The cannabis market is full of companies, trying to find the best way to use the most exciting emerging industry. With so much potential funding and many different companies competing for a tempting pie, finding a unique marijuana play can provide investors with a very healthy payday.
This brought us to Golden Leaf Holdings (OTCMKTS:GLDFF, CNSX:GLH). The company hopes that its proposal to establish a chain of marijuana chain stores in the United States, Canada and other countries will bring huge benefits to GLH stocks.
In short, the company’s plan is to create a trustworthy brand that will be licensed worldwide and different from McDonald’s (NYSE: MCD) or Starbucks (Nasdaq: SBUX).
The idea is that people will believe in brand names and expect the quality of their stores to be consistent, whether they are in Oregon or Alberta.
This is a neat concept. If it proves successful, you can see Gold Leaf’s share price rise sharply.
The establishment of franchise rights around the world will lead Gold Leaf Holdings to lead, because the company will be able to enjoy the thriving international attraction of cannabis, rather than fighting for bits and pieces on the small market.
The franchise chain will be called Chalice Farms and backed by BlackShire Capital, who signed a letter of intent for the franchise model.
So this brings us to a very important question: Is Gold Leaf a good investment?
It all depends on how you think about the latest developments in company elimination.
If BlackShire Capital and Golden Leaf Holdings can successfully build a trustworthy cannabis brand, browse a complex series of marijuana laws and defend against competitors, then GLH stocks will gain huge profits.
But this is a lot of “ifs.”
The way I see it, what you get here is a penny stock, which has been underperforming in 2018, dropped 31% over the past three months, and tried to create a wave with the idea of a moon.
This does not mean that it does not work, and I used to be wrong, but I do not think this is a strong long-term investment.
My opinion on GLH stocks
Although the Holy Grail Farm franchise concept is theoretically a solid concept, it will be much more difficult to implement in practice.
For example, the company focuses on the United States.
The current cannabis law prohibits the transport of marijuana across state lines, and even the cannabis where it is legalized. This is partly because federal laws still classify cannabis as illegal drugs comparable to heroin. (“Gold Leaf of Canada hopes to retail stores in the United States with jars”, Bloomberg, March 27, 2018)
In fact, if the company sees its franchise plan, then the company is likely to violate federal laws. There are so many things that can go wrong. Although it may never violate any law, I do believe that there are many challenges to be overcome in the legal area.
If Golden Leaf Holdings wanted to establish itself as a reliable brand for marijuana users, not only in the United States, but also internationally, it must also grow marijuana on each state’s farm while creating a consistent record of reliable quality at each location.
This means that cannabis grown in Oregon is almost identical to cannabis grown in Nevada, Washington, DC, and California. This is a difficult operation, and this is a small company with a scale of US$123.9 million, not one of the industry’s masters.
Just look at the specific situation.
The current plan of the Gold Leaf Group subsidiary is that entrepreneurs will pay a one-time fee of 50,000 US dollars and a royalty of 5% to open up the Chalice Farms storefront.
Kevin Reed, CEO of BlackShire Capital, said he hopes to launch 35 to 45 stores within the next two years. BlackShire and Golden Leaf are negotiating the establishment of a joint management company to organize franchise operations.
“At Golden Leaf and Chalice Farms, we have discovered a mature and progressive partner who trusts a superior customer experience,” said Reed. “We look forward to entering into a definitive agreement with our partners to bring this premium brand to Canada, the United States and the global market.” (“The Golden Leaf Group and Black Shire Capital signed a letter of intent to launch the Chalice Farms franchise model” GlobeNewsWire, 2018 March 27)
BlackShire plans to invest $19.4 million in Canadian and U.S. operations
“We believe we will build something that will always exist,” said William Simpson, CEO of Gold Leaf Holdings. “When people think of marijuana within 20 years, it will become part of a household name.” (Source: Bloomberg, ibid.)
Simpson added: “The franchise Chalice Farms represents an attractive tool that can execute our growth strategy of replicating the Chalice Farms operating model in new areas. We plan to start business in Canada at the time and place we are allowing. We intend to expand to The extra US market is beyond our current Portland, Oregon footprint. ”
Although I applaud their ambitions, I believe the goals of the two executives are too high and too fast.
The industry is still in its infancy and it is still too early to introduce international brands as hemp stores.
It is one thing to be a producer and sell your products to different countries, but becoming a distributor requires solving the entire legal change and different demographic issues. For example, marketing marijuana in Canada is likely to be very different from the case of selling the drug in Germany.
For me, this plan is currently too ambitious. This is not to say that it is a guaranteed failure. However, I will warn investors not to be hyped.
I almost always support companies with vision and ambition, but this is one of the times when I think investors should be cautious.
I think the most successful companies in the cannabis market are companies that are taking an international approach, but so far this only applies to manufacturers. So far, no company has tried to establish cannabis stores around the world (as far as I know).
Whenever you try for the first time, there will be skeptics. Sometimes, skeptics prove to be wrong, and the moon’s theme actually does hit the moon, and this is likely to happen here.
However, I only encountered too many problems in the proposal of Gold Leaf.
First, Gold Leaf Holdings is currently in a very weak position and needs a victory. Prices have fallen more than 31% and have been dead since the beginning of the year.
Taking into account the huge gains of the cannabis industry at the end of 2017, the price of gold leaf stocks rose only 46% in the past six months. The prospect of extending to one year has actually dropped by 14%.
In other words, although other cannabis stocks have doubled or tripled in the past six months, GLH stocks have only shown a slight increase. Although the past year has been a huge victory for many marijuana stocks (choose any top player in the industry and you will see high returns), Golden Leafs Holdings has been struggling.
My final decision on Gold Leaf’s plan is that you have a smaller stock of marijuana trying to make a huge wave in order to save things that have been marking the value of the stock by targeting the stars.
Sublime promises may be sufficient to attract new investor interest and help reverse the company’s unluckyness. However, if these commitments fail to materialize, the stock price will inevitably fall again.
If you are looking for high risks/returns of high risk/high returns, this stock may be suitable for you. Otherwise, I will wait for the company to prove myself.
“Cannabis Starbucks” sounds good, but to me it is more flashy than substance.