GREEN SHOOTS AS MARIJUANA MAKES BIG BUCKS
Local investors cashing in on the burgeoning pot industry as SA still to legalise it
Some local investors are cashing in on the burgeoning marijuana industry even as SA takes baby steps towards legalisation.
Investors with offshore trading accounts have accessed the sector through instruments such as the Horizons Marijuana Life Sciences Index ETF, which tracks listed North American cannabis firms.
The index, which has roughly doubled in value since listing in April 2017, surged as much as 45% in the nine trading days to Monday as alcohol conglomerates started wading into the pot sector.
Earlier this month, Constellation Brands, which makes Corona beers in the US, poured another $4bn (R58.3bn) into Canadian cannabis company Canopy Growth.
The news nearly doubled Canopy Growth’s US- and Canadian-listed shares in the two weeks to Monday.
Other cannabis stocks have climbed after BNN Bloomberg TV reported that Diageo, which Johnnie Walker whiskey, was in talks with at least three Canadian weed producers about a possible deal.
Not long before, Molson Coors Brewing Company said it would start a joint venture with Hydropothecary Corporation to make cannabis drinks in Canada.
Ricki Allardice, wealth manager at Sharenet Wealth, said “the response has been great” since Sharenet gave clients access to the Horizons ETF.
Those retail clients – who were surprisingly mostly older investors, he said – have been handsomely rewarded since mid-August.
“It’s one of those growth industries that people are really interested in,” Allardice said.
While some in the industry had expected older clients to shy away from these investments, a number of retired investors “are very excited about this – they see it as a good bet because it’s an emerging industry that’s been functioning for decades despite staunch laws against it”.
The index tracks medicinal, recreational and industrial marijuana companies, with its biggest constituents being Aurora Cannabis and Canopy Growth, whose market capitalisation in Toronto was about R153bn on Wednesday – making it bigger than Old Mutual.
In an investor presentation this month, Constellation Brands and Canopy Growth listed SA as a potential market since the country is moving towards legalisation for medicinal purposes. In neighbouring Lesotho, which became the first African nation to legalise medical cannabis in 2017, Canopy Growth already has an operation, having bought licensed grower and supplier Daddy Cann Lesotho for about R315bn in May.