Pull Back? Cannabis Investments Are Up 600%

Written by Jason Simpkins
Posted February 22, 2018 at 7:00PM

The cannabis industry registered $1.23 billion in investments during January alone, according to the Viridian Cannabis Deal Tracker.

That’s a 600% improvement over the first five weeks of 2017, and almost as much as the $1.29 billion raised by the cannabis industry in all of 2016.

We’re not just talking about retail investors, here. We’re talking about huge financial stakes being taken by high-net-worth investors (private placements) and businesses.

For example, beverage conglomerate Constellation Brands recently paid $245 million for a 9.9% stake in Canopy Growth Corp.

And this kind of activity is ramping up as we tear towards full-scale legalization in Canada, and a gradual relaxation of marijuana laws in the United States.

Indeed, Canada legalized medicinal marijuana in 2001, and recreational use is on the verge of being legalized by July 1. That legislation passed the House of Commons in November 2017 and is now pending Senate approval.

Meanwhile, eight of fifty United States — Washington, Colorado, California, Nevada, Alaska, Oregon, Maine, Massachusetts — and the District of Columbia have legalized marijuana for recreational use, as well.

And three more states — Vermont, New Jersey, and Michigan — are set to join them this year.

Make no mistake, this is a tidal wave.

The medical marijuana market is already firmly entrenched in both countries and projected to grow further over the next decade. But the coming adult-use market is expected to quickly dwarf it in size.

So marijuana companies have been raising huge amounts of capital to build out enough capacity to meet demand. (Remember, Nevada's dispensaries ran out of supplies almost as soon as the drug was legalized. Ditto for Maryland's medical marijuana dispensaries.)

The cannabis industry saw 65 capital raises in the first five weeks of 2018 — nine of which surpassed $50 million in value. And the average raise size was $19 million, compared to $5.9 million in the same period in 2017.

Overwhelmingly, these capital infusions were directed into Canadian cultivation and retail companies — the sector that will most benefit from changing laws, and must act quickly to expand capacity.

The biggest:

  • Hydropothecary Corp (OTC: HYYDF): $121.1 million
  • MedReleaf Corp (OTC: MEDFF): $107.6 million
  • Organigram Holdings Inc. (OTC: OGRMF): $93.4 million
  • Aphria Inc. (OTC: APHQF): $91.9 million

Again, this trend isn’t just going to continue. It’s going to accelerate.

Larger, more successful companies will continue to raise capital to further expand and streamline their operations. And in some cases, they’ll take to the M&A market, partnering up and buying out competition.

So, no matter what happens to the broader overall market, or the cannabis sector as a whole, remember that this trend is much bigger than any short-term volatility.

Big returns still lie ahead for cannabis companies — especially if you get in on the ground floor. And if that’s something that interests you, you should check out the latest stock recommendation from The Marijuana Manifesto.

Investment Director Jimmy Mengel recently uncovered an opportunity so big it has its own secret code name. It’s called “Project IVXX,” and it’s a program for creating and producing proprietary blends of marijuana.

The company has developed and acquired a custom state-of-the-art extraction lab, and it’s poised to produce the highest-grade marijuana the world’s ever seen — a product that can be tailored to customers’ needs and feedback.

You should check that out here, if you haven’t already.

Fight on,

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Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of The Wealth Warrior, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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