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Investing in Marijuana Startups

By The Biz Team (Siam)

Ever since Canada made marijuana legal for personal use, more and more companies have formally started to sell the product. The sole reason for marijuana mania is MONEY. About 18-20% of Canadians over the age of 15 regularly use marijuana, and in the U.S., 12% of adults admit to lighting up. But these numbers are probably gross underestimates, since not everyone admits to its use. Many people use marijuana because it makes them feel good, but it's also known for having positive effects on mental and physical health.

In Canada and eleven US states, marijuana has been legalized for personal and medical use. Since the legalization of marijuana in Canada, there has been a lot written about the growth of marijuana stocks, and it is projected that legal marijuana sales could reach up to $30 billion by 2025. These forecasts have many people lining up to invest in marijuana stocks in anticipation of excellent returns in the near future. But before one invests in marijuana stocks, here are some things you need to know:

What is cannabis?

Before investing in any company, it is important to know the product. The cannabis plant contains the chemicals tetrahydrocannabinol (THC), which is the primary psychoactive ingredient, and cannabidiol (CBD). Anyone purchasing stocks should know these two chemicals, because they are at the forefront of all marijuana battles. The higher the CBD content, the more likely one is going to see therapeutic benefits. If the THC content is more than 0.3%, it is considered illegal. In the US and most nations around the world, marijuana is illegal at the Federal level, chiefly because of its mind-altering effects and risk of addiction. These effects have been attributed to the THC present in the plant.

At the moment, marijuana is legal in two nations (Canada and Germany) and eleven U.S. states. At least another two dozen states are considering legalizing marijuana for recreational use, but this is not a guarantee. While public support for marijuana legalization is high, enacting a law to make it legal at the federal level is controversial, and may not happen anytime soon.

With the legalization of marijuana in Canada in 2018, the industry has been flourishing. There are hundreds of marijuana clinics in almost every Canadian city, that offer cannabinoid based-prescription drugs in many formularies. However, it should be noted that these prescription based marijuana products can cost three to ten times higher than street marijuana.

So should one invest in marijuana stocks?

Marijuana manufacturers have started to go public, making shares available to anyone who wants to invest. This is primarily done to raise more cash to meet public demand. It is the potential growth demand that is fueling the investment in stocks. In Canada, sales of legal cannabis were over 180 million Canadian dollars. Globally, there is a growing demand for marijuana, but for investors, the biggest prize is the US market. Sales of legal marijuana in the U.S. are expected to climb as high as $37 billion by 2024. But this all depends on the US government legalizing cannabis at the Federal level. If President Trump gets re-elected, then legalizing marijuana might be pushed back another four years, as he is completely against it.

Why not to invest in marijuana stocks?

There are several reasons why one should not invest in marijuana stocks. Even though sales have consistently increased in Canada, the US government might be the stumbling block for investors. However, even if the federal government doesn't intervene, the biggest reason for not investing in marijuana is the black market, which is solidly established in every corner of the nation. In almost every state where marijuana is legal, the black market has the potential to decimate the legal dispensaries because of cheaper prices. Plus, on the black market, one does not need a doctor’s prescription, which is a major cause of the increased cost of legal marijuana.

Final word

Remember that manufacturers and sellers of marijuana regularly release all types of positive data to seduce investors, and scams are not uncommon in the investment industry. For the time, it is best to be patient and wait for the American election set for November 2020. If Trump doesn't win, then consider investing. But if Trump gets reelected, consider investing in more traditional stocks.


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