What Cannabis Investors Should Expect From Europe This Spring
March 12th, 2018
If the failure of the class action in New York challenging the Schedule I classification of cannabis is any guide to investors in the canna-space, it is this. Federal law on cannabis will not be changing anytime soon in the U.S. The DEA refuses to budge. Congress is failing to act. The DOJ has a new license to prosecute. And Trump appears to feel free to throw the industry under the bus to cement questionable foreign policy objectives (see Israel.)
No sophisticated algorithm or market chart is needed to spot the obvious trends here, Cronos’ recent acceptance to the Nasdaq notwithstanding. In fact, that listing, which is based on the fact that the company will not be importing or selling weed in the U.S. should only be another clear market signal.
Investments in U.S. side cannabusiness are going to continue to be risky and carry all sorts of nasty potential implications for the time being and at least immediate future.
That means that the savvy canna investor, particularly in the U.S., is looking abroad right now. And there are several tempting possibilities. Reform is afoot in Europe this spring, with federal consequences that only bode good news for the nascent industry regionally. Here are a few broad categories of where to start to look for cannabis investments that are in companies that are federally sanctioned in at least one country. Not all of these investments will be in public companies. But here are a few of the more interesting opportunities now afoot in Europe.
Canadian Companies With Global Plays
The big boys of the Canadian weed biz are in Europe and setting up long-term footholds in Portugal (Tilray), Denmark (Spektrum-Canopy and Pedianos-Aurora) and Italy (Aurora and Aphria-Nuuvera). This is one of the easiest and lowest risk entries into the global canna space you can make. Even better, these companies are increasingly, and conveniently, listing themselves on legit exchanges. It doesn’t get better than this. And all of them are in a position of being asked to supply at this point, a continually growing consumer and medical market for cannabis in several countries. Tilray of course is not public with apparently no plans for that in the near future. But they are backed by a canna-focussed venture capital fund which keeps raising money (from investors).
International Hybrids With Interesting Options
Of note are also the Israeli and Australian firms (who are less likely to be public but more likely to have cheaper wholesale prices to get into the market) who are now circling the EU canna-market.
For a safe bet (simply because there literally is not enough cannabis in Europe right now of the legit variety), and an international cannabis play, look no further than these companies if you want an interesting market entry. This is also a place where a few insurance and technology plays may well arise, particularly in the ex-im space.
German Companies With Strategic Partnerships
There is a reason that all of the Canadian companies who are moving forward in this market have paired with local companies, one way or the other. Spektrum Cannabis was formerly MedCann, founded by an American expat (Pierre Debs), and is the result of Canopy’s acquisition of the same. Aurora cannot be mentioned without the hyphenated relationship they have with Pedianos (which pulled off a coups in Italy in January on the licensing front). Aphria is moving forward in Europe twinned now with the Hamburg-based Nuuvera. Even Bedrocan has its German partner. That said, the German side of the equation is still likely to be a private company.
This spring, however, cannabis fever in Germany is likely to go into another frenzy. The federal bid decision has still not been announced. If it is (or even redone as the persistent rumour continues to insist) look for opportunities to invest directly in the German cultivation biz. That however, is already a 30-60 million euro proposition (add approximately 20% for dollar conversions). No crowd financing allowed, if comments from officials are anything to go by. Federal grow experience and GMP capability are not likely to be waived either.
Dutch Companies Looking Beyond Coffeeshop Trade
Don’t count the Dutch out. So far, with a few noted exceptions, the Dutch growers have stayed out of the newer breed of discussion in Europe with regards to GMP cert as well as investment. That said, there is an industry there, with at least third generation breeding at this point.
Investments here, of the foreign variety, however, are usually based on relationships and private investments (so far). That said, never count the Dutch out when it comes to mercantilism and specialized agriculture of high value. Don’t overlook Holland, in other words.
Spanish Clubs Looking For A Foreign Sugar Daddy (or Momma)
Investors who are interested in a more venture capital kind of investment of the smaller kind (sort of like the early days of Colorado) should look at the club scene in Barcelona, in particular. It is high risk, but the best managed, most business-like clubs are moving forward on more regulated grows. It is an interesting market that requires time and energy to research, but if that is the kind of thing that floats your boat, the opportunities are there. And, excuse the pun, growing.
Baltic-Based Companies Plus Greece
This year is going to see a number of interesting canna plays in the Baltics. Most of them will probably be helmed or financed by deeper-pocketed cannabis companies. However that is not going to be true in every case. That is precisely why scouts are combing the region right now looking for the right opportunities. It is still unfolding and volatile, but if that is your cup of canna-tea, it is certainly brewing right now.
If you are in the mood for fun and sun of the Greek medical variety, the possibilities are endless and in need of good-old American capital, entrepreneurial inspiration and boot-strapping. Think Nevada on the Mediterranean, with better Taramasalata. The gay-themed tourist business that has been international here for years is going to be a lucrative niche market, particularly if the B&B of choice on Mikonos has its own private grow. Greece also has the distinction of very publicly throwing its doors open to marijuana investors of all varieties, even the smaller kind. In fact, this is the first federally sanctioned market in the EU to do so. Don’t think this action is waiting for anyone.
Africa And South America Are Also Options
One of the more interesting and developing plays underway in Europe is very exotic (and far flung). Companies based in both Latin America and Africa now looking to enter the German market in particular. Many of them are established distributors, but there are a few highly entrepreneurial efforts underway. Some of which are in the market for investment. It goes without saying that all of this is caveat emptor of the highest degree. However that traffic is now underway for a reason.
Where To Find These Plays?
Reading the industry press is one option in particular, the English-language cannabis-focussed press with an international focus.
However there is another alternative. Going to industry conferences. This spring, after Spannabis, the place to be is the ICBC in Berlin. The conference will be entering its second year in April. Yes, it requires the investment of airfare and hotel accommodations beyond the conference fees. However for those who are ready to brave the fascinating (and federally regulated) world of cannabis investment in Europe with a few bucks, the time has never been better to take the plunge and investigate what is going on. There is also no other conference in the German market – and few in Europe – that attracts the same level and global mix of investors, regulators, cannabis companies, distributors and media.
And while there are differences, and complications about doing business internationally, here is the best thing about all of this. There is no Mutt and Jeff in the White House and DOJ to get in the way.
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