Canada legalizes: Pot luck for PE?

Happy Thursday!

Well, everyone, it’s official. The Canadians are holding hands and singing Kumbaya. Justin Trudeau has stuck to his word, which means you can now head north of the border for recreational marijuana use.

Canada has joined Uruguay to become the second country in the world to legalize pot. What does the new federal law mean for private equity? TBD.

Marijuana legalization up north did give me a reason to check in with Salveo Capital – which invests not in growers but in underlying services like testing technology for cannabis labs – to hear their two cents.

“Legalization not only transitions a massive industry from the black market to a fully regulated and taxed market, but also increases awareness and usage from new demographics including the elderly,” Managing Partner Jeffrey Howard said.

As everyone putting capital to work in the industry knows, the aging baby boomers are the biggest consumers of healthcare — and medical marijuana is already legal in a number of states, used to treat symptoms associated with diseases including cancer.

Besides the elderly, “soccer moms” shouldn’t be ignored when it comes to the weed biz. Howard, in July, told me these two groups represent the fastest-growing, or rather, reacquainted demographics of new users.

As social stigmas regarding marijuana go away, and acceptance, usage and awareness all increase, Howard believes the U.S. “will be hard-pressed to ignore the economic windfall the Canadian economy has and will receive as a result of adult-use legalization.”

What else? Clearly this will have an enormous impact in Canada, but what about the states?

Salveo’s Michael Gruber, noting that U.S. companies have already flocked to list up on the Canadian public markets, said: “Large multinational companies like ConstellationNovartis and others have started entering this sector, mostly in Canada to date, but others will soon follow.”

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Sean Doyle