It’s no secret that the cannabis sector is one of the hottest commodities currently out there, with companies rushing to be publicly listed to get in on the action.
Putting it simply, investor interest in cannabis –both sophisticated and those new to the market– is heating up, but before any investor makes the decision to enter this market, there are a number of key decisions that need to be made.
With that in mind, the goal of the Investing News Network (INN) is to educate investors and help make key decisions with respect to their portfolios. Here, INN asked some experts in the cannabis industry some of the most important questions every investor should ask to better understand how to invest in a cannabis stock.
How to invest in a cannabis stock: does the company have a license?
One of the most crucial–if not most crucial–components of any cannabis company is the type of license they may hold or a license they could be applying for in the future.
Following an arduous review process companies can qualify to obtain Licenced Producer status from Health Canada under the Access to Cannabis for Medical Purpose Regulations, this may give the company a visibility boost based on the fact that currently there are only 48 licensed producers in the country. The company may gain a recognition of solid business practice–at least according to the health agency.
The acquisition of a Health Canada officiated licensed producer status for a cannabis producer equals a boost in visibility and a certification of solid business practice–at least according to the health agency.
Sean Gercsak, an investment advisor with Canaccord Genuity Wealth Management who’s had experience raising capital for companies in this sector, said licensed producers in Canada have seen impressive gains in their stocks over the last 24 months.
According to Mason Brown a senior analyst with Stoic Advisory, licenses are good indicators of where a company may be located in the cannabis “supply chain.”
The knowledge of what type of license–if any at all–a company holds can paint a clearer picture of where the company is heading and if it’s worth investing in.
“Depending on the stage of the licensing process, generating revenue could be anywhere from days to months to years away,” he said.