The market for cannabis stocks is white hot in Canada following the legalisation of recreational consumption on October 17, and while there has been a bit of a pullback since that milestone day, belief in the long-term outlook for the sector remains strong. But bigger news for investors is still to come.
Most observers believe that at some point, cannabis will become federally legal in the US, and when that happens the related opportunities will dwarf those in Canada.
“Enormous” California market
That view is shared by Karl Kottmeier, president of Chemistree Technologies Inc. (CSE:CHM OTCQB:CHMJF), an investment company dedicated to acquiring and developing cannabis assets in the United States and Canada.
Currently, Chemistree has assets in both the US; with its Sugar Leaf label in Washington State and prospective cannabis cultivation lands in California, and Canada through an investment in Pasha Brands, a craft cannabis firm in British Columbia.
Kottmeier says that the enormity of the Californian market is currently what makes it stand out amongst the rest, citing “far fewer barriers, greater consumption rates within the population and a massive tourist business”.
“It would be going too far to say that there is no limit, but there is certainly a vast amount of opportunity in many different areas – from cultivation to processing, innovations in cultivation and processing, distribution, marketing, branding, external mandatory testing, and so on,” he adds.
Industry veterans on board
Kottmeier says that what makes Chemistree unique is its management team, which includes several long-term players in the cannabis industry including cultivators, processors, consultants in design-build for cultivation and processing facilities, and marketers.
One name that stands out is Dennis Hunter, who Kottmeier says is “the biggest player in northern California by far when it comes to purchasing biomass, processing it and creating unique products”.
Making existing businesses better
Rather than simply buying up cultivation land, Kottmeier says the company instead looks for areas where it can deploy capital and make existing businesses better.
“The opportunities we look for revolve around the concept of making an existing business better by accessing these markets,” says Kottmeier.
“You don’t want to plant your own flag, build cultivation to the sky and hope somebody buys it off you. It is hugely competitive and good people are hard to find. Go to people who are already doing it and provide them with capital,” he adds
Sponsorship of top cannabis conference
The company is already making a move to attract those at the top of the industry, announcing on 14 November that it would be sponsoring the High Times party at the MJBizCon Conference and Expo, the premier marijuana business conference in North America.
Sponsorship of High Times and the recent launch of a new Sugarleaf website is part of an aggressive marketing and sale campaign to introduce Chemistree to cannabis retailers, starting with over 3,300 retail dispensaries and cultivators, with the majority located in California, Colorado, Arizona and Nevada.
With shares trading around C$0.39, Chemistree has a market cap of C$13.3mln.