The Latest Big-Name Pot Investor: Mike Tyson

Too much fragmentation in the pot industry could make it difficult for producers like Canopy Growth Corp (TSX:WEED) to obtain significant market share.

| More on:

The legalization of marijuana is getting many people excited, including Mike Tyson. California is the latest U.S. state to allow the sale of recreational marijuana, which took effect on January 1.

The former boxer, along with other business partners, are going to develop a ranch named after Tyson in hopes of attracting both buyers and sellers to what’s being referred to as a 40-acre “cannabis resort.” However, Tyson isn’t the only big name to get involved in the marijuana industry.

Snoop Dogg has long been linked with the growing popularity of cannabis, and the rapper even partnered with Canopy Growth Corp (TSX:WEED). Snoop Dogg is involved with many marijuana companies and has a lot invested in the industry. Even Nick Lachey, former boy-band star, also has interests in cannabis and pushed for Ohio to legalize pot.

Is this a sign of things to come?

Cannabis is all the hype these days, and we’ve yet to see big companies get involved. However, it’s likely to stay that way until marijuana is legalized at the federal level, particularly in the U.S. Once pot is legal nationwide, we’re likely to see some big-name tobacco and pharmaceutical companies take a position in the lucrative cannabis industry.

Canadian companies will have to wait before expanding in the U.S.

Investing even a moment too soon in the U.S. could be problematic, as Aphria Inc (TSX:APH) learned when it was singled out as the TSX cracked down on companies that were not in compliance with U.S. laws.

Although individual states have legalized pot, until it is legal at the federal level, companies like Aphria will run afoul with the listing agency for not being compliant with its requirements.

Canopy Growth has avoided those issues by focusing its expansion on other parts of the world, with Jamaica and the Netherlands just a couple of examples of where the company has set its sights.

With the pot industry in Canada expected to hit just over $6 billion, much of the growth will have to come from outside the country. After all, at its current valuation, Canopy Growth’s $6.85 billion market cap would put it at a higher value than the entire estimated pot industry in Canada.

What does all this mean for cannabis investors?

A famous boxer starting up a ranch is not a major development in the cannabis industry, but it does indicate a lot of hype and growth potential for the industry.

However, the more concerning aspect is that we are seeing yet another example of why the cannabis industry is likely to be very fragmented. With everyone trying to get a piece of the pie, it’s going to be very difficult for companies like Canopy Growth and Aphria to grow despite the potential in the industry.

What might be more likely is that a big company enters the industry once we see pot legal everywhere, at which point many of these smaller companies will probably end up being acquired. However, that could still be many years away.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Investing

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

TFSA Contribution Limit Stays at $7,000 for 2025: What to Buy?

This TFSA strategy can boost yield and reduce risk.

Read more »

calculate and analyze stock
Investing

3 No-Brainer TSX Stocks Under $50

These under-$50 TSX stocks have solid growth potential and can deliver significant returns over time, beating the benchmark index.

Read more »

Make a choice, path to success, sign
Dividend Stocks

Already a TFSA Millionaire? Watch Out for These CRA Traps

TFSA millionaires are mindful of CRA traps to avoid paying unnecessary taxes and penalties.

Read more »

A plant grows from coins.
Stocks for Beginners

1 Canadian Stock Ready to Surge In 2025

First Quantum stock is one Canadian stock investors should seriously consider going into 2025, and hold on for life!

Read more »

doctor uses telehealth
Tech Stocks

What to Know About Canadian Small-Cap Stocks for 2025

Small cap stocks are a great way to experience outsized gains. Here is what you need to know about small…

Read more »

Canada Day fireworks over two Adirondack chairs on the wooden dock in Ontario, Canada
Tech Stocks

Best Tech Stocks for Canadian Investors in the New Year

Three tech stocks are the best options for Canadians investing in the high-growth sector.

Read more »

Happy golf player walks the course
Dividend Stocks

Got $7,000? 5 Blue-Chip Stocks to Buy and Hold Forever

These blue-chip stocks are reliable options for investors seeking steady capital gains and attractive returns through dividends.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Investing

Fortis: Buy, Sell, or Hold in 2025?

Fortis is giving back some of the 2024 gains. Is FTS stock now oversold?

Read more »