Growing business: A volunteer holds a dried cannabis bud at the La Brea Collective medical marijuana dispensary in California. Picture: REUTERS
Growing business: A volunteer holds a dried cannabis bud at the La Brea Collective medical marijuana dispensary in California. Picture: REUTERS

New York — Cowen & Company, the nearly century-old firm founded as a bond brokerage, is racing to become Wall Street’s leading provider of cannabis research, staking a claim to an industry avoided by financial institutions.

Analysts at the New York-based company have assembled a trove of data on the burgeoning field of semilegal marijuana. And on Thursday, Cowen was due to host its first investor conference on the controversial topic.

The firm is betting it is worth the risk to explore an industry that could generate tens of billions of dollars a year — and intersect with many established sectors. Marijuana is federally illegal in the US, so most institutions and large corporations keep their distance.

But eight states and the District of Columbia have voted to allow the drug for recreational use. That means one in five people in the US will live in an area in which it is legal to get high.

"Anyone who’s interested in figuring out the future of the consumer needs to be here," said Lisa Thomas, Cowen’s associate director of research.

Twenty-eight states have legalised marijuana for medical purposes. That is helping boost total US cannabis sales from $6bn to $50bn by 2026, according to Cowen’s 110-page report, which included analysis from 10 senior researchers. And legalisation in Canada is opening up that market as well.

Cowen’s investment banking arm has also dipped its toe into the industry. It served as an adviser to Canopy Growth, a publicly traded medical marijuana company in Canada which raised $60m in December.


But the financial side of the industry remains stunted. Banks typically will not lend money to marijuana sellers and investors are leery of the penny stocks tied to cannabis because of pump-and-dump scams. Still, there is a large appetite for ways to wager on the marijuana boom. Investors sent shares of Scotts Miracle-Gro up 48% in 2016 because they saw the lawn-care company as a relatively safe way to capitalise on the trend. It sells fertilisers, lighting and other supplies for hydroponics, the indoor method of growing cannabis.

The big question is whether a federal crackdown is looming.

While President Barack Obama’s administration indicated it would not interfere with state-approved programmes, that policy may change.

President-elect Donald Trump’s pick for attorney-general, Jeff Sessions, has made it known he is no fan of marijuana. If his nomination is approved, he could enforce federal law.

No matter what happens politically, Cowen analyst Vivien Azer thinks it is impossible to ignore the industry.

She joined the firm from Citigroup, partly so she could cover cannabis. Her video announcing Cowen’s foray into the pot was the company’s most-viewed of the year. The 39-year-old wore a green checked shirt for the occasion and had her nails painted a similar shade.

Liquor Risks

The rise of marijuana is affecting many large companies in the alcohol industry, making it critical to study the topic, she said.

"Even though there is not a tonne of investable assets in cannabis, per se, I do cover Molson Coors and Constellation Brands and Brown-Forman and those are names institutional investors really care about," she said.


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