The stock market's start in 2021 has been too crazy to accurately document in a short summary, but let's take a stab at it. Companies like GameStop, AMC Theaters and Blackberry saw their stocks shoot up, thanks to Reddit memes. The Wall Street Journal quoted people with names like u/Thicc_Ladies_PM_Me. Billion-dollar hedge funds lost a bunch of money. We laughed about most of it.
Then a stock trading platform did some shady stuff, Congress started pretending to be upset, and it quickly turned back into something we'd seen before.
The uprising of small investors and social media shit-posters isn't over yet, though, and cannabis stocks are beginning to ride some of that wave. It's not all Reddit-induced this time, either. Congressional leaders have started tipping their plans toward pot policy reform, and people are excited at the thought of federal legalization. But publicly traded cannabis companies, largely based in Canada, are still slowly making their way to the NYSE American Stock Exchange, and largely trading for less than $5 a share.
One of those publicly traded cannabis companies, Clever Leaves Holdings, has seen its share prices double since the year began, but that doesn't necessarily change the business plans of the vertically integrated cannabis producer, according to CEO Kyle Detwiler. To learn more about how the recent investing frenzy will affect the pot industry, we caught up with Detwiler when cannabis stocks were still trading strongly in mid-February.
Westword: For someone who doesn't follow the stock market, how would you explain the recent surge in several cannabis stocks over the last month, and what's happened since?
Kyle Detwiler: Investors are starting to see positive regulatory developments, which will accelerate growth. Joe Biden is in the White House, Senate Majority Leader Chuck Schumer is talking about policy changes, and the United Nations has [reclassified cannabis].
How is what happened to cannabis stocks a couple weeks ago similar or different to what happened to GameStop and AMC?
GameStop and AMC have structurally challenged business models whose best years are behind them, not ahead. Cannabis companies like Clever Leaves are just stepping into the limelight. Until December 2020, there was no NASDAQ-listed company like Clever Leaves, which exported the first legal cannabis from Colombia to the United States or Canada. There was no company in the industry which had operating costs 90 percent lower than its peers. The recognition of these significant accomplishments and competitive advantages is driving strong share price performance, and these are very different trends from GameStop or AMC.
How do the cannabis companies that saw increased trading benefit from this? What if their stock falls back down? Still a benefit?
We try not to worry about our daily price changes; we focus and execute. Our industry will experience dramatic growth over the coming decades, and we’re at inning two or three right now, so the long-term bull run for the industry and Clever Leaves is just beginning.
Has the cannabis industry evolved to a point where individual investors should be betting on cannabis stocks or feel safe about investing into cannabis companies?
For companies on the NASDAQ, 100 percent. We report in United States Generally Accepted Accounting Principles and comply with investor regulatory protections such as the Sarbanes-Oxley Act of 2002, [also known as the Public Company Accounting Reform and Investor Protection Act]. This added transparency shows investors that a handful of cannabis companies are ripe for investing.
How much would federal legalization or decriminalization affect cannabis investment, both from public trading and private equity perspectives?
Immense impact. Today, few institutional investors are allowed to invest in cannabis. I think that’s one of the reasons individual investors have been so lucky to catch the green wave. The democratization of investing is more pronounced in cannabis than in any other industry.
What would you say if you had one of the fastest-growing industries in the world, but most hedge funds, private equity firms and mutual funds couldn’t invest? That’s a major first-mover advantage for individual investors, who will then benefit when these other, larger investor pools enter the sector.
How would banking access from the SAFE Banking Act and normal tax rates from the IRS affect the self-financing aspect of the cannabis industry? Would that help attract more outside investment?
Yes. Many financial institutions place restrictions on cannabis because there are risks to their larger banking franchises if they violate United States cannabis laws. Why would a bank risk its business over that? These legislative changes will help, but frankly, they need to go further. What good is improved banking if the underlying activity is still illegal? It’s a bit puzzling to implement such a half-measure. If Congress wants banking of cannabis to be legal, it should just legalize cannabis.
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