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The grass trade has traditionally evoked the stealthy exchange of green crumbs in small plastic bags. But with a growing body of research on medicinal benefits and cannabis products approved for medicinal and recreational purposes in some US states and Canada, marijuana companies are attracting more and more investors.
BDS Analytics estimates that global spending on cannabis products will increase by 230% to 32 billion dollars (25 billion euros) by 2020.
Share record growth
In February, the first marijuana company was listed on a US stock exchange with the initial public offering of the Cronos Group, a milestone for the industry. Since then, other marijuana companies have been publicly traded alongside Apple, Microsoft and Facebook.
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Canopy Growth went public in May, followed in July by the Canadian company Tilray, whose market value exploded 800% to $ 14 billion.
Shares of all publicly traded marijuana companies increased by 96.56% in August alone. In comparison, the financial sector grew by 1.13% over the same period and the S & P 500 index, which lists 500 companies in 11 sectors, has only grown by 0, 74%.
Big investors feel their luck
The alcohol and tobacco companies in particular are keeping an eye on the companies, says Stuart Titus, CEO of Medical Marijuana.
Constellation Brands, the origin of the Corona beer brand, recently invested $ 4 billion in Canopy Growth and in early September Altria tobacco company "was exploring its options". Coca Cola has also expressed interest.
Tobacco and alcohol companies want
The health factor plays an important role in this investment decision. Alcohol, sugary drinks and cigarettes have a reputation of getting worse because consumers are focusing more on their health.
Read more: Japan fights growing cannabis consumption
Cigarettes were everywhere in American society. Fifty years ago, 42.4% of American adults still smoked. Since then, this figure has decreased by more than half to reach a historical low of 17.8% in 2014.
That's why cannabis investor Alan Valdes says the cannabis market is so attractive to these companies.
"Although tobacco products are becoming more and more difficult, marijuana is becoming easier," he says. For example, companies could offset revenues from the tobacco industry.
Valdes itself invests in RXMM, a medical marijuana maker, and Diego, which sells marijuana as a luxury food. He believes that pharmacies like pharmacies and US supermarkets, such as Walgreens and Wegman, will soon be selling cannabis products.
Big Pharma also interested
Pharmaceutical companies also monitor the market. No wonder, because cannabis could absorb a large part of the income from drugs.
Titus estimates that soon, 40% of all drugs could be replaced by cannabis-based products, which means that there is great resistance to legalization among industry players.
Read more: Police uncover cannabis plant in former nuclear bunker
Until now, the Food and Drug Administration has approved only a few products as medicines. However, according to a recent analysis of medical cannabis, total sales in the United States are expected to reach $ 10 billion by 2022.
Imminent legalization
Interest in marijuana stocks is largely based on the assumption that cannabis will soon be legalized across the United States. It is currently legal in 30 states, but experts like Titus expect it to be legal nationally by 2020.
Since the summer, cannabis use in Canada is legal not only for medical purposes, but also for recreational purposes.
The industry has many advocates on the American political scene. Cynthia Nixon, for example, has campaigned on a legalization ticket against Andrew Cuomo for the governorship of the state of New York.
In the White House, opinion is shared. Attorney General Jeff Sessions insists that marijuana is dangerous and has repeatedly stated in recent weeks that it should not be legalized.
President Donald Trump, however, seems to disagree. He wants to help Congress put an end to the ban on marijuana.
Valdes is not surprised. "He is a businessman," said Mr. Valdes, noting that Mr. Trump will have to make up part of the budget deficit left by his 2017 tax cuts.
"We think the market will contribute to economic growth," says Titus.
In the United States, one million jobs could be created in the sector. Trump will not want to miss that.
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