NEW YORK (MainStreet) - The smart and monied set with investment money to place in the market has decidedly moved - and with greater strength than ever - into the marijuana sector over the last quarter.
"The successful legislation in Oregon, Alaska, and the District of Columbia, along with the close result in Florida, will make 2015 a critical year for the cannabis industry," said Michael Swartz, an analyst at Viridian Capital and Research, a Manhattan based financial analyst-banker group focused on the sector. "These midterm results will offer law makers in other states the confidence to introduce new initiatives for action in 2015 and placement on 2016 ballots. We believe several states will see bills in 2015 to legalize recreational marijuana and that legalization could be on the ballot in seven to thirteen states -- most notably California -- during the 2016 elections."
His firm also identifies and tracks publicly traded companies in the cannabis sector and publishes a report and stock index which analyses stock performance, company announcements and valuations against important industry trends. That the public market would begin to see the impact of ongoing and increasingly large investments by increasingly well known investors, particularly over the last three to six months, is not a surprise, particularly given the backgrounds and focus of those now moving into the fray publicly.
Recently Paypal founder and early Facebook investor Peter Thiel announced his intention to invest in a Series B round of financing with Privateer Holdings, currently in the middle of a $75 million raise. Privateer has investments in Leafly, a dispensary listing service, testing labs, and is even developing branded products with the Bob Marley imprint.
In Colorado this year, Arcview Investments has committed money to CanopyBoulder, an organization that will invest $20,000 in 20 start-ups accepted in its accelerator this year.
Public companies that are already established in the market with good performance to date can also expect a good year, per Swartz.
"We see continued growth in the number of cannabis companies looking to access the capital markets to raise growth capital and/or execute M&A strategies," he said. "As valuations in the public cannabis companies continue to rationalize, we expect to see increasing interest on the part of investment funds to take equity stakes in cannabis enterprises, specifically sector specific cannabis enterprises versus the straight debt and convertible debt financing that has made up the bulk of financing in public cannabis companies to date."
Swartz also believes in line with most conventional analysis about the sector at the moment that three sectors will thrive in particular this year.
"The top three sectors that we believe are the most attractive in 2015 are software, biotech, and physical security," he said. "This seems to be the sentiment with investors as well, with those three sectors being the top performers in the Viridian Cannabis Stock Index."
--Written by Marguerite Arnold for MainStreet