Please ensure Javascript is enabled for purposes of website accessibility

Forget Bitcoin! This 1 Stock Is Disrupting the Marijuana Business

By Eric Volkman - Jan 24, 2021 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This company is blazing a path with the way it helps cannabis companies finance their operations.

Everyone and their cousin loves a cutting-edge, disruptive company. The marijuana industry has one in particular that any investor considering the sector needs to be aware of.

Longtime Motley Fool contributor Eric Volkman has the skinny in this video clip from a conversation with cannabis and healthcare bureau chief Corinne Cardina during Motley Fool Live. This segment was recorded on Dec. 22, 2020.

Corinne Cardina: One stock that really is in a position where it benefits from pot companies not being able to get traditional loans and capital from banks and financial services. Of course, that's Innovative Industrial Properties (IIPR 4.94%). It's a REIT stock. What do you think about the future for IIPR as we slowly, but --hopefully steadily -- move toward decriminalization?

Eric Volkman: I think they still have a good future, because marijuana even if it's decriminalized, even if it's legalized, even if [marijuana companies] have full access to banking services...

Any kind of business getting a loan from a bank is, well, [that] wouldn't be your first choice for a financing option because it's expensive. Now, like in Canada, for example, some companies are paying double-digit interest rates on bank loans like credit facilities that they get from banks and syndicate lenders. In the States you might have a similar situation just again because of the challenges of the industry generally.

The beautiful thing about what Innovative does is, they do sale-leasebacks in which the financing advantages you're talking about, they'll actually buy a facility like a grow room or a production facility, a factory, and then lease it back to the company that formerly held it.

For the companies, they instantly get this nice little bucket of cash. They don't have to deal with, they don't have to spend money and resources on managing the facility. It can be done relatively quickly, and you don't have to sit there and negotiate with bankers and argue over interest rates, returns, things like that. It's a fairly clean way to do it.

The downside, of course, is that you don't hold this asset anymore, but at the end of the day, especially when you're operating in a habitually money-losing industry, hard assets like that -- property, plant, and equipment -- can be more of a burden than anything else.

So I think Innovative will continue to do well, and also they're basically a first-mover. They're still the only publicly traded marijuana specialty REIT. They're going to be, if not a go-to financing solution for a lot of marijuana companies in this country, they're going to get serious consideration, they'll be a leading candidate for a financing option.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Innovative Industrial Properties Stock Quote
Innovative Industrial Properties
$119.33 (4.94%) $5.62

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.