Investors Smell Profit in Marijuana Ballot Measure
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Investors Smell Profit in Marijuana Ballot Measure
Posted by CN Staff on November 04, 2016 at 09:53:44 PT
By Peter Henderson and Jilian Mincer
Source: Reuters
USA -- With marijuana legalization measures on the ballot in nine states Tuesday, investment opportunities are attracting money from Wall Street, Silicon Valley and publicly traded companies.Much of the new money is avoiding direct investment in marijuana cultivation and sales, which remain illegal under federal law. Instead of getting their hands "green," new investors are putting their money into ancillary products, such as fertilizer, grow lights, software and payroll services.
Investors new to the sector said they are eager for a piece of a market that, by some estimates, will reach $50 billion over the next decade and are looking for ways to claim profits while minimizing legal risks. For a graphic on states voting on marijuana, see: sports empire scion Lindy Snider said she invested in startup Kind Financial, a firm that makes software to keep growers and retailers in compliance with shifting regulations. Silicon Valley angel investor Fulton Connor said he put money into a web marketplace linking growers and stores.Scotts Miracle-Gro, a publicly traded gardening product manufacturer, has spent hundreds of millions of dollars to acquire companies that sell soil, lighting, fertilizer and other products to marijuana growers. Scotts’ chairman and CEO Jim Hagedorn told Forbes that marijuana was “the biggest thing I’ve ever seen in lawn and garden.”And Microsoft Corp is partnering with Kind Financial to develop the part of its compliance software that will allow government regulators to track marijuana from farm to market.Investors said they hope getting in early will serve them well in the long run. If California legalizes recreational marijuana use Tuesday, “we think it would triple the size of the legal market,” said financial services firm Cowen and Company analyst Vivien Azer.If the federal government also were to legalize marijuana, large corporations would likely flood the zone, and getting a foothold would be far more difficult, said Connor, the angel investor. At that point, he said, new entrants would “want to buy rather than build” new companies, and early investors would be able to sell their businesses and reap the profits.A GROWTH INDUSTRYAfter growing steadily in 2013 and 2014, marijuana-related investment surged in 2015 when the number of U.S. industry deals more than doubled over the previous year; the 99 deals totaled more than $200 million in new investment, according to data compiled by CB Insights.This year, the pace has slowed a bit as investors await election outcomes, but the analytics firm calculated 2016 is on track to post about 80 deals totaling nearly $100 million. Large Wall Street firms also have started to take notice and provide guidance to their clients. Merrill Lynch issued a report on medical marijuana opportunities last year, and, in September, Cowen released an encyclopedic look at the industry, projecting the legal market would grow to as much as $50 billion in a decade, up from $6 billion now.For investors to realize marijuana’s full potential, the Cowen analysts and others have concluded, federal law would need to be brought into alignment with state legalization laws.Federal tax and banking rules, as well as federal narcotics laws, make operating dispensaries and growing marijuana difficult and unpredictable, even in states where such businesses already are sanctioned. Many banks won't work with them because their operations violate federal law.Still, several marijuana investment funds are near or have exceeded $100 million. Private equity firm Privateer Holdings announced this week it had finished raising $40 million this week, taking its total to $122 million.FINDING A NICHEThe new investors in marijuana-related industries have a variety of reasons for putting money into the sector. Snider, an entrepreneur whose late father owned Philadelphia sports teams and stadiums, said she invested in several companies and funds after she founded a line of skincare products for cancer patients and became interested in marijuana’s potential for skin care.She was an early investor in Kind Financial, the Microsoft partner that makes compliance software because she saw an opening to help marijuana companies become “more businesslike."Snider said she expects to make other investments as well.“Right now I’m looking at about nine companies," she said. "There are so many good ones.”RISK TOLERANCESome investors are moving closer to the leaf than others. Former Goldman Sachs health industry banker Rick Kimball, for example, has put about $1 million into marijuana companies, including Chooze, which is creating new pot brands.The company will not actually handle the marijuana. But it will sell vaporizer pens with Chooze's LucidMood brand to licensees who will sell them after loading them with company-approved extracts of THC, marijuana's physiologically active ingredient."It allows you to produce products, which are cannabis products but let somebody else, the licensees, deal with the regulatory issues and the regulatory conflict we have between the feds and the states," Kimball said.Chooze CEO Charles Jones said the company is confident it can avoid federal laws banning marijuana sales, but he acknowledged prosecutors could try to build a conspiracy case.“If the feds ever decides to go after people, you know, we won’t be in the first round,” Jones said.He said the company’s business plan will allow it to be nimble, moving quickly into new markets as they become legal.New companies sometimes have to adapt to thrive, however, and that can add risk.Connor led a group of Silicon Valley “angel” investors who focus on young companies into marijuana investments. The Sand Hill Angels group focused on ancillary enterprises, including software and biosciences, making a six-figure investment in Tradiv, an online marketplace that connects growers and stores, Connor said.Tradiv does not handle marijuana itself, instead contracting out deliveries. Recently, it has begun considering bringing distribution in-house in light of what Chairman Aeron Sullivan described as "tacit consent" from federal law enforcement.While federal law prohibits the sale and distribution of marijuana, the U.S. Justice Department has said it would defer to states that sanctioned the drug, so long as the states set up and enforce "strict" regulatory schemes.Still, Connor said his angels were not interested in testing such murky legal waters.“For us it’s a technology play,” he said. “We don’t want to be breaking the law.”Editing by Sue Horton and Lisa GirionSource: Reuters (Wire)Author: Peter Henderson and Jilian MincerPublished: November 4, 2016Copyright: 2016 Thomson ReutersCannabisNews -- Cannabis Archives 
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Comment #10 posted by The GCW on November 06, 2016 at 16:17:55 PT
The smell of winning ballots & about STIGMA.
