Investors flock to take advantage of Germany’s cannabis-friendly laws
The growing potential of the European cannabis markets and the enactment of a more comprehensive legislation have drawn in experienced companies like World High Life Plc (NEX:LIFE), which plans to become a leader in the cannabis sector.
Cannabis has been a boon for stock market investors for some time. As more and more countries have legalized the use of cannabis, be it only for medical use like in Germany, or for both medical and recreational purposes like in Canada, the stock prices of North-American cannabis growers like Aphria (APHA:NYSE), Aurora Cannabis (TSE:ACB) and Canopy Growth (TSE:WEED) skyrocketed.
Tobacco companies and beverage manufacturers bought their way into the newly emerging industry for a lot of money, hoping for lucrative business opportunities. All the fresh money flowing into the sector had to be put to use. Consequently, last spring, Canopy Growth took over the largest German supplier to date, the cannabis division of the natural remedy manufacturer Bionorica, based in the Upper Palatinate, for a whopping $251 million (€226 million).
However, at the moment, disillusionment has taken the place of enthusiasm, and it looks like the gold rush is over for now. The prices of 40 large listed cannabis providers represented in the Alternative Harvest index fund have recently fallen by almost half.
There were good reasons for this to happen. Firstly, after the great legalisation momentum of the past two years, not that many new sales markets were added. Secondly, where cannabis has only been released for medicinal purposes, sales were limited by strict conditions. And thirdly, the areas under cultivation, and therefore the quantities of cannabis harvested, have grown much faster than the demand.
Even in Germany, not all expectations have been fulfilled. The Frankfurt cannabis trader Farmako, which started with great thunder, quickly fell under the shadow of doubt. The company had estimated its market value at $111 million (€100 million), but was then taken over only for a fraction of it.
Professional investors still see opportunities in the cannabis business
Professional investors, on the other hand, still see some opportunities. One of them is Finn Hänsel, one of the veterans among the pioneers of the decriminalisation of cannabis in Germany. At the age of 17, when he was still chairman of the Flensburg district association of the Young Union, he made a name for himself with a brash request for legalisation. His request did not find a majority at the state party conference of the junior CDU and CSU organisation. The time was not ripe. In the meantime, Hänsel hired himself out to the Internet trader Zalando, then ran the business of the removal company Movinga and made a name for himself in the Berlin digital start-up scene.
A year ago, he went back to his old interest in cannabis and founded the Sanity Group together with a partner. Their business model focuses on the import of medical cannabis to Germany and distribution of hemp-containing, non-prescription cosmetics and lifestyle products such as bath additives.
Hänsel is currently looking for new investors for his company. The new reality of the cannabis market does not bother him, he claimed. Many competitors have invested a disproportionate amount of money in setting up large greenhouses in Canada and Denmark, where the climatic conditions for growing cannabis are not particularly favorable. “In Canada, the production costs for one gram is 3 euros,” he calculated. “In Israel it’s only 20 cents.” That’s why production sites in the Mediterranean region will prevail in the long term, and it is precisely from there that Sanity wants to purchase most of its goods.
World High Life is also targeting Europe’s medical cannabis and CBD sectors
Both medical cannabis and CBD-based products have seen a sudden increase in acceptance worldwide. In the last year, legislators from several European countries started to adopt more friendly laws towards cannabis, so more and more companies are beginning to turn their sights towards the burgeoning European cannabis markets.
As new business development opportunities arise, World High Life Plc (NEX:LIFE), a UK-based cannabis investment company, is ready to conquer the CBD and medical cannabis markets, forecasted to reach a staggering $58 billion in just a few years.
World High Life’s experts have done their due diligence on how to capitalize on the cannabis sector in Europe. The company’s strategy is to identify and acquire cannabis companies with rising potential in the UK and other European countries. Besides the UK, WHL plans to enter the German cannabis market in 2020. Germany is the largest European cannabis market, where the sale of medical cannabis was legalized in 2017.
WHL offers investors the possibility to access a top portfolio of cannabis companies operating in the legal medical cannabis sector, as well as in the CBD-based products market.
Despite the fact that many cannabis companies’ shares prices have plummeted, including the industry giants Aurora Cannabis, Aphria and Canopy Growth, World High Life Plc has managed to keep its momentum. The company has a strong outlook at becoming one of the winners of the cannabis industry.