Investors flock to pot, despite Trump
U.S. industry raises US$734M so far this year
The Trump administration’s adversarial stance toward marijuana has brought jitters to the burgeoning U. S. c annabis i ndustr y, but money continues to pour in.
Pot- related companies raised more than US$ 734 million between Jan. 1 and April 21, an almost seven-fold increase from US$ 108 million in the same period last year, according to a report from New Frontier Data and Viridian Capital Advisors. That brings the total amount raised to US$1.9 billion since the start of 2016.
The i nvestment surge reflects optimism that U. S. President Donald Trump and Attorney- General Jeff Sessions won’t crack down on the industry, even as those concerns weigh on stock prices this year. Since hitting a peak in February, the Bloomberg Intelligence Global Cannabis Index has dropped 36 per cent.
For cannabis financiers, the industry’s growth potential outshines the political risk. Eight U. S. states voted to legalize cannabis in some form on Nov. 9, including the nation’s largest.
Legal cannabis demand in California is set to grow by 50 per cent in 2018, when recreational use is scheduled to come online, according to the report. The report’s authors forecast that national demand for legalized marijuana will almost quadruple by 2025.
“With each new state that legalizes, that need for capital is going to be there,” said John Kagia, New Frontier’s executive vice- president of industry analytics and author of the report. “It will continue to represent a substantial investment opportunity for the foreseeable future.”
As a result of competition for funding, seed capital is being raised in greater initial amounts and its cost is getting more expensive, New Frontier chief executive Giadha Aguirre de Carcer said.
The boom has taken place amid an unclear policy outlook under Trump. Press Secretary Sean Spicer said in February that he expects the Department of Justice to increase enforcement of federal laws prohibiting recreational pot use, even in states where it’s allowed. While Spicer defended medical marijuana, Sessions indicated he dislikes anything to do with the plant.
“Our nation needs to say once again that using drugs is bad; it will destroy your life,” Sessions said in a Marchspeech to law- enforcement officials. “I reject the idea that we’re going to be better placed if we have more marijuana. It’s not a healthy substance, particularly for young people.”
Sessions hasn’t done anything to really pump the brakes on the industry. Congress passed an amendment to the federal spending bill that prevents his department from cracking down on medical-marijuana programs that have been legalized by states. Still, Trump signalled last month that he may not consider that ban binding.