The future of the marijuana industry amid uncertain stock market conditions and federal legalization
The US stock market remains uncertain despite picking up in H1, and showing resiliency against many key global concerns, such as China’s economic slowdown and dismal oil prices. Analysts are divided about its future even though these aforesaid dynamics, plus the upcoming election, are giving the economy a boost. There are still a lot of factors that could change local market behavior. The possibility of a Brexit is one, which could bring many economic and trading instabilities in the US.
At some point, it could also affect the marijuana industry. An ambiguous stock market can, in one way or another, turn off multitudes of foreign investors and encourage them to invest in other marijuana markets somewhere. Panicking investors may just look beyond the US and wait until the likes of Canada gives national weed legalization a go, which is happening by 2017.
However, holding, or buying a stock in the hopes that its price will appreciate in the future, could also be the US cannabis market’s strength. Smart investors who strongly believe in the commercial promise of medical marijuana would not short a stock, even for companies that aren’t as big as GW Pharmaceuticals Plc. (NASDAQ: GWPH), the only nationally traded cannabis company in the country. The smaller, not pure play publicly traded cannabis stocks like Insys Therapeutics (INSY) can benefit from investor taking a long position in their stock should their product become big on a nationwide scale down the road. For most patient investors, the likes of Med-X, the first marijuana company to conduct an equity fund sourcing via the JOBS Act Regular A+, can be a good buy regardless of the stock market’s performance in the future.
Marijuana companies should turn their brands into the most palatable one not only in the country but also outside the US. It’s a good thing that they’re a little bit ahead of their would-be Canadian counterparts in terms of time, as the latter’s national legalization is still in the offing, and whose publicly traded weed firms are just existing through a court-mandated program.
Med-X, again, is doing a good job in establishing a brand that isn’t only strong but boasts of longevity, as it promises to produce only 100-percent research-based products built on years of R&D the company itself conducted. Such a branding could attract meticulous consumers, especially those who want to venture in the medical and food aspect of the industry. Add to this Med-X’s goal of changing the public’s negative notion of medical marijuana, which it does through its publishing arm, The Marijuana Times. These two things give the company a very strong market position as investors don’t see such a branding—adherent of science cum social advocate—on a daily basis.
In the next years, however, Canada could possibly become more attractive to foreign investors as its medical marijuana gets legalized nationwide, as opposed to the States where it remains only decriminalized in select states and districts.
The growth of cannabis firms in the US will find it hard to reach its utmost potential as it could only sell its products in areas where they aren’t prohibited. Unless the government allows a federally legal market, companies will remain burdened by various obstacles such as logistics, state law, and regulation nuances, and other factors, forcing them to just sell their products within the boundaries of their state. The absence of competition could hinder the possibility of better prices in the future, which directly affects stock prices. The exorbitant taxes, licensing fees, and several regulatory oversight present in legal marijuana will continue to encourage other sellers to stick to the black market, an evident encumbrance to the industry’s growth.
Economists believe that the cannabis market has a lot of promise and can stand out anytime in a vulnerable US stock market. After all, it can surpass the $7 million mark before the year ends. Still, the absence of a national policy and a federal support can just make it a mediocre version of other countries on the verge of treating it just like any other commodities such as medical drugs or food.
There’s no doubt about the market’s growth if one would look at it as a statewide industry. However, federalized prohibition can make it bigger and even more enticing even to foreign and local investors, which already somewhat happened in Canada. Through this, smaller brands can even dream of competing with GW or other Big Pharma companies and become a national—and eventually global–cannabis market leader.