Investing in cannabis: Is it a wise move to make?

“Over the next 12 months, I predict that every major institutional investor in the U.S. will make an investment in this industry,” says the founder of a cannabis-focused private equity company.

Bethan Rose Jenkins, Cannabis News Writer/Editorial

In 2018, investment banking and strategic advisory firm Viridian Capital Advisors announced that cannabis investments came close to the $14 billion mark.

This is a major increase from the $3.5 billion that was invested in the cannabis industry back in 2017 and with an ever-growing list of regions in the United States legalizing the plant – be it for medical or recreational purposes – the figure is guaranteed to swell even more this year. So far, 33 states and the District of Columbia have legalized the plant in some form. In addition to this, America’s northern neighbor Canada legalized the plant in its entirety back in 2018 under the terms of the Cannabis Act, A.K.A. Bill C-45.

Don’t be fooled into thinking that North America is the only place on the world map that is catching onto the cannabis craze. Elsewhere in the world, cannabis reform is also spreading like wildfire. 

What does the cannabis market look like on a global scale? Various new cannabis markets are sprouting out of European soil; industries are emerging in Germany, France, Spain, and the United Kingdom, where legalization is predicted to happen within the next five years.

According to Cowen Research, Europe’s cannabis market could be valued at $75 billion by 2030. Legalization is also unfurling across South Africa, Jamaica and much of South America.

Israel, which has been acknowledged as a pioneering country in medical cannabis research and development, was the place where cannabis’ psychoactive compound THC (tetrahydrocannabinol) was isolated for the first time back in 1964 by a professor at the Hebrew University of Jerusalem named Raphael Mechoulam. The country’s domestic cannabis market was valued at $150 million last year.

Even Asia is considering the financial prospects of legalization, with Thailand approving medical cannabis throughout the palm-tree speckled Kingdom back in December. Nearby Indonesia, where cannabis laws are some of the harshest in the world, could soon follow suit. President of the Republic of Indonesia, Mr. Joko Widodo, recently announced his plans to put cannabis at the forefront of his presidential campaign, stating that the crop could significantly bolster the country’s economy and stimulate job growth.

Let’s not forget about the fact that cannabis can be used as an alternative to addictive and often fatal prescription medications, such as opioids. With so many places turning green, more investors are pondering over the idea of pouring their money into cannabis. However, the question remains to be asked, “Is cannabis a good investment?” Brendan Kennedy seems to think so.

Investing in cannabis: Founder of private equity company thinks cannabis will be a major investment
(Pictured) Co-founder of private equity firm Privateer Holdings, Brendan Kennedy

Brian Kennedy is a Yale SOM graduate and is the co-founder of private equity firm Privateer Holdings. Kennedy founded the firm alongside a fellow graduate of 2005, Michael Blue. The entrepreneur’s launched their firm back in 2010 when cannabis reform was in its early stages.

“Over the next 12 months, I predict that every major institutional investor in the U.S. will make an investment in this industry,” said Kennedy, who established his firm with future prospects in mind.

With Canada having legalized cannabis in its entirety back in October, the nascent industry has had a chance to progress at a rapid rate. Investors are being spoiled for choice when investing in cannabis, from the options blossoming in Canada’s legal market, to the profusion of pot companies being set up across America.

Even alcohol giants are investing in cannabis. For example, Molson Coors Brewing Co. recently announced a collaboration with Canadian cannabis producer Hydropothecary Corporation for the development of a range of cannabis-infused beverages. With so many avenues to go down in terms of cannabis investing, such as cannabis cultivation, production and manufacturing operations, as well as the ever-growing list of cannabis stocks that have grasped trader attention on Wall Street, there’s no wonder why Kennedy feels optimistic about the industry from a financial perspective.

The masterminds responsible for running Los Angeles-based MGO|Ello Alliance have gone a step further by providing cannabis investors with weed-focused investment banking in the U.S. Ello is in the process of assisting firms in raising capital and has described itself as a “one-stop” service. Ello also plans on helping companies in the cannabis space that deal with mergers and acquisitions (M&A)

“As the industry continues to evolve, so do the needs of our clients,” said the CEO of Ello, Evan Eneman. “They are going to need support with transactions and capital formation as consolidation heats up.”

Investing in cannabis: Options for first-timers hoping to cash-in on the industry

Cannabis investors have had a lucky break this year and for the wise investors who funneled funds into the legal weed industry before the “Green Rush” started gaining serious momentum, bank balances are bulging. A vast proportion of U.S. cannabis stocks have inflated by up to 30 percent or more year-to-date.

Stocks are a good place to start, but be wary of fluctuating trading princes amidst the waves of change that the nascent industry is constantly riding. An alternative choice is to dabble in cannabis exchange-traded funds (ETFs). At the current time, cannabis investors can choose from two different ETFs; Horizons Marijuana Life Sciences ETF and the ETFMG Alternative Harvest ETF.

Pay caution to the fact that the industry is constantly metamorphosing and federal restrictions in the U.S. may contribute to marketplace volatility. Then again, nobody ever made money without taking risks, right?