(Finance) – The cannabis started getting awider social acceptance and has been legalized in an increasing number of nations and jurisdictions for recreational, medicinal and other uses. Some of the biggest companies in the marijuana industry, like Canopy Growth, Cronos And Tilray, have become familiar to investors around the world, despite continuing to experience substantial losses on the investments needed to accelerate revenue growth. Attention to the so-called megatrendor thematic investments to gain exposure to sectors believed to have great prospects, has led to the proliferation of financial instruments on cannabis, even if the promises of strong returns have not always been kept over the years.
The “pot” stocks have in fact seen prices plummet in recent months, also due to the slow progress towards a greater opening of the US cannabis market. Some analysts have called it a “regulatory recession“, as the shares are trading at low multiples of their earnings, as investors hoped the legislation would become more favorable during Joe Biden’s administration.
Legislation still remains the biggest obstacle to the development of the sector and of the financial instruments linked to it. A company active in the field of cannabis can in fact develop different products, which may be legal in one state and illegal in another, making it difficult for financial companies to create and offer the same tools in various countries. “There is a considerable complexity in how different jurisdictions deal with cannabis use and investment. We begin our approach with a basic categorization of cannabis investments into broad sections: medical cannabis, cannabinoid drugs, CBD wellness, complementary services and recreational cannabis, “he explains. Nawan Butt, Portfolio Manager of Purpose Investmentsa partner company of HANetf in the creation of The Medical Cannabis and Wellness UCITS ETF (ticker CBSX), one of the best known ETFs in Europe for investing in the sector.
“Thanks to this framework, we are able to identify investments that may not fall under the investment regulations of different jurisdictions and delete any sub-categories from our portfolios – continues Butt – Based on our current position, CBDX removes only recreational cannabis from the portfolio “.
Narrowing our gaze to medical cannabis, the most “investable” sub-sector, there is a great deal of interest from different, but different factors that have fueled the pessimism about its development. “Investors have had a much tougher time – says the Portfolio Manager – Even as the sector continues to grow in terms of patient numbers and sales each year, the performance of stocks investing in medical cannabis has been penalized by numerous obstacles. that investors have faced. From disappointing profitability in Canada, to over-regulation in the US that refuses to ease off, investors have struggled to recognize the full potential of this rapidly growing theme, but often still deregulated. However, this gives new investors the opportunity to position themselves well for the industry’s strong upside potential once regulatory hurdles have been overcome. Regarding this “overcoming”, in our opinion it is a question of when and not of if“.
In the meantime, even those who act by respecting the rules often find investors and potential partners in front of them, barring the way to those who work in the cannabis sector. It is the case of JustMary, an Italian legal cannabis home delivery company that has launched a new capital increase on the Mamacrowd portal, with a pre-money valuation of almost 6.9 million euros and a maximum collection set at half a million. “We have no problems with private investors, as evidenced by the nearly 2 million raised over the years – explains the CEO and founder Matteo Moretti – With very many institutions, from the banal loan of € 10,000 to the investment of structured funds. But having the POS is also a challenge. There is a total barricade against us“.
The company markets hemp-based products (cannabis light, CBD oil, poppers, cocktails & spirits) under its own brand and third party brands. It is present in 7 cities in Italy and 1 city in France (Paris), with a fleet of 18 riders in total. In 2020, the Covid-19 pandemic has had a positive impact on JustMary, with a growth in the number of customers per year of 373% and a growing loyalty of its customer base, going from 28% of recurring customers in 2019 to 52% in 2021, thanks also to an aggressive commercial policy. The company expects to reach the break-even point in 2023 and revenues of € 18.6 million in 2026 (from € 1.06 million in 2021).
According to Prohibition Partners estimates, the European cannabis market reached a value of around 403 million euros at the end of 2021 and should grow with a CAGR 21-25 of + 67% to reach a value of 3.2 billion euros in 2025. Considering all categories of products based on CBD, the study indicates that a percentage included between 9% and 30% of Europeans have tried CBD products in the past 12 months starting from the beginning of 2020, reaching tens of millions of consumers per year.
The new capital raising serves to “continue to invest and grow faster and faster“, says Moretti, who underlines how the company is establishing itself also thanks to important partnerships. The last one is the one with Alfonsino, a delivery company listed on Piazza Affari and specialized in small and medium Italian municipalities. In addition to the sale to a pharmaceutical industry group, the IPO remains the main avenue for JustMary. “The Stock Exchange listing project is still standing and we are aiming for Viennathe only stock exchange that accepts the sector “, says Moretti.