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Ontario to Double Number of Dispensary Licenses This Fall

By Eric Volkman – Sep 3, 2020 at 5:25PM

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The provincial government has come under fire for dragging its heels on licensing.

The Alcohol and Gaming Commission (AGCO) of Ontario, by far the most populous of Canada's ten provinces, announced it will dramatically increase its license approvals for marijuana dispensaries. 

In a tersely worded press release, the AGCO said it "is now moving to double the pace of store authorizations this fall." Despite Ontario's size and prominence (it is also home to Canada's largest city, Toronto, and the nation's capital, Ottawa) its government has come under heavy criticism for the slow pace of its dispensary approvals.

After scrapping a lottery system for its authorizations late last year, AGCO has indeed stepped up the pace of approvals. In April, it gave the green light to 18 new stores; the following month it approved 26; and in June, 23 were allowed to open their doors. Each of those tallies exceeds the total number of authorizations from March to December of 2019.

A marijuana leaf on a wooden slat.

Image source: Getty Images.

A lack of retail outlets affects the broader national marijuana market in significant ways. First, it drives many customers to black-market product simply because they don't have convenient access to licensed goods. Second, it exacerbates the country's acute over-supply problem; growers have cultivated too much product relative to the market, driving down selling prices and making it harder for licensed sellers to turn a profit.

This is why the AGCO's statement has been greeted with relief by investors in Canadian marijuana stocks, particularly those of Ontario-based companies active in the Ontario retail segment. Notable among these is Canopy Growth (CGC -7.10%), whose Tokyo Smoke brand is available in a clutch of stores in the province. 

Canopy Growth hasn't officially reacted to the AGCO announcement, but its investors seem pleased by the news. On Thursday, shares of Canopy Growth bucked the heavily bearish trend of the broader stock market to close 0.5% higher.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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