It's 420: While pot fans light up, Bay Street plans for profits
'How often do you have a chance to create an industry around something that already has demand?'
Thousands of Canadians are marking 420 — the 20th day of the 4th month of the year, which pot activists have designated as a day to celebrate marijuana — by lighting up in public at events across the country.
But away from the haze, Bay Street celebrated its own version of 420 by scrutinizing investments with an eye to making money legally from weed.
At the Toronto Stock Exchange, employees of Horizons ETF Management rang the opening bell to commemorate the day — and to promote the company's marijuana-themed exchange traded fund, launched earlier in April.
In a ritzy ballroom at the nearby Royal York Hotel, hundreds of investment bankers and private investors heard presentations from the executives of some of Canada's biggest legal marijuana firms.
Many of the attendees were stoked about pot's profit-making potential.
"How often do you have a chance to create an industry around something that already has demand?" said Steve Ottaway, managing director of investment banking with GMP Securities, which hosted the conference.
"It's extraordinarily rare to have that. And how rare is it for Canada to be sitting in a lead position with all these companies, which are rapidly evolving and growing in the space? That's pretty much unheard of."
Window of opportunity
The Canadian financial industry is getting a head start on investing in marijuana while its U.S. counterparts remain largely stuck on the sidelines, Ottaway said, because of prohibitive U.S. federal drug laws.
"We're in a situation where the 800-pound gorilla is still tied down," he said.
It's not just big investment banks that are paying attention. Private Canadian investors are also making bets on marijuana.
Brett Wilson, chairman of Prairie Merchant Corporation and former star of CBC's Dragons' Den, said he started paying attention to the marijuana sector last July.
"It was just one of those moments when a light went off, and I said, 'You know what? This has now become inevitable,'" said Wilson.
Wilson agreed with Ottaway's statement that investing in marijuana companies was an unusual opportunity.
"The last time was called Prohibition," he quipped.
Still, Wilson expects that only some of his marijuana investments will play out in his favour.
"I'm going to be wrong. Some of them are going to zero; some of them are going to triple," he said.
"It's no different than Dragon's Den. I did 60 deals on air; I closed 30 of them. Two of them will pay for all 30."
Canadian marijuana company executives presenting at the conference were focused on creating an atmosphere of trust with potential investors, said Mike Gorenstein, president and CEO of Cronos Group. Cronos owns two Health Canada-licensed producers outright and has interests in others.
"I think what people assume when they hear about a conference like this, is there's going to be a bunch of guys wearing Birkenstocks … This is actually a real, legitimate industry," said Gorenstein.
"There are institutional people, there are good stewards of capital, there's not these crazy risks associated with it that people might otherwise think."
Overcoming the stigma
On Bay Street, the stigma surrounding marijuana is changing quickly.
"I've never used drugs my whole life, I'm a healthy guy — and now I'm a user of marijuana," said Eric Paul, CEO of Health Canada-licensed marijuana producer CannTrust. His company plans to go public later this year, and Paul expects "very high" demand from investors.
Paul, a pharmacist and former president of now-defunct Canadian retailer Zellers, said he had a legal prescription for medical marijuana and was using it for anti-inflammatory purposes. For Paul, 420 this year has nothing to do with partying — his company was making a presentation to investors later in the day.
"We're here to present our story and our vision for the future and how we can play in both the pharmaceutical market and the new recreational market," said Paul.
A different kind of 420
John Fowler is president and CEO of marijuana company Supreme Pharmaceuticals but said he was a cannabis activist earlier in life. For Fowler, this 420 looked a little different than years past.
"Obviously, it's different having an investor crowd instead of maybe a group of students or more of a political crowd, but to me, it's a day where everyone thinks about cannabis," said Fowler.
"So, whether you're out here talking about your company or you're out trying to promote reform … this is a great day where people are thinking about it."