In October 2015, companies engaged in the licensed production
and sale of marijuana welcomed the victory of pro-decriminalization
candidate Justin Trudeau. Exactly what the victory meant for the
heavily regulated industry was unclear but several publicly traded
companies enjoyed an immediate rise in stock prices as the
potential size of the market expanded significantly.
In early 2014,
this blog commented on the increase in market activity ahead of
new medical marijuana regulations coming into force on April 1,
2014 and noted that, at that time, Health Canada estimated that
sales in the industry could reach $1.3 billion by 2024. The significance of the
Liberal victory is that the potential size of the marijuana market
has exponentially increased due to the fact that a recreational
market is now on the horizon. According to Globe and Mail source Martin Landry, that
recreational marijuana market could be worth between $4-billion and
$5-billion per year. That figure is substantially higher than
Health Canada's estimate for the medical marijuana market.
Some of the more high profile transactions to date have
involved public companies but only a few of the companies operating
under the twenty-nine licenses issued by Health Canada
are public. This suggests that in light of the Liberal election
victory, that sector of the market appears ripe for activity.
However, the industry also faces significant uncertainty. For
example, the recent decision of the Federal Court in Allard v Canada has thrown Health
Canada's regulatory regime into doubt as Justice Phelan found
that laws requiring patients to purchase marijuana from licensed
producers were unfairly restricting access to the drug. Although
parliament will likely amend the laws, it is unclear what impact
that decision might have on the perceived market value of a
Further, notwithstanding the positive projections that followed
the October election, it does not appear that further legislative
change, both in regards to the existing medical marijuana market or
the potential recreational market, will pass as quickly as some in
the industry had hoped. The appointment of former police chief Bill
Blair to spearhead the government's decriminalization efforts
indicates that the government is determined to move forward but
there remains much to be done. Over the next year, it will be
interesting to see if the initial high that greeted the rise of the
Liberal government recedes as the industry is forced to deal with
the slow pace of regulatory change and potential participants are
discouraged by the uncertainty that hangs over the market.
The author would like to thank Andrew Nicholl, articling
student, for his assistance in preparing this legal
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