Good bet or will pot­ma­nia go up in smoke?

The Mail on Sunday - - Financial - Ben Har­ring­ton

RE­MEM­BER Argo Blockchain? You prob­a­bly don’t. But it does pro­vide us with a salu­tary les­son as we wit­ness the rise of ‘pot­ma­nia’.

It was the first ‘Bit­coin com­pany’ to list on the main mar­ket of the Lon­don Stock Ex­change at the height of last year’s crypto cur­rency frenzy.

Argo hoped to rent out spe­cial­ist com­put­ers for ‘min­ing’ crypto coins – the method of find­ing the dig­i­tal cur­rency. It floated with much fan­fare last Au­gust at 16p with a val­u­a­tion of £47 mil­lion.

Eight months later the stock is lan­guish­ing at 3p, giv­ing it a mar­ket cap­i­tal­i­sa­tion of just £9 mil­lion. Now, there are smoke sig­nals puff­ing around the City that Argo is look­ing to switch its busi­ness model and join the rush into the mar­i­juana mar­ket, al­though a spokesman said last night: ‘Argo Blockchain is not mov­ing into cannabis.’ But there are con­cerns that the cannabis mar­ket may be an­other spec­u­la­tive bub­ble – full of hopes of huge re­turns in a short space of time – and that we may, in fact, see a re­peat of last year’s Bit­coin rally and rout. Laith Kha­laf, se­nior an­a­lyst at Har­g­reaves Lans­down, said: ‘We are slightly wary of the hype. Th­ese cannabis com­pa­nies clearly have a prod­uct where mar­kets are open­ing up. So, the re­wards are big but there are also significant risks.’

One fac­tor is that cannabis is still il­le­gal in the US de­spite some states de­crim­i­nal­is­ing its use for medicine and recre­ational use.

‘That cre­ates a lot of is­sues, es­pe­cially for banks,’ says Garry White, chief in­vest­ment com­men­ta­tor at Charles Stan­ley.

Still, this has not stopped the mar­i­juana in­dus­try from flour­ish­ing in North Amer­ica, es­pe­cially after Canada be­came the sec­ond coun­try in the world, after Uruguay, to le­galise recre­ational cannabis use. That has led to a wave of ‘pot stocks’ flota­tions in North Amer­ica and a string of deals, such as Marl­boro maker Atria Group pay­ing $1.8 bil­lion for a 45pc stake in Cana­dian cannabi­noid firm Cronos Group.

In Lon­don, there re­mains scep­ti­cism about ‘pot­ma­nia’, which has seen en­trepreneurs such as Alexan­dra Chong raise £15 mil­lion to launch her medic­i­nal cannabis firm, Ja­cana.

Kha­laf said: ‘In­vestors need to look at th­ese cannabis com­pa­nies with a fine tooth comb – they should take a good look un­der the bon­net.’

In­deed, if in­vestors had looked hard at Argo be­fore its flota­tion they would have found it was a busi­ness with just a hand­ful of staff – and zero rev­enues.

EX­PORT: Chong’s oil is made in Ja­maica

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