201706 – Crises Investing – Cannabis Wheaton.pdf (759.4 KB)
I’ve been watching them for a while…anybody have any input or comments on this???
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If I were an investor, I’d be running away from this document. It reads “too good to be true.”
I’m not saying that such a business isn’t possible. In fact, it very well might be profitable to invest in this company. But the problem is, I see phrases such as “It’s a low risk, high reward proposition” and “In short, Canada’s marijuana industry is in a race against time” and I immediately see red flags. Most investors worth their salt will tell you that those phrases are big red signs to not invest (IE: subprime mortgages were sold with the same lines).
The business model of Silver Wheaton is sound – the silver industry as a whole is relatively stable and predictable, allowing for Silver Wheaton’s business model. I wouldn’t say the same of cannabis – there’s a large boom and bust cycle and the industry as a whole is volatile. You don’t see “Silver Wheatons” of most agricultural products, because, by their very nature, they are prone to instability. Now if there was a comparable business in the wine industry, I might be more keen on this.
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Dude I’m with you Hunter…nice read and I have the same thoughts.
What’s crazy is there a a few cannabis streaming companies out right now. .
Here are some serious flaws I see within the article , more with cannabis streaming companies in general…as you have already pointed out most the red flags. Basically, there are issues with Cannabis quality, Cannabis price, this model does not work for the US, and there is lots of competition for “Cannabis Wheaton” to include other streaming companies and other cash investors.
A streaming company receives a commodity, in this case Cannabis. Treating Cannabis the same as a commodity, such as gold or silver, is a mistake. As TIME magazine states, “Weed is the new wine.” Budtenders are the sommeliers. Will the quality of the streamed Cannabis be the equivalent of Two Buck Chuck or Lafite Rothschild? It is as you said…very unstable with too many variables. There will be constant pricing issues for streaming companies if pricing is based on an index due to quality differences. If pricing is based on a cost-plus model, margins will be continually squeezed as the price of cannabis continues to fall, e.g., in Colorado, prices have been cut in half since legalization. And if pricing is based on a fixed price, the streaming model could end up losing money on every purchase.
The business model of streaming companies is to attract companies desiring cash, as such, the target companies are typically either underfunded and/or startup companies where there are other potential sources of competition for capital.
Typically, Cannabis streaming companies expect to treat their streamed Cannabis as a commodity, or if the streamed Cannabis is branded, it is branded under the target companies brand, not the streaming company.
All of the present Cannabis streaming companies are publicly traded in Canada and will presumably want to trade on the Toronto Stock Exchange (TSE). TSE policy states companies listed on their exchanges cannot invest in the “…possession, cultivation, sale and usage of marijuana in the U.S……” because it is illegal under Federal law. I understand that the exchange is reviewing its policy but I am not aware of any conclusions to date
As an end note to all of this…I realize that my “investment post” contains phrases which are as you correctly put “red flags.” That was just a serious time crunch on my behalf, for my credibility. Funny thing was all it took was a call to my old buyer and I resolved this need like that…just as easy as it was doing business with him in the dark days 10 years ago … Wish I would have thought of him before posting all these “urgent” spammy posts 
At URB we are not really looking for cash from growers to grow our company. We will have all the investment capital we need from VC’s and the Angels. We are after established operating companies, who try our product, see the future and desire stock in URB which pushes their desire to use, promote and grow that stock value with us.
Thanks for your post. You are a smart dude Hunter.
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I guess AB CANN thinks they have the answer to quality and quantity control and consistency on Cannabis???.. What about market value fluctuations?
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