The marijuana landscape is transforming before our eyes. What had once been an industry that politicians swept under the rug is now considered mainstream throughout most of North America and Europe. Canada became the first industrialized country to legalize recreational weed this past October; Mexico stands ready to give adult-use pot the green light within the next few months; and two-thirds of all U.S. states have OK'd medical marijuana in some capacity, even as the drug remains illicit at the federal level.

But with Canada being the first developed country to give marijuana the full green light, it and its pot growers have received the undivided attention of Wall Street and investors. After all, Canada's pot industry could grow from just a few hundred million dollars in annual sales to perhaps $6 billion in a matter of four or five years.

A person with gloved hands using scissors to trim a cannabis flower.

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All eyes are on Canada's top cannabis growers

Heading that industry are a number of familiar and popular names on Wall Street: Aurora Cannabis (ACB 3.26%) and Canopy Growth (CGC 0.77%).

Aurora Cannabis, the second-largest pot stock by market cap, projects as the largest producer by peak annual output. Already on track for an annual run rate of more than 150,000 kilos a year, the company in early April guided for at least 625,000 kilos per year (on a run-rate basis) by the midpoint of 2020. This assumes that its flagship Aurora Sun campus, spanning 1.62 million square feet, comes online and produces at least 230,000 kilos a year, and that Aurora's Exeter facility and Nordic 2 campus are also complete, licensed, and planted, by that time. It wouldn't take but modest expansion of Aurora's 14 grow properties to push past 700,000 kilos in eventual annual yield.

Then there's Canopy Growth, the largest marijuana stock by market cap, and Canada's projected second-largest grower. Although Canopy has been pretty secretive about its peak output number, it should be easily able to surpass 500,000 kilos with the 5.6 million square feet it'll eventually be devoting to cultivation. Assuming it simply matches the industry average of 100 grams per square foot, somewhere around 560,000 kilos annually is possible.

After Aurora and Canopy it becomes a two-way race for third between Aphria (APHA) and CannTrust Holdings (CNTTQ). Aphria has stood firm on expecting 255,000 kilos of peak yield once all three of its campuses are licensed and at full capacity. Right now, Aphria Diamond, a facility capable of 140,000 kilos a year, is still awaiting licensing.

Meanwhile, CannTrust's additional capacity of 100,000 kilos to 200,000 kilos of outdoor-grown marijuana will double or triple its previous peak output to between 200,000 kilos and 300,000 kilos. Depending on how much outdoor pot CannTrust produces from the aggregate 200 acres of land it expects to acquire will determine which company is Canada's No. 3 grower...or so we think.

A cannabis leaf laid within the outline of the red maple leaf on a Canadian flag, with rolled joints and cannabis buds to the left of the flag.

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This unknown pot stock wants to become Canada's No. 3 grower

In January, Zenabis Global (ZBISF) was formed out of a reverse takeover of Bevo Agro by Sun Pharm Investments. Like other growers, it has aspirations of becoming a big-time marijuana player. But unlike most middling mid-tier growers, it now looks to have the funding and cultivation space to make it happen.

According to Zenabis Global's management team, the company expects to be operating at an annual run rate of 131,300 kilos per year by sometime in the early part of the third quarter of this year. If accurate, that's more annual output than the likes of Cronos Group or OrganiGram Holdings. This production would include 800 kilos from Zenabis Stellarton in Nova Scotia, 100 kilos from Zenabis Delta in British Columbia, 34,300 kilos from Zenabis Atholville in New Brunswick, and a whopping 96,100 kilos from flagship campus Zenabis Langley in B.C.

What's perhaps most interesting about this little-known recreational and medical marijuana player is that 131,300 kilos is really just the tip of the iceberg. Although Atholville will cap out at 34,300 kilos, and both Stellarton and Delta have only modest expansion potential, the hybrid greenhouse Langley campus could one day span 2.1 million square feet and produce 426,000 kilos per year, according to company projections. Altogether, that's 479,300 kilos of peak annual output if everything were fully built out, and it would easily make Zenabis Global Canada's third-largest pot grower.

In addition to substantial cultivation capacity, Zenabis has two facilities, Pitt Meadows and Aldergrove, that are devoted to propagation and industrial hemp production. These facilities, spanning 218,000 square feet and 453,000 square feet, respectively, help to offer 183,600 kilos of peak annual extraction capacity. And, as you might know, derivatives are a much higher-margin product than dried cannabis flower. 

A person holding a magnifying glass over a balance sheet.

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This "major" player isn't performing like one

Now, for the head-scratcher. If Canopy Growth is worth $15.4 billion, and Aurora Cannabis clocks in with an $8.5 billion market cap, how in the heck is Zenabis Global only worth $256 million? And, for that matter, why has Zenabis Global's share price lost 72% (not a typo) in 2019?

One possible reason is that Zenabis Global is going to need a lot of capital to complete the buildout of its Langley campus and simply maintain its operations across six facilities. On a number of occasions in recent months, the company has bolstered its cash position, albeit not in a way that thrilled shareholders.

For instance, on April 17, Zenabis raised 28.75 million Canadian dollars by selling 12,777,777 shares of common stock at CA$2.25 per share. Each share also comes with a warrant to purchase an additional share of Zenabis stock at CA$2.75, for up to 36 months. Not only was the CA$2.25 offering price nearly 20% lower than where the stock had closed the previous day, but the addition of the warrants could place a three-year ceiling on the company's share price since it could lead to added share-based dilution. Suffice it to say, the sizable capital needs of Zenabis have weighed on its valuation. 

Second, we could be witnessing investors taking a "we'll believe it when we see it" approach. As of mid-April, Zenabis only had 13,400 kilos of run-rate capacity, but the company expects to generate 96,100 kilos from Langley by August, and an additional 21,800 kilos from Atholville by June. That's a short time frame for such a rapid ramp-up from a relatively unknown grower. Without any brand-name partners to back the company up, investors might not be opposed to waiting for Zenabis to deliver on what it's promised before taking the plunge.

Last, the company's operating results have given cause for concern. As a case in point, financial statements filed in late April covering the period ended Dec. 31, 2018 (i.e., just prior to the completion of the reverse takeover) listed Sun Pharm Investments as a going concern with potentially insufficient capital to fund its operations for another year. Even though capital raises have removed this near-term concern, Zenabis Global hasn't demonstrated that it has a time-tested business model as of yet.

Zenabis may have big plans to become Canada's No. 3 grower, but it's going to have to prove to Wall Street that it can crawl and walk first before it full-on sprints toward the finish line.