Recreational marijuana is coming to Sin City…
Starting tomorrow, you can purchase recreational marijuana in Nevada and Las Vegas based marijuana firms have reason to rejoice.
After Nevada voters approved a measure to legalize recreational marijuana in the November 2016 elections, the state will become the fifth state with an operational recreational cannabis market.
Nevada’s path to recreational marijuana is very different from other states that have passed similar measures and it allows certain medical marijuana establishments to start selling recreationally to adults 21 and older on July 1st.
Sin City: A Massive Growth Market
According to data from the Las Vegas review Journal, Nevada’s recreational cannabis program is projected to generate more than $70 million for the state over the first two years.
We expect Nevada’s legal cannabis market to see significant growth over the next two years and expect the companies levered to it to perform very well. While we are favorable on the market, we would be selective when it comes to investing in the sector.
Investors should focus on companies that have a proven track record of success, a licensed facility to sell recreational and medical marijuana, and enough capital to support growth initiatives.
Marapharm: An Execution and Growth Story
The last two months have been very busy for Marapharm Ventures Inc. (MRPHF) (MDM.CN) and we do not expect this trend to end anytime soon. Yesterday, the shares rallied more than 17% after Nevada’s Department of Taxation approved its recreational marijuana application for its 70,000-sq. ft. Las Vegas facility.
In May, Marapharm executed quickly and flawlessly. This put the company in position to receive the recreational license from Nevada. During this time, Marapharm acquired two buildings on its 7-acre property which were inspected and pre-approved for cultivation and processing. The company received the required approvals and completed a taxable transaction before the May 31st deadline.
Since then, Marapharm has significantly strengthened its balance sheet and firmed up its management team with the appointment of Brian Lovig as interim-President while they expand operations and prepare to scale production in Nevada.
Earlier this month, Marapharm’s subsidiary, Marapharm DHS California completed the acquisition of a 1.22-acre property in Desert Hot Springs, California for $1.3 million. The land is zoned industrial for cannabis cultivation and 29,193 square feet is an approved for cultivation (including 2,036 square feet of processing).
What About Terra Tech?
Terra Tech (TRTC) was one of the first publicly traded cannabis companies and has great investor awareness because of this. Being first is not always the best and we are cautious with the firm at current levels.
While we are favorable on Terra Tech’s leverage to the California and Nevada cannabis market, we are not favorable on the stock. Our cautious view is due to the financial structure, less-than-stellar operating results, and balance sheet.
Although we are favorable on the cannabis focused businesses, Terra Tech is trying to execute on too much at once and does not have the capital to do so. It cannot raise money in a non-dilutive manner and this due to the company’s track record. While we view TRTC as a short-term trade opportunity on weakness, we are cautious with longer term outlook and prefer firms like Marapharm.
Important Investor Disclosures
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