Article by Kristine Owram and Craig Giammona,
Canada’s cannabis companies are experiencing a rush of investment that’s making even some participants paranoid.
“You might argue our valuations are a little bit ahead of our skis,” said Paul Rosen, chief executive officer of Tidal Royalty Corp., which finances weed companies.
Tilray Inc., a marijuana company valued at nearly $9 billion, currently trades at a price-to-sales ratio of about 124. That’s more than 25 times higher than Amazon Inc. and Apple Inc., the two most valuable companies in the S&P 500. And Canopy Growth Corp.’s $11 billion-plus market value is on par with Barrick Gold Corp.’s, even though the mining firm, with 18,000 workers, is expected to post 20 times the sales this year as the 1,000-employee cannabis company.
“It’s still not a grown-up sector by a lot of portfolio managers’ standards,” said Bruce Campbell, founder of StoneCastle Investment Management Inc., which is launching a cannabis-focused mutual fund. “The valuations are off the charts if you use any type of typical metrics, so that scares a lot of institutions.”
As Canada prepares to legalize marijuana on Oct. 17, the cannabis industry has soared from virtually nothing five years ago to one with global sweep today. Canadian companies, such as Canopy, Tilray, Aurora Cannabis Inc. and Aphria Inc., are leading the way. Global consumer spending on cannabis is expected to reach $32 billion by 2022, according to U.S. firms Arcview Market Research and BDS Analytics.