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Cannabis Investment Report | December 2017 through minority investment, by acquisition or otherwise. Examples of the emergence of such strategic investors include Constellation Brands, Inc.’s (NYSE: STZ) approximately $190 million investment in Canopy Growth Corporation (TSX: WEED) and the more than $400 million spent by The Scotts Miracle-Gro Company (NYSE: SMG) to acquire soil, fertilizer, hydroponic equipment and lighting companies that are supplying the cannabis industry. These types of transactions help support the valu- ation levels in the industry and, to an extent, validate investors enthusiasm for the industry. The stock price performance and valuations of cannabis-related companies continue to be robust, irrespective of the aforementioned funding gap. In general, we believe that valuations in both the public and private markets are being driven more by investors’ expectations for the future growth of the cannabis industry than by individual company fundamentals. Similarly, especially in the over-the- counter stock market in the United States—where most of the public cannabis-related companies are traded—stock price fluctuations and valuations tend to be heavily influenced by the illiquidity in most stocks and the trading strategies of those involved. Overall, we believe that the capital markets for the cannabis industry will become more efficient and rational over time as we expect increased participa- tion from institutional and strategic investors. = Public Capital Markets More than 300 cannabis-related companies are traded on one or more stock markets in the United States, Canada and other international locations. Although these companies are publicly traded, most are in early stages of development, have de minimis revenue and are not profitable. We use the term “cannabis-related” to include companies that participate solely in the cannabis industry and those that participate in the cannabis industry in addition to other industries or markets. The ability of companies to access capital markets is dependent largely on the legal landscape for cannabis in a particular country. For example, the capital markets in countries such as Canada, Australia, Germany and Israel (countries that have a more permissive legal framework for cannabis) have been receptive to cannabis-related companies, while the reception by capital markets in the United States has been more varied. In evaluating publicly traded companies, an investor should be cognizant of where the company is traded, as there are significant differences across the various exchanges and markets with respect to list- ing requirements, liquidity, independent research and types of investors. Many cannabis-related com- panies are traded on more than one market in order to attract additional investors and facilitate trading in multiple jurisdictions. However, we believe that it is instructive to evaluate a company based on the primary market on which it trades (We determine a company’s primary market based on a number of factors, including stock price history, trading volume and availability of estimates.) In the United States, a limited number of cannabis-related companies are traded on the Nasdaq Stock Market (Nasdaq), the New York Stock Exchange (NYSE) and the NYSE American (NYSE American), the NYSE’s market for small to mid-size capitalization companies. In addition, more than 200 cannabis-related companies are traded on the over-the-counter stock market (OTC). Nasdaq and 118 © 2017 Ackrell Capital, LLC | Member FINRA/SIPC HOUSE_OVERSIGHT_024754