90% of Today’s Cannabis Companies Will Fail
Before we get started, let me explain a little bit about myself.
Longtime followers know me as America’s No. 1 pot stock expert. I jumped on the soon-to-be booming legal marijuana industry all the way back in 2016.
As one of the most tenured and experienced early movers in this industry I’ve helped folks lock in incredible gains with my exclusive Penny Pot Profits service. These include 125% on the cannabis real estate investment trust (REIT) Innovative Industrial Properties, 155% on Cronos Group and 404% on Canopy Growth.
My track record speaks for itself. And with many more current positions boasting triple-digit gains, it’s safe to say my followers are making a killing as cannabis investors.
But as the industry matures, now more than ever before, you need an expert to help you weed through the duds to find the next big gainer.
Because over the next five–10 years 90% of all pot companies will fail. And we’re already witnessing the beginning of this cannabis extinction event in California.
California’s Cannabis Extinction Event
Many of California’s pot growers are facing extinction.
Zero Hedge, for example, reported upward of 10,000 growers could go out of business soon. And that doesn’t include ancillary product producers like edible makers and dispensaries too.
One could argue edibles producers are at bigger risk of shuttering their businesses than growers. Steve DeAngelo, CEO of Harborside in Oakland, notes to GreenState.com he expects an “extinction event for 75% of the industry.”
Jackie Gowan of K Street Consulting, a Sacramento-based law firm, is even less optimistic. In a Q&A with Marijuana Business Daily:
I absolutely believe this marketplace will not look the same — it will not have the same set of players, it won’t have the same set of rules — a year from now… the extinction rate will be 90% in the next year.
The Tax Man Cometh (Among Other Head Winds)
What strikes fear in the heart of a startup cannabis business more than a federal crackdown?
Mostly it’s exorbitant city and state taxes, but it’s also the palm-greasing many have to do for licenses as well as the ever-changing regulations small proprietors can’t keep up with. It’s even competition from the illicit cannabis market.
These head winds are killing the opportunity for many new pot businesses, driving overhead costs through the roof. In San Diego distributors from outside municipalities who deliver to retailers within San Diego’s city limits have to pay up to 5% of the marijuana gross receipts tax. This is on top of already paying the city and county taxes where the distributor is headquartered.
That means growers and distributors are getting double-taxed by San Diego to fulfill orders to customers there.
It’s a perfect example of how California screwed the pooch big-time on legalization.
Instead of waiting to figure things out, California’s officials chased the money and now a company like Golden Goddess, which has operated for 12 years and raked in $180 million in 2016 alone, is considering closing its doors.
All thanks to the clawback regulations that should have been in place from day one.
And it’s not just a California problem (although business owners there are in a lot worse shape than in other states). Speaking to a number of business owners at a recent cannabis convention here in Baltimore, many proprietors noted the same problems in Maryland.
It’s why the illicit cannabis market is still thriving, creating even more competition and often undercutting price and syphoning supply away from legal operations.
Long story short, most cannabis companies face a long uphill battle against clawback regulations, a still booming illicit market and ridiculous double-taxation scenarios.
Sadly 90% of these new companies potentially will fail over the next five–10 years. It’s very reminiscent of the ’90s tech boom. A huge percentage of those companies rolled over too.
But as an expert with years of experience in cannabis investing, I’ll make sure to steer you clear of the Pets.com in cannabis and make sure we only focus on the Amazons of the pot world.
For Technology Profits Daily,
Chief Technology Expert, Technology Profits Daily