Global Opportunities Beyond the Radar

Your Next Stock Breakthrough: Legal Cannabis in NZ

Recreational pot

Big developments in the Kiwi cannabis scene over the past few weeks. Let’s take a quick bird’s eye overview of the situation and players involved.

At the moment, there are fewer than 10 companies making moves this early. They’re preparing for the referendum in 2020, which will likely result in medicinal cannabis being legalised. A few of these firms hold state-issued licenses, but full-scale operations will have to wait until the law passes.

Let’s start from the top — regulation.

Under the Misuse of Drugs Act 1975, unauthorised possession of any amount of cannabis is illegal in New Zealand.

It’s been a controlled substance since the 1927 Dangerous Drugs Act, even though it was used as a prescription medication for a short period.

Today, if a person is caught with any amount, they can incur up to a three-month imprisonment or a $500 fine. Growers can get up to seven years. Sellers can get up to eight years.

Interestingly, cannabis oil and hashish are separately classified as class-B controlled drugs, which means manufacturers or suppliers can be hit with a 14-year imprisonment.

It’s in the same class as opium, MDMA, or morphine.

As greater research has been conducted on cannabis, the call for it to be legalised…or at least rescheduled…has grown louder.

It’s led up to the Medicinal Cannabis Amendment Act passed last December…and the announcement of a referendum in 2020. The Act allows terminally ill patients to consume the product for medicinal purposes.

And in December, the New Zealand police amended their approach towards cannabis to incorporate greater power of discretion and an emphasis on alternative resolutions over prosecution.

It’s a sign that the state is changing its unofficial stance on the substance…and warming up for an official legalisation next year.

Positive news for the industry.

In terms of providers, there are only a handful companies established this early:

For investors, you can stake a claim in most of these companies now via their individual crowdfunding offers…and you can actually buy stocks in THC Global today on the ASX. In the next few weeks, we will likely hear more about Cannasouth’s IPO on the NZX.

But the big question is — will the referendum pass in 2020? If not, these companies may not have a leg to stand on.

According to Auckland University, half of New Zealanders aged 15–65 have tried cannabis. Half!

And one-in-six admit to regular use. That represents 1.5 million Kiwis who have dabbled…and nearly half a million who use on a regular basis.

According to the UN, New Zealand is among the top pot-using nations in the world…

In July of 2018, the NZ Drug Foundation conducted a poll and found surprising support for a positive referendum result. Here’s what they found:

Illegal Decriminalise Legal Decriminalise/legalise
Personal possession 31% 32% 35% 67%
Personal growing 38% 29% 32% 61%
Growing for friends 69% 18% 12% 30%
For pain relief 13% 17% 70% 87%
For terminal pain relief 10% 17% 72% 89%
Selling from a store 60% 9% 29% 38%

Data source: NZ Drug Foundation

The NZ Herald recently reported a newer poll, conducted by Horizon Research, that found similar results. When asked if NZ should legalise the personal use of cannabis, 60% said yes, 24% said no, and 16% were undecided.

Those aren’t small numbers. In fact, it seems likely that a referendum would result in cannabis being legalised to some degree. But the extent and structure of that plan will depend on the politicians advancing the legislation. We’ll simply have to wait and see what they come up with.

In the meantime, perhaps you can begin considering your opinion on the matter…and how you’d view cannabis companies as investments. The time for action is on your doorstep — best to be ready.

We’ll discuss possible investment strategies in upcoming issues of Money Morning New Zealand.


Taylor Kee
Editor, Money Morning New Zealand

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