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maltatoday | WEDNESDAY • 29 AUGUST 2018 11 BUSINESS www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way THE last few months have seen investors showing more interest in the cannabis in- dustry. As they become more at ease with investing in the once-controversial product, and as authorities around the world continue to relax the rules surrounding its legalisa- tion, anticipation continues to mount over the extent to which marijuana companies could outperform in the fu- ture. The figures seem to back up this notion. According to data from cannabis-advisory firm Viridian Capital Advisors, marijuana companies have managed to raise $4.3 billion this year through the end of July. And the industry is now expected to bring in $8 billion by the end of the year, more than double the $3.5 billion raised in 2017. Canada leads the world in terms of the biggest cannabis companies. And that should come as no surprise. Having been given approval by law- makers in June, the North American country will legalise the sale of recreational mari- juana from October 17 on- wards, thus making it the first G7 nation to do so. Some estimates now suggest that Canada's cannabis indus- try could amass $5 billion in annual sales by 2022, which highlights the potential this market possesses going for- ward. Canada is home to two of the world's three biggest publicly traded cannabis companies. The biggest of those is Canopy Growth Corporation, which recently enjoyed a whopping 63-percent annual revenue growth and commands a mar- ket capitalisation of more than $6 billion. Touted as Canada's first cannabis "unicorn", the com- pany has enjoyed a meteoric rise since listing on the NYSE (New York Stock Exchange) in late May. Canopy is close- ly followed by Aurora Can- nabis Inc., which listed on Canada's TSX (Toronto Stock Exchange) in October 2016. Aurora's revenue growth has even outpaced Canopy's re- cently, with a 211-percent an- nual increase for third-quarter fiscal 2018 being recorded. As well as dry cannabis, Aurora has also obtained a licence to sell cannabis oil. But as impressive as their recent growth has been, both companies remain in loss- making mode. The most recent quarter saw Canopy post a net loss of $90.9 million. Aurora, mean- while, notched up a $20.8 net loss for the same period. Al- though Canopy believes it can eliminate its losses by the end of 2018, it seems that many of the industry's biggest players remain unprofitable. Aphria Inc., on the other hand, which is the third larg- est of Canada's Big Three can- nabis companies, has man- aged to generate a positive net income along with operating losses in recent quarters, un- like its peers. Despite the losses, there does seem to be an increas- ingly positive outlook on the sector for the next few years. Indeed, Canada's cannabis industry is receiving growing attention from international investors, with Constellation Brands, the maker of Corona, recently announcing it would be spending $4 billion to in- crease its ownership stake in Canopy. Having already acquired a 10-percent stake in the com- pany last year, Constellation's recent move propels its own- ership up to 38 percent, as well as leaving open the op- tion to purchase a majority controlling share of more than 50 percent. Underlining the company's bullish projections for can- nabis, Constellation CEO Rob Sands acknowledged that the industry could represent "one of the most significant global growth opportunities for the next decade". Cano- py Growth's chief executive, Bruce Linton, meanwhile, pointed to the opportunity that's now available to Con- stellation of potentially being the first company to market a cannabis-based drink, a prod- uct that seems to have attract- ed growing interest. Cannabis stocks also re- ceived a major shot in the arm at the end of August after re- ports that beer and spirits gi- ant Diageo was in discussions with Canadian marijuana pro- ducers. Bloomberg Television re- ported that the UK spirits maker is in talks with at least three producers over a possi- ble investment or alliance to make cannabis-infused bever- ages. And along with Diageo and Constellation, there is also Molson Coors Brewing Com- pany, which is commencing a joint venture with Hydropoth- ecary Corporation to develop cannabis drinks in Canada. But it's not all plain sailing for cannabis stocks. As the market has matured, there have undoubtedly been major bumps in the road. Mid-August, for instance, saw the Ontario government announce that it would delay the start of recreational mari- juana sales in the province from October to next April, and would allow private re- tailers to sell cannabis, thus abandoning previous plans for government-run stores. In a note to investors, Canac- cord Genuity observed that a shift to a private-sector model "will likely further complicate an already challenging process and result in a slower ramp for rec sales in Ontario". The news was immediately accompanied by a nosedive in cannabis stocks. That said, some stocks rallied after the province announced supply agreements with 26 licensed producers, as a precursor for recreational legalisation of the substance in the autumn. All eyes will now be on the United States and its path to- wards legalisation. But while individual states such as Cali- fornia and Colorado permit the recreational use of mari- juana, it remains a federal crime to both possess and/or buy marijuana. Nonetheless, there is grow- ing expectation that things will change in the not-too- distant future. President Donald Trump has said that he would "prob- ably" back marijuana-friendly legislation, after being asked whether he would support a bill that would prevent the federal government from en- croaching on individual states' efforts to regulate the plant. However, this would fly in the face of the views previously put forward by Trump's attor- ney general, Jeff Sessions, who rescinded previous rules that instructed federal authorities to take a more laissez-faire ap- proach to states that voted to legalise cannabis. At the very least, it seems the US is moving ahead with opening the cannabis indus- try to mainstream pharma- cies and medical practition- ers after the Food and Drug Administration approved the cannabis-derived drug Epidi- olex, allowing doctors to pre- scribe it. Nevertheless, the uncer- tainty to date has kept many cannabis companies in "wait and see" mode. But Canopy Growth has reportedly stated that it will be able to "move ahead" into the US if legisla- tion were in place preventing the federal government from interfering with state cannabis policies. Why marijuana stocks are expected to boom