With little more than 48 hours till We start finding out... It's about time to start getting excited; IT'S ELECTION WEEK. Stick a stake in the vampire.-0-Something about stigma:One of the things the ignoids claimed was that cannabis caused paranoia. As it turns out, cannabis might not be causing paranoia but in fact cannabis prohibition causes paranoia. That's stigma in action. 
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Comment #9 posted by Sam Adams on November 06, 2016 at 08:51:24 PT
Hope, yes, that is so true. Cannabis therapy doctors are thriving and I think it will continue after full legalization because peoples' regular doctors don't want to talk about it. They're certainly not trained on it. And a lot of patients that have never used the herb are curious and they know the presciption meds are making them feel sick.btw I've already checked - Dr. Susan Lucas is too far away to become my primary care doctor!  Otherwise I would have switched ASAP.
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Comment #8 posted by Hope on November 06, 2016 at 07:07:07 PT
From the "Good Doctors" article...
"The prohibition on marijuana has created a negative stigma around its use, and makes patients and their doctors feel like it is something they are not safe discussing, Dr. Susan Lucas said."
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Comment #7 posted by Sam Adams on November 05, 2016 at 18:48:07 PT
Dose of Reality: The Effect of State Marijuana Leg
This is now new (Sept.) but it's so excellent I thought I would forward- Harvard economist Jeff Miron:Dose of Reality: The Effect of State Marijuana Legalizations>>Our conclusion is that state marijuana legalizations have had minimal effect on marijuana use and related outcomes. We cannot rule out small effects of legalization, and insufficient time has elapsed since the four initial legalizations to allow strong inference. On the basis of available data, however, we find little support for the stronger claims made by either opponents or advocates of legalization. The absence of significant adverse consequences is especially striking given the sometimes dire predictions made by legalization opponents.
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Comment #6 posted by The GCW on November 05, 2016 at 14:42:23 PT
About doctors who believe cannabis prohibition is right and proper...Years ago, here, or somewhere, I liked the way someone rhetorically asked:*****How do doctors ignore the negative health consequences of being put in a cage (jail) in order to support cannabis prohibition???
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Comment #5 posted by Sam Adams on November 05, 2016 at 12:28:27 PT
Weed or wine?
Weed or wine? Alcohol sellers question if voters can handle both
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Comment #4 posted by Sam Adams on November 05, 2016 at 12:23:45 PT
The Good Doctor
Docs state their case for legalizing pot,488636
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Comment #3 posted by FoM on November 05, 2016 at 09:35:21 PT
18 Minute Video: President Obama and Bill Maher
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Comment #2 posted by FoM on November 05, 2016 at 09:29:38 PT
Excerpt From Rolling Stone with Bill Maher
On the subject of marijuana reform – "Is that something you care about?" Obama jokingly asked Maher, knowing the host's stance on the topic – the president admitted that his reluctance to move on the issue is tied to the "public health problem" that is smoking in general; Obama, an "ex-smoker," said he's now reliant on nicotine gum. 
"There is this enormous public health effort to get kids to not start smoking. And make sure the parents felt guilty if they were passing on that habit with their kids," Obama said. "So that's where I think we need to go with pot, alcohol. So I don't think legalization is a panacea but I think that we're going to need to have a more serious conversation about how we're treating marijuana and our drug laws generally."
Obama noted that the results of marijuana reform referendums throughout the country this Election Day could spark that conversation.
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Comment #1 posted by The GCW on November 05, 2016 at 05:06:15 PT
Considering profits & losses
Molson Coors thinking 'very carefully' about legalization of marijuana We know, the booze industry sometimes fights against ending cannabis prohibition... Most large breweries have supported cannabis prohibition if indirectly through the AD COUNCIL, as 1 example.If You consume booze, attempt to verify that what You are purchasing is not from a heathen.
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