#1: Cannabis is both an intoxicant and therapeutic product.
Cannabis has a bifurcation of utilization, commonly referred to as recreational and medicinal but more accurately divided into intoxicant and therapeutic. The intoxicant and therapeutic categories put the uses of cannabinoids, e.g, tetrahydrocannabinol (THC) and cannabidiol (CBD), competing with industries like alcohol and pharmaceutical respectively. Currently, the majority of customers buying cannabis products are using it as an intoxicant, which is reflected in the larger market cap of intoxicant focused companies in the cannabis market.
#2: Marijuana and hemp are the same plant.
Marijuana, the vernacular for cannabis, and hemp are the same plant. The difference is that hemp is classified as cannabis having less than 0.3% THC. In the US and other countries the classification of hemp allows for the sale and transportation of the plant and derivative products in the general market. Marijuana, cannabis that has over 0.3% THC, is either regulated per state in the US or is illegal in most countries except standouts like Canada.
#3: The Cannabis industry has limited management.
Exponential growth in both the intoxicant and therapeutics categories of cannabis are being realized and will continue. However, due to the illegal legacy of cannabis, the best and brightest operators have yet to enter the industry. You can find some talented entrepreneurs but the majority of people are not high performers. In fact, many of the people operating are “pirates”, i.e. people bridging the gap from illegal to legal operations and bringing a operating perspective derived from illegal activities. The challenges for investors and operators are identifying quality management, evaluating how a company executes in the market and where a it slots in. To that point, a potential red flag is if a cannabis company is trying to be Budweiser and Pfizer at the same time. Operating a business that competes in multiple markets with massively different drivers is incredibly difficult and, based on limited management resources in the industry, most likely unachievable on a sustained basis.