THE GROWING BUSINESS OF CANNABIS
Marijuana has been widely used recreationally for generations, more recently for its medicinal benefits. Now a legal framework has been created for commercial development in Canada, the U.S. and even Europe.
“In comparison to traditional crops, cannabis can command quite a high market price,” explains Michael Yorke, president and CEO of CROP Infrastructure Corp., a new venture focused on strategic investing in the cannabis sector and publicly traded on the Canadian Securities Exchange under the symbol CROP. “With a favourable legalization trend globally and margins like these, investors are flocking to the space.”
In Canada, investors in the cannabis market have had a successful run, though the large profits seen over the past few years have levelled off. That’s not to say there isn’t opportunity elsewhere for Canadian investors. “The U.S. market is far greater than the market in Canada and is expected to be worth more than $25 billion (U.S.) by 2025,” says Yorke. “With the opportunities that presents, and no big players yet dominating, we’re being creative about ways to stay in front of the market.” Yorke also notes that as the industry evolves and consolidates, there will be even more opportunities for early adopters.
Who is the typical investor within this sector? “We’re seeing a wide range in this space, anything from millennials to more seasoned investors, many of whom were early adopters in Canada and now want to be part of the next cycle in other markets,” says Yorke. “Over the past year, institutional investors have also evolved strategically, investing in mature cannabis markets in Canada and now the early stages in the US. Investors are now also turning to Europe, where the smart money is already getting established.”
Investors are recognizing the benefits of focusing on the hard assets that comprise the infrastructure of the cannabis sector. “By sticking with the infrastructure and branding, CROP has focused on developing opportunities in an area that isn’t subject to tough federal laws or licenses,” says Yorke. “While investing in any junior equity carries some element of risk — especially with a product like cannabis, which carries additional risk — by focusing on land, branding and infrastructure, we’ve taken as much risk out of this as possible. In terms of value for dollar, we believe CROP is compelling, and from a valuation perspective, it offers attractive opportunities for profit.”