Cannabis investment could be the next hot deal. With the drug being legalised in several US states, and proposals to legalise its use in Canada, there has been never been a better time to invest in the market.
The drug is no longer associated with stoned teenagers, hippies or an array counterculture figures. Use of the plant has entered the mainstream as socially acceptable. This is in part due to the recognition of the medical benefits of cannabis. Several regions have decriminalised its use or allowed its purchase with a prescription. In Canada, dispensaries have opened up across the country, as the number of people who hold a prescription to buy the product has grown.
The effect on the economy is clear. In Colorado, where the drug is legal, 18,500 jobs were created by the market in 2015. Taxes generated from cannabis sales are now three times greater than those from alcohol.
Investors, who may previously have been wary of the market, are becoming more aware of the possibilities for growth. The stock markets reflect this. In the wake of the announcement earlier this year that cannabis will be legalised in Canada in 2018, shares in cannabis companies rose exponentially. Aurora Cannabis Inc. witnessed its stock price increase by a 9% in a matter of hours following the announcement. Canopy Growth Corp. saw its shares rise to $10.84.
There are a number of issues which investors are wary of, however. How markets will be regulated in different regions must still be determined. Cannabis, similar to many products, requires regulation to ensure that it is safe for consumers and that standards are being met. The regulations which are put in place may determine the profitability of production outfits.
If the market is as profitable as it is expected to be, it may not take much time for established companies to become involved in the trade. Tobacco companies have witnessed their profit margins being slashed for years since the public health campaign against smoking was launched. In the event that cannabis could provide an alternative source of revenue, tobacco companies could enter this arena.
Cannabis companies which have already been established, and who have seen their stock prices surge, operate in a market under current conditions. If those conditions change, then new players may enter the market, diluting current leaders.
Nonetheless, it is clear that cannabis is a market ready to be taken advantage of. The ‘green rush’ could be the hot market of the next decade. The drug has moved into the mainstream and looks likely to grow.