THE last few weeks have witnessed a wild ride for global cannabis stocks reminiscent of some of the earlier bubbles experienced by the sector.
So far this year the Global Cannabis Stock Index is up almost 75% driven, in part, by the new Democrat administration and its liberal cannabis agenda.
It has also been driven in part by the Reddit WallStreetBets community flush with their US Government $600 stimulus cheques and furloughed time on their hands.
After their dalliances in the GameStop stock which landed some damaging blow on hedge funds – while also lining the pockets of others – they turned to cannabis.
Gen Y & Cannabis
Their punts pushed fringe Canadian LP Sundial Growers, a business with last quarter revenues of $10m to a valuation US$4.4bn – before it fell back, like others in the sector.
The GCI last saw gains of this magnitude during the most recent cannabis bubble in 2017 when it gained 91.8% before tanking by over 50% the following year.
However, the latest rally has left one market participant with a belief there is a more fundamental shift taking place.
Avihu Tamir, is CEO of the Kanabo Group, which became the second company to list on the London Stock Exchange earlier this week. He has identified a more fundamental shift.
“I’m not surprised that Generation Y going after cannabis stocks. This is something that is very natural for a Millennial – it’s an industry they truly believe in.
“The older baby boomer generation is joining, but more slowly. Similar to other businesses that Gen Y traders chose it was not surprising cannabis will be a target for them,” he said.
Both Kanabo and last week’s debutant MGC Pharmaceuticals have had stellar debuts with their stocks rising sharply. By Wednesday evening Kanabo was up over 250% at 16.65p while MGC was up over 220% at 0.048p.
The largest cannabis deal of the year so far – and of all time – is the slated takeover of UK firm GW Pharma by Irish business Jazz Pharmaceuticals.
The Pharma Dilemma
One of BusinessCann’s industry contacts has shared his insights; they are well worth a read.
Oliver Zugel, co-founder of Foliumed says: “The GW transaction validates the role cannabis to play in the traditional, pharma-medicine framework with clinical trials and proven efficacy.
“However GW remains a unicorn in the cannabis industry, with a very different business model to MSOs (multi-state operators), or even the medical cannabis companies are pursuing. That is classical pharma with long development pipelines, IP protection, patents, RCTs etc.
“Whilst the MSOs never intended to play in this space and really are a distinct animal, the medical cannabis companies in Canada and outside the USA very much need to look at what this means for them.
“They are neither pharma nor consumer goods companies, have no real IP and therefore could get stuck in the middle between pharma and FMCG players.
“The dilemma of course is that when cannabis is treated as a pharmaceutical product like is the case in Germany and Australia, no-one in medical cannabis has the experience, funding, or management to undergo the RCTs the traditional model of medicine approvals will require.
“And, as patients are demanding access to medical cannabis even it is NOT a pharmaceutical product, regulators have little choice than to permit non-traditional approaches to market with products which are not clinically proven.
“The question is this; for how long will this prevail?”
