Over the last couple of years, cannabis has become the centerpiece of many conversations in North America. We’ve seen hundreds of companies emerge in the industry, vying for investors to support them in their long-term vision. And it feels like everyone who invests has put something into a cannabis stock, whether it’s out of curiosity or a real belief in the potential of the industry. You may think that it’s too late to get in early and fully capitalise on the growth of the space. But you’d be wrong.
The future of cannabis spells growth
In the grand scheme of things, the legalization of recreational cannabis is a recent development. Canadian companies have been legally authorized to sell dry flower, pre-rolled joints, oils, and capsules since October 17, 2018. The federal government is set to authorize a number of other products on October 17, 2019, including several types of edibles, beverages, vapes, concentrates, and topicals.
Unlike in Canada, cannabis still isn’t legal under U.S. federal law—but that doesn’t stop their industry from holding almost 96% of the market share in North America. And as more states legalize medicinal and recreational use, the U.S. market has plenty of room to grow.
Altogether, the cannabis market in North America is expected to reach US$36.7 billion in 2025—that’s a massive jump from its $13.21 billion valuation in 2018. And while Canada may not show the same numbers as our southern neighbour, investors would be wrong to count it out: its growth rate is set to exceed that of the U.S. in the next five years.
If you’re an investor just starting to consider the cannabis sector, this is good news. You’ll be getting in on the ground floor of what promises to be a thriving industry moving forward—and that means solid returns on your investment.
Cannabis is going global
This is a sector that’s also growing globally. Restrictions around medical cannabis have been relaxed in at least 25 countries beyond North America, with some—like Germany and Colombia—fully legalizing for medicinal use. It’s only a matter of time before recreational cannabis follows suit.
This has opened the door to cannabis exports from North America. In fact, the Canadian market’s global sales could total as much as CAD$40.6 billion in the next five years as companies do business in other geographies where cannabis is legal. Canada-born brands such as Aurora Cannabis Inc., Canopy Growth Corporation, and Tilray, Inc. are engaged in Europe, Latin America, Australia and Africa; Cronos Group Inc. is active in Israel as well.
If legalization maintains its growing momentum across the world, the global market could be worth up to US$130 billion by 2030. And within it, North America still boasts the greatest growth potential. Investors looking to capitalise on this upswing should consider Canadian and U.S. companies that are looking to generate a global footprint with their operations.
Where to invest in cannabis stocks
The major North American exchanges all have public cannabis companies trading on them, but there is one caveat: most of the American ones will only list companies that don’t violate federal law in their home countries.
Ironically, since cannabis hasn’t been legalized nationwide in the U.S., that means many lucrative U.S.-based cannabis businesses can’t be traded on the New York Stock Exchange (NYSE) or Nasdaq. Meanwhile, Canada’s biggest cannabis companies are the sole industry representatives on these exchanges because their operations are completely legal at home.
Cronos Group Inc.—headquartered in Toronto—was the first cannabis company to make its way onto a large U.S. exchange, listing on the Nasdaq in February 2018. Canopy Growth Corp. listed on the NYSE in May 2018, Tilray, Inc. held an IPO when it listed on the Nasdaq in July 2018, and Aurora Cannabis joined the NYSE in October 2019. With the exception of Tilray, each of these businesses trades in Canada as well.
The Canadian Securities Exchange (CSE) is an excellent investment platform for both Canadian and American cannabis businesses. Because the reporting requirements aren’t as strict as its southern counterparts, several U.S. companies, along with a wide selection of smaller cannabis stocks, have been able to list on the CSE.
With all these options, it’s no surprise that some of the world’s biggest investors are starting to get involved in cannabis: Vanguard, Morgan Stanley, and BlackRock are all invested in the space. And we’re also seeing funding from big names in other industries such as Constellation Brands—owners of Corona—and Altria, the maker of Marlboro cigarettes.
For investors, this type of cross-industry funding can mean two things. For starters, it indicates a broad commitment to the growth of the market—which translates into returns for investors—and secondly, it can be used as a compass when considering which cannabis companies to put your hard-earned money behind.
As the cannabis market continues to thrive and grow, and as governments worldwide become more open to the benefits that legalization brings, the investment opportunities are boundless. It’s not too late to be a ground-level investor in an industry that is on a steep upward track.
Want to be a part of cannabis growth? Check out our investor page and learn about what Eden brings to the table.
Photos: Poring Studio / Shutterstock, Ryland Zweifel / Shutterstock