Cannabis is making news on a global scale. On December 28, 2020, the Tel Aviv Stock Exchange (TASE) announced it would launch a new index composed of shares of traded companies that work with medical cannabis research, cultivation, sale, and production.
Shares of these companies will be part of a new TA-Cannabis index. This is good news for cannabis companies around the world. While medical cannabis has developed over the past several years, it is still growing. This has attracted the interest of the capital market big-wigs, and the approach and classification imply that medical weed is just that; a medicine. Tellingly, the TASE set up a new, cannabis-dedicated subsector that exists within the biomed sector. The index will include nine firms with a market capitalization that totals NIS 1.7 billion ($529,000).
The nine firms and their most recent market valuations:
- InterCure / NIS 425 million
- Panaxia Israel / NIS 313 million
- Search Medical / NIS 229 million
- Tikum Olam Cannbit / NIS 200 million
- Together / NIS 144 million
- Pharmocann / NIS 127 million
- Intelicanna / NIS 118 million
- Cannassure / NIS 84 million
- Unvio / NIS 85 million
Investors will be able to invest directly in the shares of the companies themselves. This is due to several reasons. One, the firms are very speculative. Two, the market cap of the companies is low. Three, the index won’t qualify as an asset for Exchange Traded Funds in the beginning. For context, Exchange Traded Funds are generally funds that hold securities of certain indexes, representing a particular market or segment of it.
The index will serve as the proverbial canary in the goldmine, acting as a gauge to see how the shares in that sector are doing. In essence, this is a test. If it does well, then the market looks promising, and more investors will show up at the party. If it doesn’t pan out, any loss on investment will have a minimal impact on the company’s bottom line.