Nex (formerly Ofex) is an interesting market, home to around 90 companies some of which you will have heard of, like Newbury Racecourse, Arsenal Football Club, or brewer Adnams. But although it pitches itself as a rival to Aim (and with the backing of new owner CME has a better chance than ever of establishing its growth market credentials), it’s still unfamiliar territory for many investors, and we’re mindful that liquidity isn’t comparable.
Nevertheless, cannabis investment companies have been able to raise meaningful sums through Nex, which is indicative of just how exciting this nascent industry is. And in some respects, the more sedate environment of the Nex market has been helpful – the share prices of these companies have not strayed into the bubble territory occupied by some of the more established cannabis companies in the US and Canada. Indeed, as North America has begun to regulate investors have embraced it with a dot-com like zeal. In the last five years the share prices of the big four have soared many thousands of per cent. Investors should be wary of stretched valuations.
Yet cannabis is a big opportunity, both medicinally and recreationally. According to statistics compiled in a recent report by broker Canaccord, around 2,700 tonnes of recreational (and mostly illegal) cannabis was consumed in Europe in 2017 – a market the broker estimates is worth €25bn a year. The UK’s share of that amounted to 290 tonnes worth – according to my back-of-a-fag-packet calculations – nearly €3bn.
But it is this consumer opportunity that is perhaps proving the barrier to a sensible discussion of its legal status in the UK – put simply, ‘small c’ conservative politicians are fearful of the electoral backlash any softening of the stance towards drugs will bring. Indeed, one policymaker suggested to me that rather than ending drug prohibition, we should instead scrap cash – the oil of the black market economy.
That’s an interesting idea, but doesn’t take into account the fact that drugs can now be easily purchased on the dark web using cryptocurrencies. And it ignores much of the evidence that prohibition is ineffective, economically destructive and socially destabilising – none more compelling than the experience of the US in the 1920s. As Mark Twain once put it, “it is the prohibition that makes anything precious” – to criminals at least. So it can only be a matter of time before MPs follow the market – more tax revenues, lower enforcement costs, product standards, and better healthcare outcomes are surely a tempting (Camberwell) carrot.
