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Wednesday, March 7, 2018

Cannabis and its silent path towards the USA

Por Feco

The cannabis industry celebrates again. Cronos Group, a Canadian company based in Toronto, has just become the first pure producer of marijuana traded on the Nasdaq, the favorite market for companies in the new economy. The launch on Wall Street is another sign for investors that it is a sector in which money can work.

It happened on Tuesday at the Nasdaq, where other companies that are indirectly related to cannabis are listed as GW Pharmaceutical, which develops a treatment for epilepsy. It occurred side by side with giants like Apple, Microsoft or Starbucks. Cronos Group sells cannabis in Germany for medicinal use and is establishing production plants in Australia or Israel, as well as Canada. United States is the next step. In any case, the company has been listed on the Toronto stock exchange for three years.

The Nasdaq, however, is a market with much more liquidity, to which emerging companies come to provide themselves with capital to finance their growth, and much more visible to attract investors willing to risk their money in this new business venture despite the reluctance of Donald Trump. The legalization process of marijuana use is progressively being made in the US, state by state. In nine territories it is authorized for recreational consumption and in 29 for medical purposes. But as with the new assets that come to market, its first day in the US market was dominated by volatility. Their shares fell by 2% at the premiere. Then they gained strength and closed the week with an appreciation of almost 20%.

The Canadian company has a stock market valuation that approaches the 1,530 million dollars, small when it is compared with the giants of the pharmaceutical sector. In the Toronto market, the momentum was even higher this week, 40% since Monday. The appreciation was enough to put it back very close to the historical high reached in January, before collapsing 25%. The Cronos Group curve shows that investors' enthusiasm for their business began to grow in mid-2016, although the big jump came in November. Another of the Canadian companies listed in Toronto that is directly dedicated to marijuana is Canopy Growth.

The multinational Constellation Brands, which controls Corona beer among other brands, paid 190 million dollars last year for taking a stake in this company. It is expected in parallel that Canada legalizes cannabis with recreational use this summer. The fact that the US stock market regulator gave his blessing to the Cronos quote is another evidence that the stigma towards cannabis is eroding, as its CEO Mike Gorenstein explains. Analysts at investment bank Cowen & Co project that the marijuana market will move 50 billion dollars in 2026, compared with 6 billion in 2016. Can anyone stop the success of cannabis? More so, is anyone willing to do so?