Just months away, sometime this July will be the long-awaited day where the recreational use of marijuana will be legalized in Canada. While this mainly creates many social issues regarding enforcement, the Canadian market and will also be affected on several fronts, including taxation, sales, and thus investment opportunities.
The legalization fully opens up a large industry for Canada. Cannabis sales in provinces such as Ontario will be run by the government, keeping close regulation on the many dispensaries. Cannabis is expected to be in large demand from the legalization date, giving the Federal government a great opportunity for taxes revenue. Anyone planning to purchase must also be ready for the high taxes associated with purchase; though not confirmed, taxes are hovering around the $1 per gram of cannabis mark, excluding GST. Taxes are meant to be high enough to limit the growth of consumption, but low enough to compete with an illicit market.
Alongside the increasing demand, Cannabis companies are in dire need of workers with the proper education in both plant cultivation as well as financials, just like any other company. Courses in post-secondary education such as Durham College have even been offering courses on marijuana, indicating the more and more significant growth of this industry’s popularity, as well as assuring the future of the industry itself, all while greatly increasing job and labour income possibilities. Deloitte's study on marijuana legalization concludes that a $22.6 billion boost could be evident annually.
Investors have had eyes on the emerging Canadian marijuana industry as well. Canopy Growth Corp., Canada’s biggest cannabis producer has recently talked a possible $245 million dollar investment with Constellation, a massive American Fortune 500 company that produces wine and spirits. This bold move made by Constellation has been seen as a hedge against the weakening of wine and beer sales from cannabis disruption. Recent one-year return analysis of the Canopy stock reaches almost 280%.
But make no mistake, although with great prospects, this industry is highly dangerous, with marijuana stocks being among the most volatile of the TSX. Leaders such as Aphria, Aurora, and even Canopy has been recorded with common price movements of more than 20% a day. The Cannabis market is becoming more saturated as well; now with hundreds of companies joining, even with an averaged $20 billion in size, most undercapitalized competitors will simply not last.
Nonetheless, after years of debate, the legalization opens up new doors for Canada, and whatever changes we find will likely be here to stay.
Derek Liu is an experienced cryptocurrency and stock trader with a background in finance. He follows and writes about controversial economic topics and American politics. Other than a writer, he is also an ambassador for multiple other student led economics and leadership clubs, such as Target Alpha and PUYO, and a grade ten student at St.Roberts CHS.
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