Cannabis / Marijuana, EDITORIAL
Top Speculator Peter Thiel Makes a Big Bet on the Cannabis Industry
By Anthony Wile - January 10, 2015

As we predicted long ago, cannabis is rapidly emerging as an industry. Those of us who saw the opportunity knew the large money would be made as the market gradually developed venture-capital and IPO participation. That's what is occurring now.

Ultimately, this is going to be a worldwide industry, one of our largest and most popular. The promise is immense and the possibilities are still not fully understood by most. But the starter's gun has sounded. Venture capitalist extraordinaire Peter Thiel has now taken his first big cannabis position.

Thiel's track record includes placing startup funds with both PayPal and Facebook. Here's more from Wikipedia:

Thiel cofounded PayPal with Max Levchin and Elon Musk and served as its CEO. He also co-founded Palantir, of which he is chairman. He serves as president of Clarium Capital, a global macro hedge fund with $700 million in assets under management; a managing partner in Founders Fund, a venture capital fund with $2 billion in assets under management; co-founder and investment committee chair of Mithril Capital Management; and co-founder and chairman of Valar Ventures.

He was the first outside investor in Facebook, the popular social-networking site, with a 10.2% stake acquired in 2004 for $500,000, and sits on the company's board of directors. Thiel was ranked #293 on the Forbes 400 in 2011, with a net worth of $1.5 billion as of March 2012. He was ranked #4 on the Forbes Midas List of 2014 at $2.2 billion.

In a way, Thiel's participation should not come as a surprise. He styles himself a "libertarian" and the decriminalization or legalization of cannabis usage is philosophically aligned with some libertarian values. From a purely industrial and financial perspective, when investors like Thiel step forward, the industry surely benefits from a funding standpoint.

And here, from Forbes, is more on the latest deal:

Legal Marijuana Co. Privateer Holdings Scores Millions From Peter Thiel's Founders Fund … Brendan Kennedy bristles when you ask him if smoking pot recreationally is still a stigma in the American workplace. In fact, he says that moment passed two or three years ago, as the majority of Americans now support legalizing marijuana, and even more approve its medicinal use. "Anyone who wants to consume is already consuming it," Kennedy says.

So what's Kennedy smoking? As cofounder and CEO of Privateer Holdings, he's poised to cash in on that trend in a big way, tapping a market that he believes is worth $50 billion in the United States and four times that worldwide. And now with major institutional venture backing, he's hoping to blaze a trail in making legal, legitimate bucks off that trend.

Privateer Holdings, a private equity firm with three major distinct investments in the legal cannabis space, announced Thursday that it's raised millions from its first major institutional investor, Founders Fund, as part of an ongoing Series B Round. The firm led by billionaire Peter Thiel has invested undisclosed millions but isn't leading the round, which will total $75 million between a $60 million raise and a $15 million convertible debt note. That brings the company's total funding to date to $82 million, the rest of it from earlier wealthy individuals and family offices.

The deal confirms intentions Kennedy made clear in an interview with Fortune in July, when he announced intentions to bring an institutional investor onboard. In December, Business Insider reported the deal could value the company at more than $400 million.

Privateer, the article tells us, operates three fully-owned subsidiaries involved in the cannabis industry. Tilray grows medical marijuana in British Columbia. Leafly is a cannabis-information and news site located in the US that supposedly gets 4 million visitors a month. And now there's Marley Natural, a 30-year licensing deal for cannabis products in partnership with the Marley family.

According to the Forbes analysis, "Privateer and Founders Fund are betting that the marijuana industry in the United States now has the popular support to be ripe for a new wave of trusted major brands."

As of November 2014, according to USA Today, "Twenty-three states and the nation's capital already permit medical marijuana. [Now] Washington, D.C., Alaska and Oregon join Colorado and Washington in allowing adults to possess and consume marijuana."

The rapidity with which cannabis decriminalization and legalization has moved in the US – and abroad, as well – may have surprised some but here at The Daily Bell we've predicted it almost from the beginning. We could see right away the forces gathering around cannabis were going to be almost unstoppable in short order, and indeed, they've proven so.

Others have come to share the same view and believe the industry will continue to rationalize itself along modern lines. Privateer execs, according to the article, believe the ultimate profile of the cannabis industry will be similar to alcohol or soft drinks, "where economies of scale are very important." In such instances, those first-in have an opportunity to create brand awareness and broad strategic networks.

Privateer hopes that the Founders Fund investment will encourage other venture capital firms to investigate the field. The first investment usually makes the next one easier, and Privateer itself could benefit from more investment interest, obviously.

Like Privateer and Founders Fund, High Alert has analyzed and determined what we believe to be the best way to capitalize on the cannabis trend. Count us in.

Posted in Cannabis / Marijuana, EDITORIAL
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