The End of Israeli Public Cannabis Companies?
Before the pandemic, the Tel Aviv Stock Exchange was bubbling. Now the Tel Aviv Exchange is dropping the Cannabis Index. What gives?
In what is going to be a blow to the idea of a public cannabis company in Israel, if not beyond, the Tel Aviv Exchange has dealt another blow to the public cannabis company model. Namely, it is dropping the so-called Cannabis Index.
Just three years ago, both celebrities and public figures were being avidly recruited by Israeli cannabis companies to promote themselves to investors and raise their stock value. Much like in Canada, many Israeli companies that went public did so by merging with an existing shell company already listed on the exchange. After their debut on the exchange, at least initially, stock values soared. 18 months ago, the exchange then created its own Cannabis Index, although many doubted how useful this would be. The biggest reason for such early doubts? There were actually very few companies listed on the exchange, and as a result, it was dominated by just a few companies. In fact, the value of the exchange was mainly based on the valuation of just one company.
After soaring in value, the cannabis bubble burst, and the worth of the index has now dropped 70%, leading to the decision to delist it, as of this Thursday, August 4.
Are Public Companies the Future of The Cannabis Industry Anywhere?
While there are successful public cannabis companies, the continued roil of their worth on the public markets continues to be controversial. For example, Canopy Growth, by far the market leader both domestically and during the first expansion overseas, to Germany, was just delisted in Canada.
Part of this painful arc is the huge costs that have been required to both build certified facilities as well as gain market share. The largest companies have gotten this way by acquisition rather than organic growth.
Part of this is the growth of the industry, in all places, almost simultaneously.
In Israel, the Pandemic is also surely partly to blame.
Not all public cannabis companies are doing badly. But the reality is as the industry goes into its next iteration that public companies are not necessarily the only model, or the best one, to create a profitable company.
The Israeli exchange may be headed for extinction, but the idea of a public cannabis company is not.
For all the excitement about recreational legalization, one thing is increasingly abundantly clear. The structure of cannabis companies themselves is far from a given – and public companies may not (yet) be the best or ideal way to raise cash and conduct global operations.
While there are increasing numbers of public pot companies globally, it is also clear that there have been some gigantic missteps too.