Does it make sense to invest in cannabis now?
Pre-COVID-19, cannabis investment was seeing an all-time low as companies were finding it harder and harder to find investment compared to the green rush pre-Q3 2019.
Yet, in a pandemic environment where social distancing laws and lockdown regulations have caused most companies to downsize or go bankrupt – cannabis has been designated as an essential good and come out as a hero. In fact, cannabis has seen record sales over the past few weeks according to Business Insider. If someone had the foresight to know what to invest in consumer goods in a pre-apocalyptic virus scenario, anyone looking at earth right now might think “humans are hilarious.” Looking backwards, some things should have just been obvious Long-lasting foods, face masks, and medicine. But what else did people buy to prepare for the worst-case? Toilet paper, video games, and feeding their vices – alcohol, condoms, and cannabis.
Many consumers are recreational, but what separates cannabis from all other products is that it serves both recreational AND medical needs. Long lines outside dispensaries, record-breaking cannabis delivery orders, and even custom cannabis “boxes” have become common-sight. More importantly, patients who use cannabis as natural treatments for conditions like insomnia, chronic pain, and epilepsy have stockpiled cannabis goods for their own health – and lo and behold the cannabis industry delivered.For investors who had the foresight to invest in cannabis, they likely have seen a huge return, but a question remains – what is the future of cannabis and does investment now as the pandemic seems to be winding down still make sense?
The Cannabis Investment Outlook Post-Pandemic
The state of cannabis industry today has laid a foundation for a strong post-pandemic investor outlook. As cities and counties re-open businesses, cannabis businesses have seen a slow-down in its previously skyrocketing sales as people are free to go back to the club, the bar, or restaurants. However, even recent data shows that cannabis sales are 100% higher when compared to the same period last year. This leads to a positive outlook for cannabis with multiple factors contributing:
Cannabis is now considered essential goods. Even if a relapse of COVID occurs, cannabis companies now know they need to be pandemic-prepped and ready to serve. Cannabis laws prohibit interstate commerce. This means that disruptions to the chain of production are limited to in-state businesses and how efficiently they can react to their changes. Cannabis legalization is happening across the country, with new states coming online and even the SAFE act potentially allowing for federal banking.
Social acceptance is spreading due to use during COVID, this leads to pro-cannabis voters and governments wanting to cash-in on the rapidly expanding industry. New technology is being developed to better serve consumers and legitimize the cannabis industry and with potential federal legalization looming on the horizon. Federal legalization could then combine the pandemic-ready industry with a new, country-wide business model.
These reasons lead to a strong foundation for the industry with more public acceptance, legislative support, and pandemic-proof revenue both for companies and governments. There are multiple pro-cannabis groups who now have more ammunition in their arsenal for country-wide acceptance.
Pre-pandemic, it may have been the case that investors lost trust in the burgeoning industry with promises that every product is a unicorn. Post-pandemic, investors can see more of what the future will look like and what cannabis can and will achieve. COVID-19 has literally changed the way the world does business and surprisingly for the cannabis industry, it has mostly been a positive change. Right now, venture capital, institutional, and investors may be bleeding out from their traditional investments – like hotels, restaurants, and non-essential goods. Cannabis investors are now more savvy about investing and focus more on a strong team, operational experience, and a clear plan of action. Ultimately, the “Green Rush” is far from over.
COVID-19 breathed in a breath of fresh-air into the previously damaged industry. Cannabis investments could now be considered a safer investment purely due to its status but investor experience in 2019 have made it so that companies need to be held to the same standard as investing in any other industry. Yet, the foundation for cannabis post-pandemic show a bright path that investing now could potentially result in massive returns when cannabis becomes federally legalized. Cannabis investors faced difficult battles in 2019 but post-pandemic – cannabis companies may see a surge of investment in recession-proof industry.