Sunday, October 14, 2018
A Manhattan based investment firm, Merida, has invested $50 million in 17 companies related to cannabis in less than two years. According to a Forbes article by contributor Julie Weed, the firm's owner Mitch Baruchowitz says his company invests in the "boring" parts of the cannabis industry.
That includes any technology or equipment related to cannabis that gets widely used like laboratory testing services, compliance and data collection software, production equipment, and packaging. “There is a lot of traction in lab testing,” Baruchowitz said for example, “because it’s part of the supply chain, so everyone needs it and you can’t get around it.”
Weed writes that Baruchowitz's methods for choosing companies to invest in include analysis of company management and potential for growth.
The first question is always: how big can sales get? “We look for products that have large potential markets,” Baruchowitz said. “We don’t want a small brand or niche product that might not grow at the rate the market grows.” The national market is expanding “so we want something that will grow along with overall industry increases.”
The article also mentions that family wealth offices are starting to invest in cannabis as a higher growth, higher risk investment.
Stock prices of the publicly traded KushCo Holdings and GrowGeneration are both up from their launch. KushCo launch January 2016 at $2 per share and has recently been trading at over $5 per hare. GrowGeneration launched in November 2016 and ended its first day of trading at $2.30. It recently traded at $5.30. Most of the investment and return information is not shared because the company is privately held.
This article seems to demonstrate that the growth of the cannabis industry is not limited to just distributors and dispensaries.
Companies in charge of packaging, research, and compliance validation are also part of this, and may continue to grow along with the rest of the market.
-- Alex Bennett