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by Stockwatch Business Reporter
The Canadian Securities Exchange Composite Index dropped 0.4 point to 403.46 Thursday. One of the problems that has pushed Canadian cannabis stocks down in 2019 is the continued success of the black market. Two of the most prominent reasons that it continues to thrive are (1) purchasing marijuana from the black market is much cheaper than buying legally; and (2) the lack of retail stores in Canada. Illegal growers do not pay taxes and do not have all the overhead expenses that legal producers have, so it is difficult for legal companies to compete with the black market by price. According to StatsCan, since legalization in the fourth quarter of 2018, legal marijuana has gotten increasingly expensive compared with black market marijuana. In the third quarter of this year, legal marijuana was selling for an average of $10.23 a gram, while the average selling price on the black market was $5.59.
For a habitual marijuana smoker who smokes a gram a day (which is about one large joint), that would amount to a difference of $1,690 a year. It would cost roughly $3,730 to smoke a gram a day of legal weed for a year versus $2,040 using black market weed. That is a hard sell for the legal stuff given that many regular smokers will have been accustomed to paying lower prices for years. With a massive oversupply of legal marijuana in Canada expected by next year, though, the gap is sure to shrink.
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