'It's kind of like the Gold Rush': U.S. investors look at Canada to invest in cannabis
The head of an advisory firm that connects private U.S. cannabis companies with Canadian capital said investors should be skeptical over the rapid rise of Canada’s marijuana companies, comparing their market performance to automaker Tesla Inc.
“I think there’s a day of reckoning in Canada,” said Tormont Group CEO Patrick Wood in an interview with BNN Bloomberg on Thursday. “Producers are trading at multiples that are going to be hard to really kind of meet. It really is the Tesla of the world, you know, the Canadian cannabis stocks right now.”
Cannabis company valuations were highlighted earlier on Thursday when New York-based investor Riposte Capital LLC highlighted how undervalued Quebec-based producer Hexo Corp. was when compared to some of its peers such as Canopy Growth Corp. and Tilray Inc. Meanwhile, electric carmaker Tesla has seen its valuation skyrocket to about US$47 billion, in the same league as Ford Motor Co. and General Motors Co. despite delivering a fraction of the cars that other automakers produce.
Wood said that companies operating in the U.S. states where cannabis is legal will benefit from the head start they’ve had over Canada’s pot players, having had the opportunity for their businesses to mature beyond just production.
“In the U.S., they’re a much more mature market than us – Colorado and Washington were legal way before Canada even had a listed company – so, branding, distribution, all these key things that are missing in the Canadian market space have really been formulated and perfected there,” Wood said.
U.S. companies have already begun to eye Canadian investors. Acreage Holdings, which operates in 14 U.S. states, announced plans last month to list on the Canadian Securities Exchange, along with news it had raised US$119 million in private funding.
Wood said that despite the current legal restrictions and concerns investing in the U.S. marijuana space, Canadian investors should take advantage of the opportunity to get involved the American market.
“These are more mature markets down there and they really are focused on really hitting those top and, more importantly, those bottom line numbers now,” he said.
“It really is kind of like the gold rush. The people making the pick-axes and the shovels are the people in the U.S. right now and they’ve really kind of been ignored by the market… Or, perhaps not ignored, but they’re now finally coming to our market and investors should be really excited about that.”