Cashing in on the cannabis opportunity in Lesotho

In February 2017, Lesotho became the first African nation to legalise marijuana for medicinal purposes.

Prohibition Partners’ recent African Cannabis Report estimates that the African legal cannabis market could top $7.1 billion by 2023 if key markets legalize medical and recreational marijuana.

With its first-mover advantage on the continent, Lesotho is undoubtedly the tip of the spear for cannabis investors looking to gain exposure to the African marijuana market.

Due to a handful of factors, Lesotho is one of the best countries in the world to grow weed.

Thanks to its progressive government, high altitude, and cultivation-friendly climate, the Kingdom of Lesotho is already shaping up to be a potential cannabis hub for the African continent and potentially medical marijuana markets around the globe.

Investing in Lesotho’s Up-and-Coming Cannabis Industry

While the country’s Ministry of Health awarded the first provisional cannabis operators licence in Lesotho to a company called Medi Kingdom allowing it to grow, process, and sell marijuana for therapeutic purposes, the company is privately-held and therefore not investable.

While the first company to win its Lesotho cannabis license is private, there are still some publicly-traded options for investors to consider looking at.

Unlike Canada and the United States, however, Lesotho has far fewer choices when it comes to publicly-traded cannabis stocks with noteworthy exposure.

In March of 2018, The Supreme Cannabis Company, Inc. made a strategic equity investment in Medigrow Lesotho, another federally licensed producer of cannabis in the Kingdom of Lesotho.

Despite the sizeable $10 million CAD investment, it still only got Supreme an approximate 10% ownership interest in Medigrow.

This may have been due to the fact that, according to BBC News, Medigrow was granted permission by the Lesotho government to begin cultivation in 2016, a year before the state legalised medicinal marijuana for all companies.

Then, in May of 2018, Canopy Growth Corporation announced that the company acquired Daddy Cann Lesotho PTY Ltd., doing business as as “Highlands” for approximately $28.8 million CAD.

Based on the average of the valuations paid for Lesotho cannabis license-holders by the four different cannabis companies, Halo Labs picked up Bophelo for at an approximate 66% discount to its implied value thanks to the advantageous deal it signed in December 2018 that leveraged its cannabis industry expertise.

Furthermore, at over 200 hectares (454 acres), Halo Labs’ partner, Bophelo, is the largest cannabis cultivation license in Lesotho – which will serve the 70 million + citizens of South Africa, the European Union, Australia, Israel and many other countries..

If we compare the four publicly-traded cannabis stocks with exposure to Lesotho by valuation data from Wallmine, we can also see that Halo Labs is the undervalued player in the bunch.