Marijuana Stocks Struggle During Coronavirus Pandemic

Marijuana Stocks
Marijuana Stocks

While the stock market is thriving since an initial downward spiral at the beginning of the COVID-19 pandemic, marijuana stocks have continued to struggle. This is prompting seasoned investors to consider possible alternatives to cannabis stocks.

Cannabis Investors Disappointed in Stock Performance During Coronavirus Pandemic

It was expected by many that cannabis stocks might thrive during the COVID-19 pandemic because customers who were stuck at home would seek out marijuana from retail stores. This optimism was only emboldened when states declared that marijuana dispensaries are “essential businesses” that can remain open despite shut-down orders being issued for most other businesses. Unfortunately for investors in cannabis stocks, the subsequent rise in demand for recreational marijuana has not translated to gains in the market.

Some of the worst performers among cannabis stocks include Aurora Cannabis, ETFMG Alternative Harvest ETF, and Tilray. In just a few months, ETFMG Alternative Harvest ETF saw its value plummet by more than 30%. The losses for investors in the Canadian cannabis company Aurora Cannabis were even greater: the stock has plummeted by 50% since February. While Aurora Cannabis was able to remain on the New York Stock Exchange thanks to a reverse split, the move did not boost the stock price: shares in the high-profile marijuana stock have continued to drop.

Investors in Cannabis Stocks Not Seeing Strong Returns in 2020

One possible explanation for the plunge in values of marijuana stocks is that investors might be reacting to a number of negative assessments of the global economy as the coronavirus pandemic continues. Many well-respected institutional investors are cautioning against buying into the stock market’s recent rebound because unemployment numbers remain high. This pessimism has not stopped investments in the stock market generally, with the Nasdaq hitting a record high and the S&P 500 approaching its own record high.

However, cannabis stocks have not been so fortunate. Investor confidence might be waning because of the new challenges faced by cannabis companies during the pandemic: delayed state approvals of operator licenses, operational difficulties faced by cannabis companies with limited access to capital, scaled-back operations by smaller retail marijuana businesses, and uncertainty about a possible “second wave” of the COVID-19 pandemic.

Investing in Cannabis Real Estate Funds as an Alternative to Marijuana Stocks

Cannabis stocks may be struggling, but there is still plenty of good news for investors in the cannabis industry: more and more states seem likely to legalize both recreational marijuana and medical marijuana, sales of recreational marijuana in the U.S. have more than doubled over the past year, and the international market for medical marijuana is thriving.

Moreover, there are strong alternatives to marijuana stocks for anyone looking to invest in the burgeoning cannabis industry. One of the best options for prospective investors is a privately held cannabis real estate fund that owns income-producing properties such as marijuana dispensaries and marijuana cultivation facilities. These types of investments can be considered more reliable and secure than cannabis stocks because, unlike stocks, cannabis real estate funds are more personalized. When you invest in a marijuana real estate fund, you know exactly what you are getting.

Contact Scythian Cannabis Real Estate Today

Scythian Real Estate Fund LLC is the Colorado-based real estate partner of several well-capitalized, highly sophisticated cannabis operators that are expanding nationally. Through its longstanding relationships with retail marijuana companies like The Green Solution and Grassroots Cannabis, Scythian Real Estate has built a premier single-tenant real estate portfolio valued at nearly $40 million. For more information, email Scythian Real Estate today.


Scythian Real Estate Helps Cannabis Operators Raise Money

Cannabis Real Estate Funding
Cannabis Real Estate Funding

Scythian Real Estate is a full-service real estate company that appeals to experienced cannabis operators in the untapped cannabis real estate market. Scythian works with cannabis companies that need assistance with raising capital, acquiring retail properties, and managing real estate assets.

Colorado Cannabis Operators Look to Raise Funds in Sale-Leaseback Transactions

When the Colorado legislature passed House Bill 1090 in November 2019, it set the stage for cannabis companies to gain access to financing from new sources. Prior to the passage of the law, Colorado marijuana businesses could only be owned by private companies with a limited number of owners. Once the law went into effect, however, publicly traded corporations and private funds could hold ownership stakes in Colorado cannabis businesses. This opened the door for publicly traded corporations outside Colorado to invest in local dispensaries with state licenses.

Despite the increased opportunities available to cannabis companies looking to operate in Denver, Aurora, Fort Collins, Pueblo, and elsewhere in Colorado, the reality is that most cannabis operators would still prefer to raise funds through sale-leaseback transactions. Randy Roberts, a partner at Scythian Real Estate, said that the Denver-based real estate investment company continues to generate interest from sophisticated cannabis operators who simply do not want to part with equity in their companies. Moreover, observed Roberts, it is still difficult for these types of businesses to raise money through traditional avenues because “not a lot of [financial] institutions are willing to do deals with cannabis companies.”

Scythian Real Estate Continues to Close Deals with Marijuana Businesses During COVID-19

Some marijuana dispensaries have been adversely affected by the coronavirus pandemic. In fact, more than a few smaller operators have been forced to temporarily close due to high operational costs. This is one reason why Scythian Real Estate prefers to work with well-established cannabis operators: these larger companies are less likely to be impacted by COVID-19 and can handle the increased costs of running their businesses during the pandemic. For investors in the Scythian Real Estate Fund, this is good news: the cannabis real estate fund has a deal pipeline that remains strong, with recent deals closed in North Dakota and Pennsylvania.

Additionally, when state governments responded to the pandemic by declaring dispensaries as “essential businesses” that could remain open despite stay-at-home orders, the move sent a powerful message to states where marijuana has not yet been legalized. According to Scythian Real Estate partner Randy Roberts, these other states may now feel more pressure to legalize cannabis for recreational and medical purposes as the marijuana industry becomes less stigmatized. Roberts noted that this could be extremely good news for investors in cannabis real estate funds that team up with “really well-capitalized, strong cannabis companies” because those companies are going to have opportunities to grow by expanding into new markets and by capturing additional customers in existing markets.

Scythian Is Preferred Cannabis Real Estate Partner of The Green Solution

Scythian Real Estate maintains an excellent working relationship with The Green Solution, which is one of the largest vertically integrated cannabis companies in the entire country. Scythian’s role in most of its deals is to identify, evaluate, acquire, and own real estate assets before leasing back those assets to The Green Solution. With added capital, The Green Solution is then in a better position to operate their retail dispensaries and to expand their operations into states where cannabis is medically and/or recreationally legal.

The Green Solution’s co-founder Kyle Speidell recently commented on the economic benefits of the cannabis company’s sale/leaseback deals with Scythian Real Estate: “It’s honestly a no-brainer economically.”

Contact Scythian Real Estate Today

If you are a cannabis operator looking to raise funds, or if you simply want to get involved in the cannabis market, Scythian Real Estate Fund LLC may be able to assist you. To learn more, contact Scythian.