Institutional investors will put money into cannabis stocks this year, though many publicly traded MJ businesses could eventually fail because of poor fundamentals, according to a report from a New York-based investment firm and adviser.
The report – released by Viridian Capital Partners – says investors will increasingly scrutinize public cannabis companies, seeking strong management teams and sustainable business models.
Companies’ ability to raise capital is threatened by what Viridian calls a “toxic financing structure” thanks to a lack of experienced management within the nascent industry.
Still, the investment firm is “very bullish on the industry” thanks to a slew of good news. Colorado recently reported $700 million in marijuana revenue last year, rec stores are scheduled to open in Alaska and Oregon in the next 12 months, and legislators have told the Department of Justice to back off enforcement of companies operating within state laws.
The Viridian Cannabis Industry Index that tracks 75 publicly traded cannabis companies gained 38% overall last year, buoyed by a strong first quarter. But it declined 33% in the third quarter and 32% in the fourth.