The need for weeds: why Wall Street becomes addicted to cannabis

Wall Street is developing a bit of a habit of drugs.

Nelson Peltz, the veteran activist investor, signed this week as strategic advisor to Aurora, a Canadian cannabis producer, picking up a plethora of stock options. in the process. The news of the appointment pushed Aurora's shares up 14% in New York City, bringing gains for the year to more than 80%.

The hiring of Mr. Peltz – best known these days for his significant holdings in Procter & Gamble and General Electric, two pillars of the US business – is evidence of the "grip" of "stockpiles". pots ", as legal barriers disappear and consumers show it. more interest in cannabis products. Less than a year after Canada broke the mold by allowing adult recreational cannabis use, hedge funds, individual investors and long-term mutual funds are on the rise.

Anthony Scaramucci, who has returned to his investment company SkyBridge after a brief period as the Trump Administration's director of communications, is planning to hold cannabis sessions at his SALT conference in Las Vegas this year. alongside other hot topics such as AI and stem cell therapy. The company is integrating the problem, he said. "Over the next fifteen years [the] the industry will experience the dotcom growth that we experienced from the mid-to-late 1990s. "

The challenge now facing investors is how to get through the fog to distinguish winners from losers.

Bruce Linton, General Manager of Canopy Growth, a Canadian cannabis producer, will start many startups. His company, WEED, is listed in a former Hershey chocolate factory in the small town of Smiths Falls, Ontario. Its market capitalization is C $ 21 billion (US $ 15.7 billion) with sales of C $ 147 million over a nine-month period. December.

"Google is out of [the dotcom boom]but a group of other companies that have disappeared, "said Linton.

The breakthrough for the industry was national legalization across Canada, which came into effect last October, making it the second country after Uruguay to give cannabis badurances.

In 2018, some Canadian groups also began trading on the New York Stock Exchange, an Intercontinental Exchange unit, and Nasdaq, allowing companies to register as long as their business is legal in the United States. jurisdiction where they operate. At the same time, some US corporations operating under state control rather than federal authority have registered shares in Canada.

But it's not just the legal changes – real or expected – that interest investors. Insiders pointed out that cannabis has a multitude of untapped applications in several industries, including pharmaceuticals, packaged foods and beverages, as well as cosmetics and beauty.

Last year, tobacco company Altria took a stake in the Canadian group Cronos and beer maker Corona Constellation Brands invested in Canopy. Meanwhile, Vancouver-based Tilray formed partnerships with AB InBev and the Novartis pharmaceutical group.

Many cannabinoids, or chemical compounds found in cannabis, have therapeutic effects. CBD, or cannabidiol, is receiving a lot of attention. It can be used to treat anxiety, seizures, depression and nausea and also serve as a sleep aid or muscle relaxant, according to Curaleaf, a Mbadachusetts-based clinic of clinics in 12 US states.

Some US states have already legalized cannabis for medical or recreational purposes. At the federal level too, there is movement: the agriculture bill, pbaded late last year, opened up new prospects by removing hemp from the list of controlled substances and allowing American farmers to grow it for industrial purposes. The bill defined industrial hemp as a cannabis strain with a concentration of THC – the part of the plant that elicits the most users – less than 0.3%.

The Food and Drug Administration is still struggling to get noticed, said Gail Javitt of the Epstein Becker & Green law firm in Washington, DC. The FDA has stated that products bearing therapeutic claims on cannabis products must be approved and that it is still illegal to introduce dietary supplements and dietary supplements containing CBD for interstate commerce.

Yet, many are optimistic. Cowen, one of the few US investment banks conducting cannabis research, says CBD can generate "conservatively" sales of $ 16 billion in the US by 2025 .

"The CBD is less controversial than corn syrup," said Brendan Kennedy, chief executive of Tilray, listed on the Nasdaq, Financial Times last summer.

Sean Stiefel, fund manager at the hedge fund Navy Capital, one of the first investors in cannabis companies, said the US was becoming "much more interesting" than Canada because " it's a much bigger cake. "

Analysts and investors view the legalization of cannabis as a key element of the US presidential election of 2020 – a model that enjoys a rare bipartisan support.

Cam Battley, General Manager at Aurora, Edmonton, talks about a "dramatic change of attitude" to the sector.

"We do not have the opportunity every day to participate in the very early stages of creating a big global industry and that's what's happening right now," he said. declared.