Pot production issues mean cannabis investing involves more than just buying marijuana stocks

Investors are looking to make a fortune by investing in the surging marijuana industry. Now that more and more states are legalising marijuana, the lure of marijuana stocks and businesses and their massive potential for growth is too big to leave unexplored.

Efforts to take a sizable share of the booming market are stronger than before. For instance, the California Growers Association is fighting the authorities’ decision to put limits on acreage that can be used by a single grower. Marijuana Stocks reported that a real chance of this leading to big agribusiness dominating small-time grower in the Salinas and Central valleys.

The CGA is willing to fight the Department of Food & Agriculture in court to overturn its one-acre-per-grower limit for marijuana cultivation. As this industry continues to expand, it would not be a surprise that more producers will fight over the right to cultivate and produce on a massive scale.

Production costs: up or down?

While cultivation area remains a point of contention in California, mandatory wage hike is expected to influence a surge in the cost of producing marijuana products and derivatives in Ontario. Medical marijuana producer Aphria Inc expects additional US$600,000 (AU$770,250) annual costs due to the minimum wage increase from US$11.60 (AU$14.89) to US$14 (AU$17.97) per hour.

In 2019, the minimum wage would hit the US$15 (AU$19.26) mark per hour, which would incur another US$300,000 (AU$385,000) per year. Industry insiders say that eventually, the added costs could be passed on to the consumers and buyers.

Meanwhile, others believe that a surge in producers in the future could more than offset this potential hike in prices. ArcView Group CEO Troy Dayton said things will only get better with the advancement of agricultural technology. “Anybody that is investing in this sector or starting a business in this sector needs to be doing so with the understanding that the price of cannabis is going to drop precipitously,” he added.

The efficiency in production could result in a price drop of less than US$300 (AU$385) a pound from a high of more than US$1,000 (AU$1,284) a pound.

Investing in the industry

With the cannabis market in North America to hit over US$20 billion (AU$25.67 billion) in five years with thanks to the legalisation of the plant, more companies and individuals are dipping their toes in the surging industry — whether as a business entity or an investor.

For those who want to invest in a startup of wholesale marijuana cultivator, indoor cultivation sets them back US$75 (AU$96.29) per square foot. Greenhouse cultivation costs US$50 (AU$64.19) per square foot while a combination of both costs US$17 (AU$21.82).

On the other hand, the outdoor type of cultivation remains the cheapest at US$10 (AU$12.84) per square foot. Indoor cultivation requires greater financial support because marijuana is grown in a controlled environment where temperature and humidity are measured and artificial lighting is placed.

Meanwhile, for those looking for marijuana stocks and cannabis companies to invest in, these companies are recently making waves in the market.

Aphria

Aphria Inc has decided to sell part of its stake in Liberty Health Sciences Inc recently. The continued banning of marijuana under the federal law in the US served as catalyst why Aphria Inc is selling 26.7 million Liberty shares at US$1.25 (AU$1.60) per share. Frozen yoghurt chain Yogen Fruz is reportedly buying 80 percent of the shares while the rest goes to be acquired by Delavaco Capital.

Aphria CEO Vic Neufeld believes it was a necessary step to take. "While I continue to believe there is tremendous opportunity in the US for medical cannabis, the sale of these shares serve the best interests of our shareholders," he added.

Aurora Cannabis

Aurora Cannabis Inc has acquired a 19.9 percent stake in Liquor Stores N.A. Ltd for US$103.5 million (AU$132.87). This move will give Aurora Cannabis new platform to reach target audience faster. Liquor Stores have a total of 231 stores in Western Canada and some parts of the US. The company revealed that it plans to convert some of its outlets into cannabis stores.

PotNetwork Holding

PotNetwork Holding, Inc (OTCMKTS:POTN) is still going strong this year after having a stellar 2017. The company’s revenues skyrocketed by as much as 1,300 percent. This growth was primarily driven by its subsidiary Diamond CBD. Its CBD products are gaining momentum with the legalisation of medical marijuana.

Diamond CBD features products that cater to different consumer demographics. They even have products for overall wellness of pets. Among its most popular CBD products are hill Gummies, Relax Gummies, Liquid Gold vape liquid, flavoured CBD Hemp Oils, Blue CBD Crystals Isolate and Relax Extreme CBD.

Its wide variety of offerings for consumers has led PotNetwork to achieve a total revenue of about US$14.5 million (AU$18.61 million) in 2017 — surpassing the projected US$8.3 million (AU$10.66 million) figure — thanks to Diamond CBD outperforming its sales growth each month.

Article based on supplied press release.