DENVER, March 12, 2019 /CNW/ -- As the cannabis market grows, companies are seizing the opportunity to make strategic investments in the sector and establish a foothold in the promising space.
- Cannabis and related products are legal in an ever-increasing number of jurisdictions.
- Businesses have responded with an increasingly diverse range of products.
- Companies making the smartest investments, such as carefully selected mergers and acquisitions, are in the best position to profit from this while minimizing risks.
SinglePoint Inc. (OTC:SING) (SING Profile) has invested in a number of other cannabis companies to grow its portfolio and leverage its position in the market. Marijuana Company of America Inc. (OTC:MCOA) (Profile), with its hemp-oriented business, is expecting a surge in profits following the crop's federal legalization in the United States in December. Medical Marijuana Inc. (OTC:MJNA), the first publicly traded cannabis company in the United States, has seen record sales. PotNetwork Holding Inc. (OTC:POTN) is reaching out to new customers with a CBD-infused slushy machine. And American Premium Water Corp (OTC:HIPH) is also pushing CBD into the soft drinks market with its infused water.
To view an infographic of this editorial, click here.
A Big Year for Big Investment in Cannabis
This year looks to be an important year in the development of the cannabis market. The legal groundwork for those changes was laid last year, with significant legislation moving forward in Canada, the United States and elsewhere. With the legal aspects in place, fresh opportunities for the market to grow and for companies to make bold moves within the sector have become more frequent — and look to be more profitable.
This momentum is fueling the ongoing development of two important trends. One is product diversification, as cannabis companies and the businesses supporting them develop a wider range of products for an increasingly varied market. The other is big investment, as both the larger cannabis companies and outside businesses with big bank balances move to carve out chunks of the market. Money is flowing in, making the most of the opportunities that legal and product changes provide.
A Changing Global Context
Things have been looking rosy for cannabis for some time, and last year saw significant growth in the sector continue. SinglePoint Inc. (OTCQB:SING), a young tech company that has moved into the cannabis sector, saw its revenue hit the $1 million mark. In addition, like many cannabis companies, the company ended the year expecting even better things to come, with a prediction that revenue will dramatically increase over the next 12 months.
How can companies in a relatively untried sector make such bold claims?
The answer lies in the changing attitude of lawmakers to cannabis. The prohibitory model for managing the drug that has dominated for half a century is increasingly recognized as not just ineffective but harmful to public health. Consequently, governments are legalizing cannabis for medical use. And in the most forward-looking cases, they are creating regulated markets for recreational cannabis, most significantly in Canada, which made the trade legal nationally last October.
For American companies such as SinglePoint, change has come on a state-by-state basis. Though the majority of Americans favor legalization, the federal government has been too reliant on conservative voters to support nationwide change. Instead, individual states have created legal markets, with Michigan becoming one of the most recent when cannabis went legal there in December. Two-thirds of U.S. states now allow medical cannabis, and one in five have legalized its recreational use, with more expected to follow over the next few years. This has allowed SinglePoint to begin investing in cannabis without having to consider a national cannabis business.
December saw a significant step towards wider legalization. Following months of wrangling, the 2018 Farm Bill passed into law, making industrial hemp legal on the federal level. This nonpsychoactive from of cannabis has provided many companies, including SinglePoint, with an important entry point into the sector, as the chemical cannabidiol (CBD), which can be derived from hemp, can be more widely sold than other forms of cannabis. CBD's meteoric rise has given a further boost to the sector, especially to companies entering via this route.
The Farm Bill will allow cannabis businesses to grow significantly through hemp and provide a precedent as federal politicians reconsider the wider cannabis industry.
Now that they have more opportunities to produce cannabis, companies are doing what companies always do — finding new ways to sell their products and services. This has led to a wave of innovation and an increasingly diverse range of cannabis-based products.
