Akanda (NASDAQ: AKAN) is one of those stocks which should be doing really well. Cannabis is being legalised, place by place, around the world. So, a cannabis provision company should be doing well. But that's near universally not the experience in the sector. The larger the company the larger the losses in fact. So, something's seriously wrong. One problem is that all too many growers seem to be trying to grow in the wrong parts of the world. As Forbes once pointed out sourcing from Southern Africa (where a large portion of the world's tobacco also comes from) would reduce costs massively. Which is something that Akanda has in fact got right - they're based in Lesotho. Where the government has looked at the land and the climate and agreed, yes, the nation should try to become a global cannabis supplier. So, that part is entirely correct.
What we think the basic sectoral problem is, is that we've got both too much competition and too much regulation. The effect being that near no one is able to make money out of this new legalisation. A part of it is still that international trade is very limited - as this frees up that will benefit Akanda - but we do still have those other two problems.
Akanda share price from NASDAQ
The competition issue is just one of those things and even that comes in two flavours. The first is that there are simply so many companies trying to enter the field. So legalisation happens, a wall of capital hits the sector and no one can possibly make any profit. The other flavour of this is that legalisation has proven to be highly protective of the extant and illegal business. If consumption for recreational use is legal if bought from a store then it's really hard to prosecute - even find - those smoking illegally produced material.
But there's also that overlay of the bureaucratic process. We're actually seeing how good - sorry, how bad - bureaucrats are at designing markets. In California, for example, the industry is so layered with paperwork and taxes that the legal stuff is both more expensive and also worse than the legal.
Cannabis legalisation is and was an excellent idea. But people are finding it very hard to make money out of it simply because of the way the market has been constructed.