THE narrative changed for the global cannabis capital markets when the listed Canadian companies were unable to meet the lofty expectations that had enticed investors in the first place.
Will Muecke, of Artemis Growth Partners, puts it another way; ‘The bloom came off the rose – and all of the fast money has now left’.
He expects this year to be ‘choppy’, but foresees exciting times ahead with money coming back into the industry, and annual growth rates of at least 20% exceeding any other on the planet
Speaking to BusinessCann, he elaborates: “Looking at the recent history; 2109 started with a huge increase in cannabis stock, publicly, so there was a lot of excitement.
From Cash to Crash
“In October 2018, there were some 25 IPOs or RTOs, there was a lot of money. The cash cycle was functioning with private investment into early public companies, liquidity events and capital coming into the industry.
“But, once companies had to perform against their very loft projections in the first quarter of 2019, and on into the second and third quarters, the bloom came off the rose.
“People realised the overshooting, the over-promotion of these cannabis companies was just that, and that growth was going to be much slower.”
The realisation saw stock prices of the Canadian cannabis business plummet by over 50% with thousands of job losses and industry rationalisations still underway
He continued: “The view that the Canadian perch was going to dominate the world? Well, as we have seen, many of its leading companies have floundered; Canopy Growth has, this year, retracted from all of its foreign investments.
“I think the story changed, and with that the public and the private capital markets, so by the end of 2019, the opportunities were thin, with very little money available.
All Of The Fast Money Left
“As a result, the people that didn’t really understand the industry, said ‘Oh, my God, this is a bubble, and the party’s over’. So all of the fast money left, which is fine, we like that dynamic.
“We think the in-and-out, quick kind of speculative play, provides a lot of heat at the time, but it’s not the long-term fuel the market needs.
“So the folks who were left behind in 2020 were saying ‘ok the craziness has gone, valuations have come down, the better companies who have actually raised the cash they should be able to make it through the next cycle’.
“We were looking at 2020 to say this is going to be one of the best years to invest in cannabis as we have the capital, market valuations have come down, a lot of great companies are frankly running out of cash – because cannabis is taking longer to launch than people had initially speculated – and then Covid-19 hit.
Cannabis Is Recession-Resistant
“With Covid-19 there was initially a lot of hand-wringing; the world’s coming apart, but if you look a the US market-place, and the resilience of cannabis, especially when it was deemed to be an essential category in many US states, and the realisation dawned that actually cannabis is recession-resistant and shock resistant.
“Cannabis may have tripped over its own crazy speculation, but the reality is, there is a built-in demand and that demand is not going away, it’s only growing.”
Mr Muecke says the dynamics for future growth remain strong with possible changes in the US political landscape, federal legalisation and the removal of restrictive banking laws in the spotlight.
In Europe, a market of up to 700m people, the cannabis industry is on a rapid growth trajectory, whilst this re-embracing of the cannabis plant is global.
He continued: “The secular trends of cannabis towards liberalisation are continuing. The medical community is waking up and realising its medicinal potential.
Fastest-Growing Global Industry
“Here we are in the Covid-19 environment; Many investors took their money out of the public markets as the crisis hit, and they are now starting to invest back.
“Many of these investors are still sitting on cash and when they see what is happening with cannabis – its resilience and progression even through the capital crisis of 2019 and now the Covid-19 crisis of 2020 – the money is turning back to cannabis.
“While 2020 will be a really choppy year, 2021 will be a chance for investors to lean-in and support the industry with capital. We are definitely seeing people coming back to say cannabis is very interesting.
“The long term trend for cannabis is still tremendously robust and the industry itself is still growing at over 20% per year.
“There is no other industry in the world that is being projected for the next five years to be growing at that rate of expansion.”
@Part Two of our in-depth chat with Will Muecke looks at the first five years of Artemis and its future plans. This will feature on BusinessCann in the coming days.
