The "Green Rush" – is this new age prospecting?

However, there was a very good reason to list this ‘analogue’ agricultural product.
 
In multiple countries, lawmakers are de-criminalising or legalising the substance. Essentially, the world is changing its mind on cannabis.
 
That’s led to a so-called ‘green rush’. Market forecaster Arcview estimates that retail cannabis sales will total $10 billion in 2018, and will rise to $24.5 billion by 2021. It projects a total global market worth $57 billion by 2027.
 
There’s no doubt North America is driving this activity. Arcview says the US and Canada currently contribute 90 per cent of global cannabis-related sales. This is understandable. 30 US states have legalised cannabis to some extent, while Canada is in the process of completely legalising it.
 
Naturally, investors are now taking an interest. However, their options are limited. US-based funds are hamstrung by the peculiar legal status of the substance. In short, cannabis may be legal in US states, but it is still federally outlawed.
 
That prohibits cannabis companies from exporting and from listing on public markets. As a consequence, big institutional investors are largely absent from the sector. In their place are private funds such as Privateer, iAnthus Capital and Poseidon.
 
Canada is different. As of 2017, it was home to 69 publicly traded cannabis-related companies, most of which were listed on the Canadian Securities Exchange and the Toronto Stock Exchange. These companies collectively raised more than $770 million in the first half of 2017 according to Viridian Capital Advisors.
 
Meanwhile, Israeli investors are also watching developments. According to a 2018 report by the IVC Research Center of Tel Aviv, Israel already has 68 companies active in the field including Breath Of Life Pharma, Tikkun Olam and ICAN. 

So what makes cannabis such a compelling pharmaceutical product?

Evangelists argue it is a wonder drug with multiple applications and minimal side effects. They ascribe its special qualities to unique ingredients called cannabinoids. There are over 100 of them in the stalk, leaves, flowers, seeds and resin of plants.

The most psychoactive is delta-9-tetrahydrocannabinol (THC). Others include cannabidiol (CBD) and cannabin (CBN), both of which are non-psychoactive but still possess pharmacological effects.

Crucially, humans have cannabinoid receptors on cells located in nearly every organ in the body. Researchers believe interactions between cannabinoids and receptors can treat conditions including cancer, epilepsy, nausea, MS, chronic pain, AIDs and more with minimal side effects.

In fact, there are already multiple cannabis-based medicines on the market. They include Sativex, Bedrocan, Epidiolex, Cesamet, Dronabinol and Syndros. Many more are in development.

The big challenge for the manufacturers of these drugs – and for investors – is the inconsistency of cannabis legislation around the world.

The UK is a perfect example of this confusion. In legal terms, the UK remains very prohibitive. Cannabis is currently a Class B drug, and anyone found in possession can face up to five years in prison.

And yet, Sativex is now (conditionally) legal in the UK. Meanwhile its British manufacturer, GW Pharmaceuticals, exports so much Sativex that the UN’s International Narcotics Control Board (INCB) described the UK as the world’s main producer and exporter of cannabis-based medicines in 2016.

So the ‘green rush’ leaves the British investment market in a curious position: cannabis is effectively illegal, but investing in cannabis-related stocks may not be. In fact, in March 2017, a company called the UK’s first medical cannabis investment vehicle to be listed on the Nex exchange.

Clearly, there is now a precedent for cannabis-related companies to look to UK markets to raise money. With US IPOs not an option and Canada’s exchanges over-populated with cannabis stocks, we expect overseas investors to start considering joint listings and other M&A activity in the UK.

Without doubt, the ‘green wave’ represents a huge potential opportunity. It’s one we are watching extremely closely.

Indeed, we will shortly publish our inaugural annual report into this exciting new sector. To register your interest in receiving the report, click here.

To watch Nick Davis’s interview with Sky News anchor Ian King on the cannabis industry, click here.