Two of the biggest areas for innovation are the creation of confectionaries and beauty products. The former have obvious appeal as a way to consume cannabis without smoking it. The latter are a natural fit given the suggested well-being benefits of CBD and THC, along with the willingness of customers to try new plant-based beauty products. But even more innovative products are hitting the market, such as Phyto-Bites, a product SinglePoint distributes on its website SingleSeed.com, designed to improve the health and well-being of pets.
Human health and well-being remain a huge driver for innovation in cannabis. Aware of that, SinglePoint has also been adding health and wellness products to its sales lines. Its SingleSeed store recently unveiled a range of TorusMed Hemp CBD products to its offerings. The new products include treatments such as Sport Relief Topical Cream, an ointment designed to provide pain relief for professional and amateur athletes.
Smart Investing in the Cannabis Sector
The growth of the cannabis sector has inevitably led to some instability. Companies are operating in a space that didn't even exist 20 years ago. The sector is evolving quickly, with the last few years triggering a wave of consolidation, and of course in a fast-changing market, there will be challenges and bumps along the way. Amid all this, working out how to investment smartly has become critical.
A lot of the secrets to smart investing in cannabis are the same as for any sector: do research, understand the businesses being invested in, have a plan and stick with it. Understanding the specific circumstances of the cannabis market is essential, and the big trend within the industry over the past year has been mergers and acquisitions, as companies such as SinglePoint have expanded through investment in promising companies that provide products and services that will complement and support its strategy.
SinglePoint's most recent investment has been in TorusMed, a company developing new ways to optimize CBD output from hemp and therefore increase the profitability of this part of the cannabis sector. With hemp on the verge of a new boom thanks to the Farm Bill, SinglePoint has used its understanding of the market to invest in a company that appears to offer great potential to make the most of this moment.
Moves like this can put a company in a strong position heading into what looks to be a big year for cannabis. "[This year] will be a banner year for SinglePoint," said SinglePoint CEO Greg Lambrecht. "We are equipped with the proper funding, partners and opportunities to be firing on all cylinders. We as a team expect to position SingleSeed and SinglePoint as market leads in the CBD market while continuing to enable the founders of the companies we have acquired to grow their businesses. We are well diversified and have large opportunities across many emerging markets that should enable us to be successful into 2019 and beyond."
New Year, Fresh Growth
Marijuana Company of America Inc. (OTCQB:MCOA) is also making the most of the opportunity provided by the Farm Bill and is expecting significant growth off the back of this legal change. The company has a vertically integrated range of cannabis interests, including a hemp farm in Oregon and its hempSMART range of products. The legal changes should allow the company to more easily produce CBD-rich plants and sell the products derived from them without worrying about legal complications for crossing state lines. MCOA will also face lower federal income tax, thanks to the change in hemp's status, allowing it to keep more profits.
Federal legislation against cannabis production and distribution has hampered the ability of companies to raise funds through public investment in the past, but some have found ways. Medical Marijuana Inc. (OTC:MJNA) was the first cannabis company in the United States to be publicly traded, a move that put it in a strong position both financially and for its public profile. It has recently experienced record sales, buoyed up by the growth of the cannabis market in the U.S. and beyond.
PotNetwork Holding Inc. (OTC:POTN) has worked hard to develop a wide range of products, answering the increasing demand for product diversity in the cannabis market. The latest of these is the Brain Chill Slushy Machine, provided through its subsidiary Diamond CBD Inc. Initially launching in South Florida, these machines serve slushies in a variety of flavors, all infused with CBD. With millions of gallons of slushies consumed every year, these new machines are designed to provide an appealing introduction to CBD.
Also working on drinkable CBD is American Premium Water Corp (OTC: HIPH), a diversified luxury consumer products company that bases its range of health and beauty products on biotech research. Its Lalpina CBD water is infused with CBD and features in several recently announced distribution deals, as the company extends its reach in the U.S. and beyond.
Legal changes are encouraging an increasingly diverse cannabis market, in which companies that make smart investments are primed for profit.
For more information about SinglePoint, please visit SinglePoint Inc. (OTCQB:SING).
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