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4.0¢ auscann group holdings ltd

Ann: Initial Director's Interest Notice - A. Chapman, page-15

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Pennthorpe

168 Posts.

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14/12/23

11:51

Post #: 71446097
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Originally posted by AusCannOfficial: ↑

Hi Pennthorpe,

I think the industry will consolidate for sure but the catalyst for higher share prices will come from the US in my view. With MC becoming Federally legal and the possibility of a Trump election win in 24, I think the momentum is clearly shifting towards the positive. With it becoming federally legal, then the 280E Tax Act changes for MC companies in the US, which means they become mainstream investable. At the moment there are no institutional investors allowed to invest into the Sector in the US. When this changes the market will run as there really aren't that many names to invest in so there will be a lot of money chasing not much options in my opinion. This will naturally flow then to the Oz market and the EU market as well. I invest personally also in the MSOS ETF in the US and its just starting to show some signs of life after 3 years of daily down days. Volume is starting to pick up and people are starting to position themselves for the Federal changes in my view. There was too much hype at the start and we are now dealing with the reality of that the industry is just really difficult at the moment to make money in. This will change I'm sure but not sure when. Lower interest rates will certainly help going forward also. That is my views on the investment landscape.

In terms of the overall industry landscape - its still a start up industry and the regulations are consistently changing so its still difficult to navigate and I think people forget this. It took 20 + years for the poppy industry to turn into the morphine industry that we know today and I think the MC industry is following the same trajectory...we're 7 - 10 years into this journey depending on where you are located so in my mind, we're still at start up phase and the associated challenges and its an industry wide problem and you can see this very clearly in the performance of the stocks in the sector on pretty much every exchange in the world.

I think Europe is looking really exciting though as they really missed the first boom in the sector as it really wasn't available to invest into due to the POCA (Proceeds of Crime Act) in the UK and the convoluted nature of the EU regulatory environment which prevented all institutional investors from wading in so I think the EU will be the largest market certainly for Medical in the world in the very near future but the difference is there that you also have a recreational push at the same time coming down the pipe. This was different to the US where it started Medical then Rec came after. The EU is going full speed on both and you have to look back to the 1920's to see what happens when you have two large markets converging on the same product - alcohol. I'm not a history expert but I am pretty sure Prohibition ended when the governments figured out two things - how to make it safe and replicable and how to tax it...I personally think this is where Germany and by default, the rest of the EU is at now. You have to understand though that GMP (Good Manufacturing Practice) is not all equal - for instance if you have German EU GMP (which HAPA does) you can sell into the broader EU without problem as the German tick of approval is seen to be the highest standard, if you have say Portugal GMP - you can't sell into Germany so it doesn't go the other way at the moment. This may change but with the German demand set to be the largest in the world for Medical (and probably rec later on), I'd suggest that it will follow a similar path to alcohol in the 20's - make it safe (minimum quality standards) and taxable then it will be available everywhere. The only way to tax it is to have the minimum safety standards and this will mean it will have to be medical initially I suspect as this is the only way you can control the value chain. Building a brand will be super important also as too will be the delivery method of getting your product to the consumer initially (Germany is very complicated in this aspect as the product HAS to go through the pharmacy) and how the consumer takes it. In the Canadian market for example - apprx 30% of people take their medical cannabis via either a pre-rolled or a vape so companies will need to think about this plus the genetics of growing in order to grow consistent, safe, high quality plants that you can do on scale to make sure the cost per gram is competitive - so you need to have a facility somewhere that has all these attributes as well.

Sorry long winded answer and I'm no scientist but this is just my personal view shaped from the 7 years we've been investing in this sector.

Andrew.

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Thanks Andrew, really appreciate you sharing your thoughts on the industry. I also follow MSOS, and good to also see some surprise revenue (higher than anticipated) announcements for some of the listed Cannabis stocks in the US/Canada. I read a good article the other day (I think it was on marijuana moment) about Cannabis (at a recreational level) starting to bite into the alcohol market as people start to prefer that over say a 'craft beer' i.e. no hangover, possibly cheaper etc. Better signs for the industry as a whole moving forward, though sure there will continue to be frustrations along the way.

AC8 Price at posting: 4.0¢ Sentiment: Hold Disclosure: Held
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