In this week’s Q&A, we’re going to do more than just answer your questions about CannTrust and cbdMD. We’ve got some insight on Jay-Z and Joe Montana… and how they relate to the cannabis industry.
Aside from the fact that they’re both millionaires, Jay-Z and Joe Montana now have one more thing in common.
Both have partnered with Caliva, a California-based cannabis company. Caliva produces branded cannabis products, flower, and oil throughout the Golden State. It also operates a cultivation facility and retail store in San Jose.
Additionally, the private cannabis company has also teamed up with Ben and Jerry’s, giving away free ice cream on April 20.
When Montana first partnered with Caliva in January, he helped it raise $75 million. Jay-Z, who reached out to Caliva in hopes of finding the right cannabis partner, just signed on as its Chief Brand Strategist.
And it wasn’t a hasty decision. You have to take your time to find the best investments.
The rap mogul was searching for a company he could trust.
“With all the potential in the cannabis industry, Caliva’s expertise and ethos make them the best partners for this endeavor. We want to create something amazing, have fun in the process, do good and bring people along the way,” Jay-Z said in a statement.
This is a timely lesson, as one marijuana firm lost the trust of its shareholders this week.
Questions & Answers
CannTrust Holdings (NYSE: CTST) recently announced that its Ontario facility was found non-compliant under certain regulations by Health Canada. Following this news, CannTrust’s stock price fell 37% from July 2 to July 11.
So, even though CannTrust isn’t in our model portfolios, I wanted to answer your questions about the this company and its situation.
Thomas B. asks: “Hi Greg, would you please comment on the current ‘situation’ with CannTrust?”
Hi, Thomas, great question!
I know a lot of folks would like to know if the stock price will keep dropping.
I can’t say whether the stock drop at CannTrust is an overreaction. That’s because I’ve never seen the company as anything other than a mid-tier producer. In other words, I didn’t think CannTrust deserved its original share price.
But I can certainly speak more about the company.
I don’t know whether senior management had a direct role in the regulatory trouble the company is in. What I do know is that these things can happen to any company, even if the senior executives are not doing anything wrong.
It’s simply impossible for senior management to be at all places at all times. For example, I’m pretty sure the top Boeing executives did not know that some of their most crucial software was being sent to low-cost contractors.
But senior management can reduce the risk of violating regulations or suffering other disasters by creating a “culture of compliance” at the company. It’s something that one of our amazing NICI staff wrote about this past week, and it’s something I harp on, not only when I’m writing to you, but when I talk to company executives.
It’s crucial that companies create an environment where everyone, from the CEO down to the newest plant trimmer, has the knowledge necessary to comply with laws and regulations.
Ultimately, events like this are the growing pains of an industry coming out of the “wild west.” Even a year ago, something like CannTrust’s violation might not have even affected the stock price because most investors thought cannabis companies not playing by the rules is the norm.
Today, investors know that isn’t right, and companies are on notice to straighten up and fly right after events like this.
Finally, I’d like to answer a question about a CBD company making some big moves in the world of sports.
Roland & Joan ask: “We have a question regarding cbdMD (NYSE: YCBD). Recently, you referenced that company and Bubba Watson’s partnership with them. We have personally used their CBD oil, and they are a very credible company with good quality control. If you have recommended them to be a part of the cannabis portfolio, we missed it and would like to know your opinion. If you haven’t recommended them, we would like to know why. Thank you.”
Hi Roland and Joan! Thanks for the question, and I’m glad you found a CBD formula that works for you.
YCBD is too small of a stock for us to recommend. What I mean by that is there aren’t enough buyers and sellers right now to create stable prices for that particular company. For example, if I told our members to buy Amazon, it wouldn’t make much of a dent in trading activity.
But if I said buy a small company like cbdMD, all of the trades all at once would send the stock price up very quickly. When the frenzy died down, prices could drop drastically, and many of our members who bought in at the top would experience significant losses.
That’s not good for the companies, or for us.
Thanks again for the question, and I hope I was able to provide some clarification.
Executive Director, National Institute for Cannabis Investors
12 responses to “What Jay-Z and Joe Montana Have in Common”
July 13 2019