CannabisNewsWire
Editorial Coverage: As the cannabis industry sees its profits
and legitimacy rise, the market potential is drawing increased
attention from big investors.
- The U.S. and global cannabis sector is seeing great growth,
lifted by the success of medical and recreational cannabis and
legalization in Canada.
- This is drawing in previously reluctant investors as companies
become listed on stock exchanges.
- Greater integration within the sector is both a symptom of and
a support for this cannabis boom.
Cannabis Strategic Ventures (OTC: NUGS) (NUGS
Profile) shows this integrated approach, bringing
together cultivation, product sales and personnel services for the
cannabis industry. Tilray, Inc. (NASDAQ: TLRY) is
working across borders on international research to create better
cannabis-based medicines. Canopy Growth Corporation (NYSE:
CGC) (TSX: WEED) has benefited hugely from the surge in
investor attention, receiving billions in investment from the
beverage sector. CBD products are allowing parts of the cannabis
sector to achieve widespread acceptance, thanks to the work of
companies like Charlotte’s Web Holdings, Inc. (OTCQX:
CWBHF) (CSE: CWEB). All of this means a rise in sales for
suppliers of hydroponic equipment such as GrowGeneration
Corp. (OTCQX: GRWG).
Cannabis’s Money Problems
The legal cannabis industry is one of the newest in the world
and one weighed down with a great deal of baggage. Decades in the
legal wilderness have tainted the public image of the drug, leaving
many potential customers and investors with a negative knee-jerk
reaction to the sector and its products. Even now, as legal
cannabis becomes more common on a state-by-state basis, the U.S.
industry is held back by lingering federal laws enacted as a result
of the war on drugs.
This has created challenges for cannabis companies in search of
finance. Both the legal restrictions in the United States and
historical prejudice against the industry have made it hard to find
mainstream investors. But with the market expanding and profits
rising significantly year on year, that looks set to change.
The Signs of Change
In the United States, the cannabis industry is taking off in a
big way. California is the largest of the nine state-sized markets
for recreational cannabis, so it makes sense that the state has
become home to many of the companies working in the sector, such as
Cannabis
Strategic Ventures (OTC: NUGS). But the seeds for the
rise of these companies lie elsewhere.
The first signs of the huge potential for a legal cannabis
market came in 1996, when California passed Proposition 215, the
first law making medical cannabis legal in a U.S. state. The
medical market quickly took off, with legal companies moving into a
business previously owned entirely by criminals, while other states
considered such legislation of their own. Just over 20 years later,
31 states have legal medical cannabis markets, and a whole host of
companies have sprung up to cater to them. Knowledge of cannabis’s
benefits has also grown swiftly, thanks to these companies’
research efforts.
But the biggest bellwether for growth in the recreational market
has come from north of the border. This October, Canada became the
first G8 country to legalize recreational cannabis on a national
level. The result is a tightly regulated and quickly growing
industry that is setting an example for the rest of the world.
That example holds out great promise for the likes of companies
such as Cannabis Strategic Ventures. Cannabis Strategic Ventures
has taken a portfolio approach to the cannabis sector, developing a
range of brands covering areas such as cannabis oil, concentrate
extraction services, staffing for the cannabis sector, and most recently
cannabis cultivation itself.
The industry is growing quickly, with analysts predicting that it will reach $65 billion by
2023. That’s creating plenty of space for companies such as
Cannabis Strategic Ventures to grow. It’s also drawing the
attention of investors.
The Rise of Cannabis Investment
The cannabis industry didn’t initially attract a lot of funding
from investors. The potential of cannabis as a legal market was
unclear, and it came with risks thanks to the drug’s illegality at
a federal level. Investors couldn’t yet see much potential for
profit, and they were wary of throwing their financial lot in with
such a dubious group.
Now, however, the market has had time to mature. The sector
isn’t just a handful of cultivators and retailers trying to work on
an untested business model. There are specialist cannabis tech
firms, research outfits and umbrella companies such as Cannabis
Strategic Ventures. It’s looking more and more like a conventional
market sector — though a market sector subject to staggering
growth.
