZYNE).
Schultze Special Purpose Acquisition Corp. II
-0.24 (-1.84%)
Valens Company
+ (+0.00%)
4Front Ventures
+ (+0.00%)
APHA
+
Aurora Cannabis
-0.05 (-0.51%)
CV Sciences
+ (+0.00%)
CannTrust
+ (+0.00%)
Canopy Growth
+0.27 (+1.02%)
Cronos Group
-0.1 (-1.23%)
Trees Corporation
+ (+0.00%)
IGC Pharma
+0.035 (+1.98%)
Tilray
-0.035 (-0.38%)
Trulieve Cannabis
+ (+0.00%)
ZYNE
+