Tom Franck | CNBC
Shares of German cannabis company SynBiotic rose sharply on Thursday shortly after the new government pledged to legalize the drug.
Shares of the Munich-based company rose 33% to 29 euros ($ 33) on the Frankfurt Stock Exchange. The company now has a market capitalization of over 100 million euros.
An agreement was reached on Wednesday between the center-left Social Democratic Party, the Greens and the Free Democratic Party that will see them rule together in a three-way coalition for the first time. The so-called “traffic light” coalition agreed on plans to legalize the sale of recreational cannabis to adults in licensed stores.
Led by Lars Muller, SynBiotic aims to use compounds in cannabis to treat conditions such as chronic pain, stress, and sleep problems. Cannabis has a number of negative side effects depending on its strength, how often it is consumed and the individual.
Tech investor Christian Angermayer told CNBC by email on Thursday that he owns 45% of SynBiotic’s shares.
“The biggest profiteer [of German cannabis legalization] is my cannabis platform company SynBiotic, which is the only listed German cannabis company – and one of the largest in general, ”Angermayer said.
Angermayer has invested in a company called ATAI, which is trying to develop drugs that can be used to treat mental health issues. ATAI shares jumped 40% when it debuted on Wall Street in June, but their value has since halved.
Alexander Galitsa, an analyst at investment bank Hauck and Aufhauser, wrote in a note to clients on Thursday that the German cannabis market is set to experience “explosive growth” in the coming years.
Galitsa pointed to studies suggesting that legalizing cannabis could generate between 3.4 billion and 4.7 billion euros in annual tax revenue, while creating around 27,000 new jobs.
“Obviously, this is great news for SynBiotic which has already established a strong position in the European cannabinoid market and especially in Germany,” he said.
“With its pioneering advantage in Germany and broad value chain coverage, SynBiotic is ideally positioned to benefit from regulatory changes and establish itself as the European market leader,” added Galitsa.
The recreational use of cannabis in Canada was legalized at the end of 2018 and the annual turnover has already exceeded 2 billion euros, Galitsa said, adding that Canada has far fewer people.