The result is a growing surge of investment. Since January this
year, U.S. cannabis companies have raised more than $8.2 billion of
investment, while their Canadian cousins raised $2.2 billion in
October alone.
Getting listed on a stock exchange is invaluable to a getting a
company’s stocks in front of powerful investors and thus raising
additional funds. Larger cannabis companies are looking at moving
from the Toronto exchange to the New York Stock Exchange, the
largest stock market in the world, while others such as Cannabis
Strategic Ventures are preparing for
their first listings.
Investors are more prepared now to take a chance on the cannabis
market. Stock exchange presence will allow cannabis companies to
tap into that potential and so to take a stronger place in a
fast-growing market.
A Fractured Industry
The American cannabis industry is a fractured one. Without the
well-established business relationships and support structures of
longer-standing sectors, many of the pieces are small and
disjointed. Progress has been driven primarily by small
startups.
The same moment of maturity that has brought the recent wave of
investment has also brought the seeds of change for the industry’s
structure. Some companies are using mergers and takeovers to build
bigger businesses focused on particular parts of the sector,
benefiting from the efficiencies these acquisitions bring. Others
are diversifying to create companies with greater reach across the
sector and even potential to take it to new places. Cannabis
Strategic Ventures, for example, is expanding its product lines
to include
beauty products even as it adds cultivation
to its portfolio for greater vertical integration.
Within the industry, one of the big fractures in the United
States is that between the different states. With cannabis still
illegal under federal laws, businesses have to operate within the
borders of individual states with their own local regulations.
Though some companies have operations in several states, it’s not
yet possible to create a properly integrated national operation, at
least in part because of states where the drug remains entirely
illegal. But with the White House
hinting at potential reform, this is something that could
change over the next few years. While politicians respond slowly to
public and investor demand for a more efficient and integrated
cannabis sector, it’s the companies that are leading the way.
An Industry Coming Together
Despite the limitations they face, cannabis companies are
finding ways to come together and cooperate, both within the United
States and across international borders.
Tilray, Inc. (NASDAQ: TLRY), a leading medical
cannabis company, is supporting research work beyond the borders of
the United States. As a supplier of
materials for clinical trials in Canada and Australia, Tilray
working with other research-oriented companies to increase
understanding of the effects of cannabis and develop better
treatments based upon it. These could be invaluable in treating
such problems as chemotherapy-induced nausea and childhood
epilepsy. And while the work has an invaluable humanitarian
element, it’s also appealing to investors who recognize the profits
present in the pharmaceutical industry.
Canopy Growth Corporation (NYSE: CGC) (TSX:
WEED) is one of the great investment success stories. One
of Canada’s largest cannabis companies, it has attracted several billion dollars of investment from Constellation
Brands, an American drinks manufacturer. This represents an
interesting twist on integration within the cannabis industry, with
an alcohol company looking to get involved in other recreational
chemicals. Tobacco companies have been taking a similar interest in
cannabis, and the industry may one day bleed over into one or both
of these related sectors.
Already connected into the cannabis industry is industrial hemp,
a form of cannabis that doesn’t get users high. Recent years have
seen a surge in sales of cannabidiol (CBD) products, which use a
compound extracted from industrial hemp. Companies such as
Charlotte’s Web Holdings, Inc. (OTCQX: CWBHF) (CSE:
CWEB) have had huge success is developing and marketing
CBD-based health and wellness products. These products are gaining
mainstream acceptance, with Charlotte’s Web getting its products into three thousand outlets.
The success of cannabis growers and retailers has been a boon
for companies providing the products and services they need.
GrowGeneration Corp. (OTCQX: GRWG), which supplies
hydroponic systems and nutrients used in growing cannabis, has seen
a massive rise in sales off the back of legalization initiatives.
The company’s sales went up by 80 percent in 2017, and it has
acquired several smaller companies to help it make the most of this
surging demand.
Greater investment helps companies to achieve these successes,
which in turn draw in greater investment. As more cannabis
companies hit the big stock exchanges, the industry looks set to
see its growth continue.
For more information on Cannabis Strategic Ventures, visit
Cannabis
Strategic Ventures, Inc. (NUGS)
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