Don’t wait for parliament to get high on pot

Pot stocks are a hit in North America. The UK government considering legal cannabis is good news for investors.

“Can I ask you something? Do you smoke weed by any chance?”

A complete stranger asked me that on a supermarket parking lot last weekend. I don’t think he was doing a survey.

It’s not the first time that’s happened either. On my way home from work there’s usually “a guy” curious to know if we share the same interest.

Suffice to say, it’s not that hard to get marijuana in London. But it’ll be even easier to get the drug once the government allows it to be sold on the high street.

Pressure is growing on the UK government to legalise medicinal cannabis. Home Secretary Sajid Javid has said he’s “seriously considering” the case for legal cannabis.

That’s good news for UK investors. After all, investors in North America have done very well after Canada and the US moved towards liberalising their cannabis laws.

The success of “pot stocks” on the other side of the Atlantic may well be a sign of things to come for the UK markets.

The trick is not to wait for the Commons to pass any cannabis laws before investing in this new market.

Woodstock for weed stocks

Last month Canada became the second country to legalise cannabis use, after Uruguay in 2013. The US is moving in the same direction.

Nine US states plus Washington DC have legalised the recreational use of cannabis for adults of 21 and over. Medicinal cannabis is currently legal in 29 states.

But since cannabis use is still illegal under federal law, US cannabis companies aren’t allowed to float on US stock exchanges yet. To get more funding, US companies have sought listings on the Canadian stock market instead.

Canada has emerged as the Woodstock for weed stocks. A great many cannabis producers are now listed on the country’s exchanges. There’s even a North American Marijuana Index that tracks 36 pot stocks.

But even the US now has a few cannabis companies listed on its exchanges.

Canada’s Cronos Group became the first US listed pot stock when it floated on the Nasdaq in February. In May Canopy moved its stock listing from Toronto to the New York Stock Exchange.

US markets allow companies which operate in countries where (medical) marijuana is legal. It just takes issue with US companies that fall under US federal law.

More proof of increased acceptance of the drug came last week when Wall Street had its first initial public offering (IPO) of a cannabis company.

Tilray, a Canadian cannabis producer, completed its IPO on Nasdaq last Wednesday. Investors immediately got high on the stock as its shares jumped 32% on its first day of trading.

It’s a game changer for the cannabis industry. An IPO on the US stock market means more publicity and access to a bigger pool of investment capital.

“It’s another high-profile marker of how the cannabis industry is maturing and professionalizing,” marijuana market analyst John Kagia told the Washington Post.

The first American “marijuana IPO” illustrates investors’ healthy appetite for pot stocks. At the time of writing, Tilray shares are trading at $29.50 – almost 75% higher than its listing price of $17.

It’s quite likely that more cannabis businesses follow suit. There’s just more money going round on the US stock markets than the Canadian markets.

Once US federal law stops forbidding cannabis, US companies will finally be able to join their Canadian competitors on the US markets.

Don’t wait on the Commons

Voices in the UK calling for cannabis to be legalised are growing stronger as well. More and more studies proof the drug can have a positive effect on various illnesses.

Cannabis was already known to be an effective painkiller, but new studies claim cannabis can stop cancer spreading and may boost the immune system.

Drug experts are now advising the government to revise existing laws to make marijuana available on prescription. Home Secretary Sajid Javid is said to be taking these recommendations seriously.

It’s not improbable that the government will make medicinal cannabis legal in the not so distant future. The Home Office recently granted two boys with a rare form of epilepsy a short-term licence to get cannabis oil.

As evidence for the medical benefits of cannabis mounts, the government will find it harder and harder to keep its legalisation off the agenda.

Technology Profits Confidential editor Sean Keyes lists three reasons to explain why political attitudes towards cannabis are changing in a new report on the UK cannabis industry.

The UK public is more accepting of cannabis; there’s already a small UK cannabis industry; and doctors are seeing the incredible potential of cannabis medicines.

“Cannabis [is] a treatment for dozens of hard-to-treat diseases. No Health Secretary can ignore it,” writes Sean.

“The ball has already started rolling towards full legalisation of marijuana in the UK. I reckon you’ll see marijuana sold on Oxford Street within five years.”

A UK government warming to legal cannabis is good news for UK investors.

The North American Marijuana Index has gone up 150% over the past year. If pot stocks prove anything as popular in the UK, investors stand to make big gains.

But: there’s a valuable lesson for UK investors to be learned. Cannabis companies didn’t shoot up when the Canadian legislation was passed.

Since Canada’s cannabis law had been in the air for a while, the markets had factored it in. That’s why the big surge in pot stocks had already happened by the time the Canadian parliament said yes to legal cannabis.

Now there’s talk of the UK legalising medicinal cannabis too. As we’ve seen in Canada, investors who want to make the most of this investment opportunity will have to take note now.

If you only get involved once a law is passed, you risk missing out on the first big move.

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