
Namaste makes a bigger push into the marijuana delivery sector with a non-controlling share in Pineapple Express, street reacts poorly.
The Fundamentals
Namaste Technologies (TSX.V:N) announced Monday that they have spent $3M in stock to top their ownership in cannabis delivery service company Pineapple Express. The $3 million in N shares buys a 49% interest in Pineapple Express, and buys Namaste CEO Sean Dollinger a seat on the PE board.
Pineapple Express offers same-day delivery of cannabis to Canadian customers, including customers of Namaste online medical cannabis retailer Cannmart. The areas in which delivery is available are not yet clear, though CBC’s The National did a ride-along out of their Winnipeg shop in October, and Cannmart offers same day delivery via Pineapple Express in Toronto.
PE’s website lists major LPs as partners, and the CBC story made them look busy on the day after legalization.

The Hype
Namaste’s press release about this transaction contains seven mentions of the words “innovative” or “innovation,” because forward-thinking, cutting-edge Namaste Technologies has done it again, acquiring another piece of the cannabis consumer economy of the future! Nobody likes having to go to the store and pick things up, especially not millenials! Pineapple Express, named after the popular Seth Rogan movie of the same name (classic!), is going to deliver that new legal weed right to your face! Cannabis consumers aren’t like other consumers, they’re special! And they need a special kind of delivery service to get their deliveries coming in special. This is a prime example of Namaste skating to where the puck is going to be, and dedicating themselves to the future of cannabis.

Back on Earth
In keeping with their habits, Namaste has done a deal meant to look and feel like the acquisition of a piece of the emerging cannabis economy, but really just prepends “cannabis-” to a well established product or service that they have no special advantage in, but claim to. This investment came on the heels of an announcement that the company was going to be opening up a line of cafe’s and a food delivery service with its own celebrity chef.
The on-line cannabis delivery economy for both the legal and un-licensed arenas is mostly serviced by the post office right now. With the exception of perishables like hot food, consumers are happy to wait a day or so for most stuff that arrives by mail. Even prescription drug delivery isn’t that common.
There is no special license required to deliver cannabis.
The value being built in these LPs is being made possible through government fiat. The licenses are valuable because there are only 134 of them. Their license to supply the domestic rec and medical markets make them the only companies on the planet in a position to develop the working framework of a modern dope business in a developed economy. That makes them first-movers when it comes time to scale into the US, so valuing Canadian dope growers in the tens of billions as a sector isn’t unreasonable.
The courier and delivery business has already been built and optimised. It will continue to evolve, but PE doesn’t have a special or unique opportunity to effect that evolution just because they decided to do same-day cannabis delivery.
Pineapple Express appears to be operating as a central dispatch much like a traditional courier, and whether or not they plan to expand to independent subcontractor drivers like Uber and Skip-The-Dishes isn’t yet clear. Most same day delivery businesses run on that model, and it’s done a great job attracting the interest of convenience enthusiasts with celphones, but it hasn’t been very good for investors. Original Ubifier Uber Inc lost $939 million last quarter on $2.1B in gross revenue according to CNBC.
The Verdict
The street did NOT like Namaste’s latest deal. N is off $0.16 (-14%) since the announcement, presently at $1.08 in a crappy market, and we haven’t seen much enthusiasm for the deal coming from even the N fanboys. The Dec 19th N420 is scheduled to go live any minute here, but last weeks’s episode provided some insight into what might be going on in Jupiter, Fla.
Dollinger’s solo performance, live from Switzerland, came off defensive. He spent a lot of time explaining now N’s scope sprawl wasn’t a scattered Frankenstein’s monster at all, but rather an opportunity to focus on cannabis education, which is vitally important to their mission. He spent a good portion of the 40 minutes he was on rambling about it, and re-visited the idea of cannabis education being a core part of their mission at least twice. An odd segment towards the end encouraged viewers to “do a bit of due diligence” on a company called Cooper’s Hawk; a chain of wine bars where the food and wine are “not incredible, they’re good,” but they’ve created some kind of environment that Sean enjoys. Presumably, this is the template for Namaste’s cafes, but it’s hard to tell within the context.
The Great Namaste Paradox
The knowledge and experience to be able to get through to a large audience of investors (especially retail investors) is Namaste’s greatest strength. Their inability to listen to what that audience is telling them might be their most significant weakness. The live chat on the Namaste 420 videos is perpetually asking for updates on the UK deal Namaste has been teasing. Previously, the hot question was about when Cannmart was going to get its sales license from Health Canada.
We’ve been full of left-handed praise about the Namaste promotion, but we want to make it clear that we don’t mean that to imply that the Namaste audience are all a bunch of dimwits that Sean has schooled and made to hang off of his every move. Among them are momentum investors, grateful for a window into the engine creating the momentum. This paleo-yoga-topknot guy is way into himself, all the way in on this trade, and capable of keeping everyone’s attention for good or ill. They’re patiently waiting through all the noise about AI for retail, Uber for pot and an educated user base being good for the world because, eventually, Sean is going to announce that he’s advanced a material business. But they appear to be running out of patience.