Prime Minister Justin Trudeau’s plan to impose an excise tax on legalized recreational marijuana is getting the thumbs up from at least one member of the analyst community.
In an interview on BNN, Vahan Ajamian, an analyst at Beacon Securities who covers marijuana producers, said the proposed taxation levels are a relief for an industry that braced for a higher burden.
“I think there was a fear out there in the market that the government might mess it up, they might kill the golden goose and it would be too much taxation,” he said. “We’ll have to see the details, [whether] HST is added on top or not, but overall it’s positive.”
Shares of Canada’s major producers, including Canopy Growth (WEED.TO) and Aphria (APH.TO) rose about one per cent in early trading Wednesday after Ottawa said it would impose a $1 tax on sales below $10 and 10 per cent on purchases surpassing that threshold.
Pricing perfection is key to the government’s strategy to use legalization to stamp out illegal dispensaries; Ajamian cautioned that will likely take three to five years, but only if legislators get everything right.
“It’s going to depend on factors such as taxation, if the dollar a gram starts creeping up significantly higher, if the supply isn’t ready, if the legal product isn’t perceived to be as high quality as some of the black market product, it could take longer,” he said.
Ajamian said Canopy is among the best positioned to deliver strong results under this regulatory framework due to its geographic diversification.
“We saw New Brunswick, they came out and said, ‘We’re going to give [memorandums of understanding] to our two local producers, Canopy and Organigram.’ Now, Canopy is going to be local in five different provinces,” he said. “I think Canopy’s best positioned to have the most supply to fill those shelves on day one.”