Curaleaf shares jump 10% on upbeat study on medical uses of CBD

Shares of small-cap marijuana company Curaleaf Holdings, whose 2018 IPO turned majority shareholder Boris Jordan into a billionaire, rose nearly 10% in over-the-counter trading yesterday, August 21. The rally was fueled by a scientific study suggesting that a substance found in marijuana, cannabidiol (CBD), may help treat alcoholism, according to the Motley Fool. It thinks that further successful studies could lead to "something of a revival" in demand for CBD.

Curaleaf jumped nearly 9.6% to $2.86 per share yesterday in over-the-counter trading in New York. It climbed 9.4% on the Toronto exchange to CAD3.95 per share.

The gains were sparked by the news that CBD probably helps with alcoholism, writes Eric Volkman, a contributing Motley Fool finance and stock market analyst.

Curaleaf makes products with CBD. The compound, Volkman writes, had its moment of popularity some years ago, but has since devolved into basically a "low-profile niche product." Other successful studies like this, however, could lead to "something of a revival," he argues.

Citing a report on the study published in the scientific journal Nature, Marijuana Moment said that researchers at the University of California, San Diego conducted the clinical trial on 166 rodents. Two cohorts were given shots of synthetic CBD, and another was used as a control group. The rodents that ingested the CBD demonstrated milder alcohol withdrawal symptoms and had a lower risk of relapse.

The study was partially funded by the federal government's National Institute on Alcohol Abuse and Alcoholism, which, Volkman says, "might at least slightly tilt officialdom's sentiment on marijuana-derived substances." The Trump administration is weighing a relaxation of federal law on medical marijuana. At the same time, a "draft document detailing recommendations on promoting health in American youth... on Trump's desk" flags the risks of THC, the compound in cannabis responsible for its intoxicating effect.

Curaleaf, originally called Palliatech, was founded in 2010 by banker William Todd, a neighbor of Boris Jordan, Forbes reported. At the time, Jordan was building a business in Russia. He was among the founders of investment bank Renaissance Capital, his investment group Sputnik was active in privatization, he chaired the board of oil company Sidanko, and he managed television network NTV, according to Forbes.

Initially, when his neighbor suggested investing in marijuana, Jordan replied: “are you nuts? I’m not investing in drugs.” He only later learned that medical marijuana was not classified as a drug, he told Forbes. When Todd developed a device that allowed patients to use medical marijuana without smoking it, Jordan changed his view and became one of Palliatech’s first investors.

The device business ultimately failed, but Jordan proposed shifting into medical marijuana itself with the aim of becoming a major U.S. player. Between 2013 and 2015, he nearly bought out Palliatech entirely, as the company aggressively acquired competitors and secured licenses in states that allowed medical marijuana sales. By 2018, the company was practically a monopoly in the U.S. market, Forbes wrote. Still, its expansion, including its ability to raise funding, was constrained by the federal ban on marijuana.

That year, Curaleaf became one of the industry’s pioneers to go public, holding an IPO on a Canadian exchange, as marijuana is legal in Canada. The company raised $400 million, nearly triple its initial target, with a valuation of $4 billion, Forbes reported. Jordan, who held a 34% stake after the IPO, became a billionaire with a fortune of at least $1.4 billion.

Today, Curaleaf has a market capitalization of CAD3 billion ($2.16 billion at current exchange rates) on the Toronto Stock Exchange. It has seven "buy" ratings versus one "hold" from Wall Street coverage analysts, according to MarketWatch. The average target price of $3.22 per share implies 12.6% upside versus current levels.

The AI translation of this story was reviewed by a human editor.