The health of Elixinol Global in Australia is related to its global performance, particularly in the US market.
The health of Elixinol Global (ASX:EXL) doesn’t tie directly to the medical cannabis market in Australia, but it does offer a clearer picture on the progress of this sector.
The company offers labelled products, along with bulk and wholesale hemp-derived cannabidiol (CBD), around the world. Its offerings have a variety of health- and wellness-related uses.
Though it’s based in Australia, Elixinol operates heavily in the US, selling hemp-derived CBD products.
The US hemp industry has become attractive for CBD-focused companies, thanks in large part to regulatory moves that have changed how the country’s federal government views hemp.
In an exclusive interview with the Investing News Network (INN) during the recent MJBizCon event in Las Vegas, Nevada, Leif Harrison, CEO of the American division for Elixinol, explained that due to the global nature of the marijuana industry, potential investors are not deterred by the company’s ASX listing.
The executive added that although marijuana and hemp investment have stuck closer to the Canadian capital markets, US investors interested in the cannabis plant have also seen their horizons expanded.
“This doesn’t feel like (a) traditional US homegrown public entity … I don’t think it surprises anybody at this point,” Harrison said.
The executive added that, in his estimation, Elixinol’s US assets account for a leading portion of the company’s revenue. As such, it falls on them to support the firm’s expansion plans. And because the firm has operations worldwide it must also keep communication open to maintain its direction.
The health of Elixinol Global: Challenges in Japan
A crack in this system showed last year for the company’s division in Japan. In October, Elixinol told investors it had discovered a breach in its compliance standards out of Elixinol Japan.
The issue, which caused the company to launch an internal investigation, was due to the sourcing of CBD used in its products.
“The non-compliance relates to the strict requirements in Japan on sourcing CBD from only hemp stalk and seed,” the company said in a statement.
Harrison explained to INN that the international ventures of the firm are more likely to get fed hemp-derived CBD products from the US. This led to a mismatch in the regulation standards since the company makes its products from flowers and leaves.
“Until we can set up local production based on local rules, then we’re out of that market until we get back in the right way,” Harrison said.
In December, the parent company confirmed it had sold over half of its stake in Elixinol Japan.
“We have made an important decision to move to a licensing model for Japan and to press ahead with our growth priorities in our key markets,” Andrew Duff, chairman of Elixinol, said at the time.
The health of Elixinol Global: Investor takeaway
So far in 2020, Elixinol has seen the value of its shares rise steadily as it tries to regroup from a difficult 2019 for itself and the financial space at large. During the year, the firm saw its value drop by nearly 80 percent on the ASX.
Shares of Elixinol had bounced back by over 20 percent in value by the start of February 2020.
Despite the challenges presented to the global cannabis investment market last year, experts agree 2020 may be poised to offer alternative takes on the market with a bigger spotlight on investors.
Cameron Bell, an analyst with Canaccord Genuity Australia, issued a note to investors highlighting how investors’ concerns about the industry may be easing up, including in the burgeoning Australian market.
“The strength has been partially led by investor sentiment in offshore markets, as some key concerns have eased while expectations for demand growth remain very high and access to funding improves,” Bell wrote in his note.
Elixinol is a leading name in Canaccord’s own Australian Cannabis Index based on its market cap.
For more on Elixinol, listen below to INN’s interview with Joy Beckerman, the company’s regulatory officer and industry liaison, at last year’s MJBizConINT’L event in Toronto, Ontario.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.