Canada’s stock market provides exposure to a healthy, robust economy, and to a number of high-growth companies, making it an attractive location for capital from around the world. The market has received special attention in recent years for a unique opportunity: the chance to invest legally in the burgeoning marijuana industry.
The narrative of a new industry hitting the stock market and enjoying massive growth is nothing new. A familiar example that still hurts many investors to remember is the Dot Com Bubble. For those who remember this era, there’s no need to say more. For the uninitiated, the stock market from the mid-90s to 2000 enjoyed meteoric growth, driven largely by new tech companies. The market, simply put, loved any company with a “dot com” at the end of it. Companies with little beyond a website, business plan and foolhardy growth projections enjoyed valuations that seem absurd today.
Today, however, any Canadian company with a green leaf in its logo enjoys similar love from the markets, regardless of whether its deserved. We also see the same volatility and spectacular growth rates, as Mr. Market slowly separates the wheat from the chaff. This can be a messy process, just like it was in the early 2000s. Many companies perished, but this era also gave us modern day giants like Google and Amazon.
Take Canopy Growth Corporation (CGC), for example. It has one of the highest market capitalizations in its industry, and its share price has exploded from a few dollars in early 2017 to over $50 at the start of this year. That sort of movement can be seen in a number of cannabis stocks, and it’s enough to entice a great deal of investment. However, Canopy Growth also illustrates the volatility of this sector; the stock has lost more than half its value since its April high.
This precipitous fall is no less common than its meteoric rise. The good news: when it comes to investing in these companies, it is possible to have your cake and eat it too. A stock-backed, non-recourse loan puts liquidity in your pocket without losing your rights to shares, unless you decide that you’d rather keep your loan proceeds. You can walk away from the agreement at any time, with no damage to your credit, and we’ll simply keep the shares you no longer want.
Along with many other major markets, we’re proud to offer loans backed by Canadian securities, including cannabis stocks. Our loan offerings enable clients to expose themselves to an exciting new investment opportunity while responsibly hedging against volatility and the potential for capital loss.
Contact us to learn more about managing risk while participating in a booming market with a Canadian security-backed loan.