Cannabis Investor Appetite Has Changed, Arcview Panelists Say

During a prediction panel at the Arcview Investor Forum in Las Vegas last Tuesday (November 13), Canadian Securities Exchange (CSE) leading executive said the cannabis play has evolved for investors across the board.

Dubbed the “Bold Market Predictions” talk moderated by Neal Gilmer, research analyst with Haywood Securities, the panel offered investors a peek inside what the experts are eyeing for trends moving forward in the space.

The panel, in addition to Richard Carleton, CEO of the CSE, featured Michael Hayford, CEO of Lighthouse Strategies, Stephen Lenn, a partner with Greenspoon Marder and Brian Schinderle, a managing partner with Solidum Capital Advisors.

International markets overview

When discussing the international markets, the panel highlighted how big an element this play is and how there is still not a lot known regarding the actual size of the international market for existing companies.

Lenn explained he is focussed on answering the question of how exactly will companies export brands internationally.

“How do we build something very successful, gain consumer adoption and then look to globalize that opportunity?”

Carlton added he is keeping a close eye on Israel and its development in the cannabis space and, in particular, with the research advancements for the plant.

The executive added Israeli-based cannabis research companies are coming for public listings on the CSE over the next three or four months.

When asked about the potential continued growth of the Canadian market, Carleton reemphasized the pipeline of companies coming to the CSE to raise capital is “jam-packed.”

“It’s abundantly clear that the investor appetite has moved from people with cultivation licenses and ambitious programs to build greenhouse capacity… to companies that are investing in portfolios of intellectual property,” Carleton said.

Making a prediction of his own, Gilmer told the audience he expects to continue to see the growth of the CBD market in 2019.

The analyst explained a lot of the current growth for this market is due to anecdotal references and recommendations.

He expects there to be a drive up on the CBD market once research shows the benefits of the compound and perhaps some celebrity endorsements appear.

Potential for TMX Group to ease regulations when it comes to US investing

Carleton was asked about the regulatory stance that differs his exchange to the TMX Group operated ones.

The executive said it would take a full descheduling of marijuana under the Controlled Substance Act (CSA) in the US for the TSX and TSXV to open listings to US-focussed companies.

However, Carleton explained some companies are starting to exploit how to access the US market in ways that don’t affect listings in the TMX Group exchanges.

In a weekly column to investors Alan Brochstein, cannabis analyst with 420 Investor, explained how large licensed producers such as Canopy Growth (NYSE:CGC,TSX:WEED) and Aurora Cannabis (NYSE:ACB,TSX:ACB) have entered the US space.

“The ability of the largest LPs to effectively enter the US market bodes well not only for their future but also likely improves the availability of capital to the American cannabis industry,” Brochstein wrote.

On the issue of whether or not the US government will remove cannabis from the illegal list and fully open the doors to the industry the way Canada has done so, Schinderle told the investor audience he doesn’t expect a change in scheduling for the next two years.

Schinderle said he expects a change of administration to cause the rescheduling.

Marijuana, despite its illegal status on a federal level, has been legalized by several states in the US for medical or even recreational use.

In June, Sens. Elizabeth Warren (D-MA) and Cory Gardner (R-CO) introduced a new legislation dubbed “states rights” which would remove the cannabis ban at the state level.

Schinderle said this legislation would fix the current banking issue for existing cannabis-related businesses and would potentially allow the entry into the scene from US broker dealers and US private equity.

“They are sitting on so much money that they don’t know what to do with and it’s killing them that they can’t run in here and get involved,” he said.

During his panel at the MJBizCon show in Las Vegas last Wednesday (November 14), Kevin Murphy, CEO of Acreage Holdings, a soon to be public US multi-state operator, said his company is pushing hard for the passing of this legislation.

Untapped areas of the cannabis market

When asked about what areas of the sector they felt had the best chance to be the next big opportunity Hayford, Carleton and Schinderle agreed the possibility to manipulate compounds of the plant in a lab is exciting.

“I think that’s very interesting if we can figure out how to turn off certain cannabinoids… and have a plant create 10 times that number of cannabinoids,” Hayford said.

Carleton added he has heard pitches from companies claiming to create cannabinoids in a petri dish inside a lab which later got acquired by name-brand players.

“Somebody thinks there’s something there,” he said.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.