Tuesday, January 13, 2015

Marijuana, Investors, and Columnists

Marijuana, Investors, and Columnists

At times it is difficult to find topics worthy of a blog post.  I’m in one of those periods where the financial news stories seem dull and repetitive.  I’m wondering if Andrew Ross Sorkin, the editor of Deal Book, isn’t facing the same problem.  In his column this morning[1], he tried to use a small investment by a venture capital firm in the marijuana industry to raise the question whether ethical issues will hinder PE managers from investing in pot.  Writing about marijuana and investing is sure to draw attention, especially when they’re on the front page of the business section of The New York Times. However, there’s no substance to the column.

Peter Thiel, co-founder of PayPal and an influential investor, made the investment.  Mr. Sorkin tries to connect Mr. Thiel’s investment to the trend toward socially responsible investing by institutional investors.  Over the past forty years, any number of investors have placed restrictions on investments in alcohol, tobacco, and gaming.  Some institutional investors are now also considering the divestiture of carbon-based energy companies.

Investments in the marijuana industry face far greater challenges than potential prohibitions from socially responsible investors.  For starters, the production of marijuana is still not legal under federal law.  Second, the product is only available in a few states.  Third, it’s not clear that the marijuana business will ever require mass amounts of institutional capital.  Even if some investors reject marijuana’s medicinal benefits and see it as a social evil, there will still be plenty of available capital if the nascent industry one day needs to draw upon money from public pension plans or large endowments.  Capital isn’t going to be an issue.

Mr. Sorkin’s column accomplished at least one thing.  It gave me something to write about.

[1] http://dealbook.nytimes.com/2015/01/12/ethical-questions-of-investing-in-pot/?ref=business

No comments:

Post a Comment