Article content continued

We're having to spend a lot of effort on the Canadian public side that's not delivering a whole lot of results Jeff Mascio

The dominance of retail investors has been an issue even for larger U.S. companies like New York-based Columbia Care Inc., which has lost about two-thirds of its value since April but still has a market value of over $900 million.

“Until the larger institutional investors in the U.S. begin to look at the sector from a long-term perspective, I think you’re going to see a lot of volatility,” CEO Nicholas Vita said in an interview at the company’s office on Fifth Avenue. “I think you’re also going to see a thematic trend where people are picking baskets rather than picking companies because there’s a lack of information and a lack of time to really sort out the differences between the different operators.”

Private Bets

The business case for investing in the burgeoning cannabis industry hasn’t changed but private companies are currently a better bet, according to Matt Hawkins, founder and managing partner of private equity firm Entourage Effect Capital LLC, formerly known as Cresco Capital Partners.

“The market’s only going to get bigger and smart investors know that,” he said. “But, unfortunately for the public companies, prices are driven by retail investors who in some cases aren’t savvy enough to be making the buy-sell decisions. They’re losing money that they maybe shouldn’t have been investing in the first place and they’re spooked.”

This means the trajectory of pot stocks could change dramatically when institutional investors begin to buy in, said Vita.

“If the U.S. investing community, particularly the U.S. institutional investing community, decides to lean in, you’re going to see a massive spike in valuations,” he said.

Bloomberg.com