With the anticipated legalization of cannabis in Canada, Wall Street traders are expecting to see a lot of green – money, that is. For Canada, legalizing weed is seen as a billion-dollar opportunity for investors. Just one cannabis company alone, Tilray, increased its value tenfold in two months since its initial public stock offering. The company is now worth more than Macy’s or Tiffany’s.
Canada is the leader in this new industry, but other countries will probably follow suit. The cannabis industry could become a $200 billion market.
A number of American companies have jumped on the cannabis bandwagon, which is still against U.S. federal laws. Coca-Cola will be working with Canadian-based cannabis company Aurora Cannabis to create health drinks infused with the cannabis component CBD, which has positive effects on the immune system. The drink will be marketed as a pain reliever. Following the announcement, Aurora’s stock soared.
After Molson Coors has announced a partnership with Canada’s Hydropothecary Corp.to sell cannabis-infused beers, Hydropothecary’s stock jumped 18 percent. The manufacturer of Corona Beer, Constellation Brands, has invested $4 billion in another Canadian cannabis company, Canopy Growth, to manufacture weed-infused beer. With the anticipated legalization of cannabis, Canopy Growth has increased in value by 100 percent, while Cronos Group, a Canadian company that sells cannabis for medical use, has jumped 72 percent.
While recreational cannabis use is still illegal on the federal level in the U.S., the Center for Medicinal Cannabis Research at the University of California San Diego gained approval to purchase cannabis capsules from Canadian company Tilray to be used for medical studies.
These days, cannabis is golden. The value of Canada’s largest cannabis companies has doubled since August. These are numbers that bring tears of joy to Wall Street. But it may reach for a tissue quickly enough when it recalls the dot.com bubble of the 90s.
With nine states in the U.S. having already legalized recreational use of cannabis, and medical use of cannabis being legal in 31 states, more states may decide on legalization. But the process is expected to be slow. The profits to be made are simply too high and too volatile.
At the moment, marijuana is a hot item. Everyone wants a part of it, especially investors.
There are, however, eerie similarities between the cannabis industry and the dot.com fiasco of the 90s. There are more than120 Canadian cannabis companies vying for a huge bundle of marijuana dollars. But they won’t all be successful. There will be many failures, and the Wall Street bull may have to run for his life.
Many of these cannabis companies are receiving investments not on current sales, but on anticipated future revenues. That will make some investors rich, while others could suffer dismal losses.
Like during the dot.com bubble, there were fortunes to be made, while at the same time, fortunes were lost.
Canada’s knows it will make money by legalizing cannabis. But is it considering what will happen when the weed bubble bursts?