Canadian pot stocks are booming this week with some companies seeing their value rise by over 20 percent in one day, leaving some analysts worrying that investors are acting irrationally and creating an investment bubble.
One analyst told Barron's that the market is "completely irrational" and rising "like bitcoin levels."
The surge in Canadian pot stocks comes as the country is on the verge of becoming the largest country in the world to open a nationwide pot market, attracting notable investments from booze makers like Corona's Constellation Brand's and Smirnoff's Diageo. Legal pot sales are expected to start in mid October.
One pot company, Tilray, has seen its shares rise from $22 a share to over $60 a share in just its first month and a half of trading. Another company, Cronos Group, which has a $1.8 billion market value, saw it's stock rise 21 percent on Monday.
Canada's pot market is far more attractive to investors because the country has actually legalized pot. Washington's attorney general might tell you otherwise, but investors aren't buying the American bullshit. Nowhere in the U.S. is pot actually legal. There are eight states where local laws permit the sale of cannabis, but the plant remains completely federally illegal and thus big businesses are not interested in touching American pot.
That is almost guaranteed to change as soon as the federal government legalizes weed. The billion-dollar evaluations we are seeing in Canada will be commonplace in a hypothetical America where pot is legal. We have almost ten times the population of our ally to the north and the U.S. market for weed already dwarfs Canada's.
Despite American prohibition, the Canadian stock market is already looking to make inroads into the U.S. pot market wherever it can. Washington's largest pot company, Northwest Cannabis Solutions, found a way to trade itself on the Canadian stock market under the umbrella company Cannex. That company doesn't physically handle pot in Washington, instead, it owns the company's buildings and intellectual property which the pot company then pays Cannex for. That allows it to skirt the federal prohibition and trade on the Canadian market. When the company went public in March it had a nearly $48 million evaluation, the largest for any American pot company at that time.
This Canadian surge has raised the stock price for Cannex over 10 percent in the last week, although it's still trading at pennies on the dollar to its Canadian competitors. Cannex is worth just $0.95, far less than Tilray's $60 a share price.
For now, the big money is looking north for its weed.