APH vs CGC - A Bipartisan Manifesto As we watch this clash of the titans emerge, i’m feeling somewhat ambivalent about how it’s being fought. With this most recent flare up regarding TMX policy towards companies with operations in the US, i see it two ways. Part of me feels like Vic and Bruce should have stated their cases without rancour. Vic should have said, “we did our due diligence, we had extensive talks with the TMX and feel very comfortable with our position”. Bruce should have said, “We aren’t willing to take the risk associated with doing business there at this point.”, and both left it at that. Part of me thinks it’s kinda ugly, and doesn’t really benefit anybody, but in a sense reflects poorly on the sector as a whole. Like with the pesticide issues at Mettrum, as well as the veteran pricing issue at APH, neither of those reflect well on the industry, and must be a consideration to the thoughtful investor when doing his DD.
But then, this is business. Would we really be happy with a CEO that wasn’t ready to get out there and bloody some noses, and get bloodied in return, to get what they want for their company, and to work every edge they can? It’s really interesting the way this is playing out. CGC and APH continue to take calculated risks in their own way, and their respective strategies seem to be almost diametrically opposed, to some degree.
I was going through the scenarios of how this TMX thing is going to play out, as i see it anyhow, i’d be curious to hear peoples’ thoughts on the percentage probability for each. I have my own.
Scenario 1 - TMX comes out with clarity, and says no Canadian based company can do any business whatsoever in the US. Bad for APH and CGC. Moreso for APH as they’ve taken “the gamble”, but it may also discourage American investment into Canadian LP’s more broadly. It’d also basically shut down CRZ and multiple other companies who have a focus in the US. Scenario 1 is lose for APH, win-lose for CGC (imho)
Scenario 2 - TMX comes out with clarity, and says any Canadian companies doing business in the US currently are grandfathered, but no new companies allowed. An obvious coup for APH, as it locks out CGC and gives APH the green light. I don’t see this as being likely, tbh, but again, would like to hear others perspectives on percentage of probability.
Scenario 3 - TMX comes out with clarity, and says “Fill Yer Boots”, do whatever the hell you want in the US, kids! We don’t give a shart. Again, doesn’t seem likely. Good for APH, as they have a head start, but also good for CGC, as it means they have a clear path to enter that market. I’d love to see this happen, for obvious reasons for both companies, but don’t think it will, either.
Scenario 4 - TMX comes out with a more nuanced but clear position, and makes operations in the US possible under certain conditions. Good for both, a little better for APH as they have a head start.
Scenario 5 - TMX somehow manages to not make a clear decision one way or another, which would in effect be a status quo, i guess. Good for APH, bad for CGC.
Regardless of what happens here, i’m liking my positions in both of these “emerging titans”, and think they both have reached a point where they will at the very least be major players domestically and internationally.
Discuss. Or not.
GLTA