These two marijuana stocks are budding on the Australian cannabis market
Australia rescheduled marijuana in 2016 for medical purposes, with the first cultivation license issued in February 2017. It represents a cannabis market that is roughly four times the size of Colorado’s market, given that Australia has a population of 24 million people.
While federal law permits legal medical marijuana sales and use across the country, each state regulates its own policies, much like the Canadian model. For example, each state separately funds research, like the New South Wales government, which has set aside nearly $10 million to fund cannabis research. The country also has an organized Australian Cannabis Industry Association, and the Therapeutic Goods Administration works to make laws as consistent as possible across all states.
The Australian stock market as a whole reached a decade high in September, only to then experience large declines during September over concerns about international trade and the political uncertainty of changing prime ministers that same month.
Some cannabis stocks may offer a brighter future for the ASX. In all, about 25 cannabis producers are listed on the ASX.
Elixinol Global (ASX: EXL)
Elixinol Global (ASX: EXL) is an Australian medicinal cannabis producer that has raised AU$40 million (US$28.9 million) to foster international growth in what is a very ambitious expansion plan to increase exports to both the United States and Europe. Elixinol is newly listed on the ASX just this year in January 2018. They raised initial capital of AU$20 million ($14.5 million) for the IPO. The company’s revenue doubled in the first six months on the ASX exchange, driven by the global demand for hemp CBD.
The additional capital is being used to ramp up CBD production to meet the world’s increased demand. The company has filed with the Office of Drug Control for a license to build a medical cannabis facility in Australia. They’re also looking to expand to other markets, like Japan, which has a very health-conscious population. In May 2018, Elixinol began advertising on billboards in Tokyo train stations.
Since late August, the stock has increased from AU$1.37 to AU$1.92 per share. CEO Paul Benheim stated in a NASDAQ press release that his company “recognizes the need to move quickly to leverage the opportunity around the business” in the rapidly growing global cannabis market. The raised capital helps them to be poised to seize new market opportunities.
Benhaim has an interesting background. Born in London, he lived in Canada, where he discovered hemp’s nutritional value. He traveled globally to learn more about hemp cultivation, then settled in Australia where he became a hemp farmer. In 1999, he founded Hemp Foods Australia, and in 2014, he founded Elixinol. The company is based in Sydney but also has offices in Colorado and Europe. Elixinol is set to open a new production facility in Boulder, Colorado by the end of the year.
The company has three divisions which are focused on medical marijuana and hemp-based products: Elixinol Australia for medical marijuana, Hemp Foods Australia (hemp-based foods) and Elixinol USA (hemp-based dietary supplements and skincare).
Several industry analysts have projected that hemp-derived CBD could surpass the cannabis market by 2022. Brightfield Group reports that the CBD industry could reach $22 billion by 2022. Much of these projections are based on the United States expected passage of the 2018 Farm Bill. The bill is important because if passed, it would clarify and classify industrial hemp as an agricultural commodity, thus removing it the U.S. Drug Enforcement Agency’s (DEA) controlled substances list. If hemp is descheduled, that move would signal a wide open market for the hemp industry. The 2014 Farm Bill expired on September 30, without Congress passing the new Bill. The Senate and the House Agricultural Committees are working towards an agreement on the bill.
Tilray Inc. (NASDAQ:TILRAY)
Tilray (NASDAQ:TLRY) has been in the news in Australia with the recent successful export of their CBD 100 product to the state of Victoria. Tilray CBD 100 is an oral solution of concentrated cannabinoid extract of 100mg/ml CBD in a 25ml vial and is used to treat pediatric patients with intractable epilepsy.
Three Victoria hospitals--Royal Children’s Hospital, Monash Children’s Hospital, and Austin Health—will distribute the CBD100 to children with intractable epilepsy. The distribution to these hospitals is being done via Tilray’s wholly-owned subsidiary, Tilray Australia New Zealand Pty Ltd.
The company first exported medical cannabis products to Victoria last year in March 2017 to 29 seriously ill children via the compassionate access provision, a fast-track way to get the medicine to pediatric patients who desperately need it. In fact, these 29 patients were Victoria’s first legal medical cannabis patients.
Tilray became the first marijuana stock to debut on a major U.S. exchange when it listed on the NASDAQ in July, rather than going the route of first listing on an over-the-counter exchange, then uplisting to a major exchange (Canopy growth did this, uplisting to the NYSE). After Tilray’s IPO in July, the company’s stock has experienced tremendous volatility, mainly due to their limited share offering in the IPO. With only 17 million shares made available for trading, the stock price has been prone to wild swings.
Between August 1 and mid-September 2018, the stock was up more than 830 percent, mainly due to a short squeeze by investors. The positive news regarding Tilray stock triggered an increased demand, and the company saw a dramatic rise in share price. However, rising stock prices are bad news for short sellers, so many exited their position last week, sending the stock from $300 to $100 per share. The Australian announcement did cause a stock rise, as investors reacted positively to the news. Investors expect that Tilray will settle out over the long run as the global market opens up.
The overall outlook for the Australian cannabis market
Outlets such as ArcView Market Research and BDS Analytics expect the 2018 Australian medical marijuana market to have around $3 million in sales this year, but nearly $50 million by 2022. Hemp CBD will be a big part of that, so stay tuned to our neighbors down under.