New year, new market. For the North American cannabis industry, 2020 started out with a bang, as a big and populous state kicked off recreational marijuana sales. It’s legalized this form of consumption in a different way from other states, and that’s already had quite an impact.
Marijuana stock investors need the optimism this can bring, because for their sector 2019 was, to use a technical term, a disaster. This new round of legalization is a good start to the year and marked last week as a historic one for the cannabis trade.
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Illinois joins the legal recreational use club
The state where recreational weed just became legal is Illinois, making it the 11th U.S. state to do so. We shouldn’t underestimate the impact of this, for two reasons.
First, it’s the sixth most populous state in the nation, at over 12.7 million souls — it’s also home to the No. 3 U.S. city by population, Chicago. This makes it immediately and compellingly a large, important market for any emerging business sector.
Second, Illinois was smart about freeing its recreational pot market. The state immediately allowed existing medical cannabis growers and dispensaries to sell to the public. As a result, around $3.2 million in sales occurred on Jan. 1 alone. And it should be quick in awarding licenses to newcomers; it’s obligated by law to begin accepting and processing licenses on March 15 and issuing them on May 1.
Another element that sets Illinois recreational legalization apart is that it came from the state’s legislature, having passed that body last May, rather than directly from the citizenry in a referendum.
The advantage of this approach is that professional lawmakers were able to develop a full-bodied law that addresses many key aspects of legalization from the outset. This is arguably preferable over slipstreaming right behind popular will and thus having to figure things out largely on the fly.
An important, and very humane, aspect of the new Illinois law is its expungement clause. People with nonviolent cannabis-related offenses on their criminal records can have them basically erased following an official review. It’s estimated that almost 800,000 Illinois residents can benefit from this measure.
The big pot companies will scramble to get a piece of this market. One in particular that stands to gain handsomely is Curaleaf (OTC:CURLF), which last summer agreed to pony up $875 million to buy dispensary operator Grassroots. Relatively large for a multi-state dispensary network, Grassroots has four stores in Illinois with their doors open, and another four on the bubble waiting for the state to begin issuing new licenses.
The catch for Curaleaf is that nearly half a year after this deal was signed, it still hasn’t closed. When it does, though, it’ll immediately make Curaleaf an important player in this newly and suddenly critical state.
Tilray taps yet another new market
Meanwhile, on the opposite side of the world, the nation of Israel is apparently about to receive its first shipment of commercial medical marijuana. The delivery comes from internationally focused Big Cannabis player Tilray (NASDAQ:TLRY), which announced it last week.
Israel is no Illinois. Like a number of other countries around the globe, it has legalized marijuana only for medical use, and within fairly strict guidelines. To some degree, this has contributed to shortages in product grown locally, hence the need to seek assistance from exporters.
Tilray is moving up to 2.5 metric tons of product with this shipment from its recently opened cultivation, research, and distribution facility in Portugal. The arrangement plays nicely into the company’s ambitions to be a major supplier around the globe; this, plus its recently announced first medical cannabis shipment to Switzerland, indicates it’s doing well in reaching this goal.
Neither Switzerland nor Israel — the 14th and 15th nations, respectively, Tilray has delivered to — will have a huge direct impact on the company’s results. It’s encouraging, though, that it’s scoring deals on foreign markets. In the future, at least a few will go the way of Illinois and sanction recreational weed too, which, although lower margin, has a larger potential market. Tilray will very much benefit from this development.