Wall Street’s Increasing Presence in Pot Will Spark Huge Growth Among Marijuana Stocks

Wall Street Pot Stocks

It’s no secret that when it comes to investing, there’s no better place to find wells of cash than Wall Street. The famed New York City area houses hundreds of billions of dollars in capital waiting to be doled out to companies that the bank big wigs deem enticing. For marijuana stocks, getting in on the Wall Street action is another way for these companies to see massive growth in the coming months and years.

We’re already witnessing an increasing interest of Wall Street in pot stocks. Viridian Capital Investors, for instance, calls itself the first licensed investment bank for cannabis and has been fielding a ton of offers from family offices, hedge funds, and wealth investors looking to invest in the U.S. cannabis industry. According to the bank, it’s turning down 95% of the calls it gets. (Source: “U.S. bankers are answering the call of cannabis as deals flow away from Canada,” Financial Post, July 23, 2019.)

And it’s not only boutique investment firms that have begun getting interested in marijuana stocks. Large U.S. banks have also begun to interact with cannabis. Last year, for instance, Goldman Sachs Group Inc (NYSE:GS) and Bank of America Corp (NYSE:BAC) both participated in the Constellation Brands, Inc. (NYSE:STZ) deal to acquired a huge chunk of marijuana leader Canopy Growth Corp (NYSE:CGC) in a $4.0-billion deal.

And it makes sense as to why banks would want to get in on the action. After all, legal marijuana sales surged passed $10.0 billion in the U.S. last year. 2019 has already added an 11th state to legalize recreational pot, and you have dozens of states where medical marijuana is permitted.

But there in lies the problem: state by state, we have individual legalization laws, while a federal prohibition still remains in place preventing larger institutions from going full bore into the marijuana industry.

But that may be changing. The SAFE Banking Act is set to receive its first ever Senate hearing as the U.S. is considering whether to permit large banks from essentially circumventing the national prohibition in order to help fund and store large amounts of cash that are being generated from the marijuana business.

In fact, states like California have seen upticks in armed robbery of marijuana storefronts due to the largely cash business. This is the direct result of many banks being unwilling to handle legal marijuana sales because if the money crosses state lines, that is technically a federal offense. While unlikely to draw intervention from the federal government, why bother taking the chance? That’s the calculation many banks are making, and the result is that the marijuana industry needs more capital storage—and access to more funding.

And that’s the most important aspect of this as far as marijuana stocks and investors are concerned: there’s all this untapped potential waiting within these marijuana stocks that will only be accessed once banks fell comfortably fully interacting with the pot industry.

Considering that marijuana is still very much in its infancy, capital injections at this stage are hugely important and will allow the current $10.0-billion industry in the U.S. alone to balloon into a worldwide, potentially $100.0-billion industry in the coming years.

But it’s going to take a lot of money in order to fund this growth, and that’s where big banks come in. Right now, there’s a lack of massive pools of investment money, but as shown above, that is changing. Wall Street marijuana stocks are becoming more and more normal and as they continue to form a relationship with one another; expect to see the results on the pot stock market.

Analyst Take

Access to capital is a huge need of any young industry. Marijuana stocks are no different.

At this point, there’s a sore lack of big institutional investment, but that is changing. When the U.S. does finally permit full-on investment from large banks, the capital that will be available to the cannabis market will be unrivaled and lead to massive jumps in share value across the board, much like we saw when Constellation Brands, Inc. invested in Canopy Growth Corp.