Coronavirus crisis allows cannabis industry to show staying power

Cannabis has historically not been closely associated with reliability and steadfastness, but coronavirus has highlighted the newfound durability of the herb's demand and supply chain.

What has also become clear, is that many investors still seem to need to be educated on the difference between medical cannabis and smoking weed.

When the outbreak spread west and from late February and throughout March governments began enforcing a lockdown of businesses around the world, cannabis was of the industries that was declared an “essential business” to stay open in all Canadian provinces and 21 US states during the shutdown.

Across Canada and in that large handful of American states, marijuana is legally allowed for medical or adult use, meaning cannabis operators and the whole supply chain was deemed an essential service, allowing for producers and dispensaries to remain open even as the majority of the retail economy are shuttered.

Cannabis investment pricing

This event was a “watershed moment” for the industry, say analysts at HANetf, and is part of what has been a critical few weeks for cannabis as an investment.

The huge stresses that have been put on financial markets are pretty much unprecedented — while the medical marijuana and wellbeing industry as it currently exists had never been through such an experience before.

Investors and the financial side of the industry have in the past couple years been dragged like a rag doll through what the HANetf analysts call a “price-discovery phase” for the sector after it became legalised and regulated, with rocketing valuations and rapid discounts providing an unwanted association with volatility and speculation.

While stock markets around the globe collapsed, with cannabis stocks not escaping the carnage, the analysts said a “silver lining” from the pandemic has been “the importance placed upon medical cannabis being available to patients […] showing solid support from regulators of the definitive future of the medical cannabis industry”.

READ: Londons first Cannabis ETF to list as industry growth looks set to accelerate

“This silver lining has defined what we believe to be the valuation floor for medical cannabis,” the analysts said.

While headlines were made by bankruptcies in the Canadian adult-use cannabis sector, ie weed smokers, the Medical Cannabis and Wellness UCITS ETF (LON:CBDX) is not focused on this area of the market.

The ETF, which was Europe's first exchange-traded product focused on medical cannabis when HANetf launched it in January, is made up of companies working in the medical cannabis, hemp and CBD industries, including producers and suppliers of legal medical cannabis, biotechnology companies that are engaged in research and development of cannabinoids and other legal tertiary companies.

“For medical cannabis and CBD wellness, the support of regulatory bodies in providing access to patients is the affirmation investors have been awaiting to finally start believing the secular story again,” the analysts said.

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