Analysts at the New York-based company have assembled a trove of data on the burgeoning field of semi-legal marijuana. And on Thursday Cowen will host its first investor conference devoted to the controversial topic.
The firm is betting it’s 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 U.S., 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 Americans will live in an area where it’s 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. The same goes for people interested in health care, industrial agriculture and other areas, she said.
Twenty-eight states also have legalized for medical purposes. That’s helping boost total U.S. cannabis sales from $6 billion to $50 billion by 2026, according to Cowen’s 110-page report, which included analysis from 10 senior researchers. And legalization in Canada is opening up that market as well.
Cowen’s investment-banking arm also has dipped its toe into the industry. It served as an adviser to Canopy Growth Corp., a publicly traded medical-marijuana company in Canada that raised $60 million in December.
But the financial side of the industry remains stunted. Banks typically won’t loan money to marijuana sellers, and investors are leery of the penny stocks tied to cannabis because of pump-and-dump scams.
Still, there’s a huge appetite for ways to wager on the marijuana boom. Investors sent shares of Scotts Miracle-Gro Co. up 48 percent last year because they saw the lawn-care company as a relatively safe way to capitalize on the trend. It sells fertilizers, lighting and other supplies for hydroponics, the indoor method of growing cannabis.
The big question is whether a federal crackdown is looming. While the Obama administration indicated it wouldn’t interfere with state-approved programs, that policy may change. President-elect Donald Trump’s pick for attorney general, Jeff Sessions, has made it known that he’s no fan of marijuana. If his nomination is approved, he could decide to enforce federal law.
No matter what happens politically, Cowen analyst Vivien Azer thinks it’s impossible to ignore the industry. She joined the firm from Citigroup Inc., partly so she could cover cannabis — and takes the opportunity seriously. 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 checkered shirt for the occasion and had her nails painted a similar shade.
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 ton of investable assets in cannabis, per se, I do cover Molson Coors and Constellation Brands and Brown-Forman and those are names that institutional investors really care about,” she said.
Brown-Forman Corp. and Boston Beer Co. have already added legal weed as a risk factor in their regulatory filings. And Azer’s research suggests that the concern is warranted: Beer isn’t selling as well in states where recreational pot is legal.
Cowen’s conference Thursday was intended to be a small gathering, but demand has been higher than expected, she said. More than 150 people will be attending the event in New York.
While some competitors have published one-off notes on weed, Azer sees herself as the chief luminary for the turbulent industry.
“Investors are relying on me alone,” she said.