Recreational Cannabis Fires Up North American Publishers And This Investment Guru

Photo Credit: VividGro

In a recent story, Kathy Ibsen cited this from Marijuana Business Magazine: “more than 60 percent of the U.S. population now lives in a state with some form of legalized marijuana.” When the article appeared, 29 states and the District of Columbia (D,C.) allowed legal medical cannabis in the U.S. Legal recreational use was allowed in eight states (Maine, No. 9, awaits the governor’s action of a veto-proof legislation to legalize recreational use). The reason for Ibsen’s cannabis-centric article, however, was not to count heads–it was to count magazines.  Widespread interest in legalized cannabis has fired up the North American publishing world to the tune of functioning cannabis-focused magazines in the double digits, covering topics that range from the street-smart to the Wall Street-smart. Indeed, in the spring of 2017 the longest surviving and undisputed top pot periodical, the over 40 year-old High Times (HT) had been sold to a private equity firm for $42 million. It’s a leading voice in the cannabis world.

Last February, HT’s online version reported a deal between Canada’s Ontario provincial government and the online Ottawa-based e-commerce platform, Shopify: the latter will benefit from the former’s ready and waiting legislation to legalize recreational cannabis.

The Chicago-based David Friedman has a few things to say about cannabis in Canada and North America. In 2015, he co-created the Vancouver-based Arcview Investor Forum’s North American Marijuana Stock Index that tracks the leading legal cannabis stocks operating in the U.S. and Canada. Today Friedman co-heads the cannabis venture capital Panther Opportunity Fund, and he is the president of VividGro, a division of Lighting Science, a global designer and manufacturer of LED lighting for consumer and commercial applications. VividGro is invested in lighting for cannabis production.

Friedman says, “If you want to predict the future, find something inevitable… Cannabis in general is inevitable, and in Canada it is imminent”.

His take is that federal recreational cannabis legislation will roll out in Canada this coming summer.

As it is with states in the U.S., Friedman says, “Most provinces seem to be embracing the opportunity…federal legalization simply paves the way for an unencumbered cannabis economy. Ultimately, local jurisdictions can decide if they want to participate.”

A major difference between the U.S. and Canada is the way the so-called vice businesses are distributed and sold. With just a few exceptions, in the states it’s mostly in private hands. In most of Canada, the provinces have their hands in it, which is why instead of dealing with vendors, Shopify has a cannabis deal directly with Ontario province.

As Friedman sees it, the province made a good choice: “Shopify was chosen by the Ontario province to be the online/mobile e-commerce platform for cannabis sales…Having a mainstream e-commerce provider willing to step into the market is further evidence of market adoption.”

Notice that the deal is for online/mobile shopping. In Ontario province, cannabis will be available for sale online and also at so-called “bricks and mortar” locations, where all sales will be done via a mobile device that will go directly to the Shopify Point Of Sale e-commerce platform. The cash-free transaction is a good form of control, especially over inventory and taxes.

Since provinces will be free to adopt or eschew cannabis legality, Friedman is unsure how the Ontario/Shopify deal will go over with the other provinces: “If I had to guess, the other provinces will probably wait to see how the partnership plays out before they decide what to do. What is unique about Ontario is that they have elected to operate only government-run marijuana sales, making a partnership like this with a centralized vendor management system much more feasible. Other provinces are taking a more hands-off approach which will make a partnership a lot more difficult.”

Since the majority of U.S. states have yet to legalize recreational use, the question becomes how will Shopify prevent cannabis sales (and shipments) to U.S residents?

Friedman says he has not seen the Ontario/Shopify agreement: “I do not know if there will be a feature in the system that prohibits a shipping address outside Canada, but it would not be difficult to do. Ultimately, I think the policing of that measure will fall to the seller and not the e-commerce partner…but given that the e-commerce piece interacts with the banking components, it’s an interesting question with respect to ultimate liability.”

The fact that states can act as a laboratory for the U.S. federal government may soon put to rest concerns about shipping across the border. New York Senator Chuck Schumer’s recent announcement to introduce a marijuana legalization bill in Congress has supporters.