This Hedge Fund Billionaire Is The Latest Buyer Of Marijuana Stocks

Hedge fund billionaire Leon Cooperman has personally invested in Chicago-based cannabis cultivator Green Thumb Industries (GTBIF), making him the latest big investor in marijuana stocks.

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Green Thumb founder and Chairman Ben Kovler told IBD that Cooperman, the founder of Omega Advisors, invested this year. He declined to say what Cooperman's stake was in the company or the dollar amount of the investment.

"It gives us confidence in the business plan," Kovler said of the backing from Cooperman. "It legitimizes what's happening. Here is a guy who has seen cycles over and over and understood how to create wealth over time.

In an interview with Marijuana Business Daily, Cooperman said, "I've known Ben Kovler since birth – he's an impressive young man. I think he has great vision for this industry."

Kovler, whose father is in the investment business, said he believed the two were first introduced in the early 2000s.

Marijuana stocks have boomed for much of this month. Not Thursday, however. Cronos Group(CRON) plummeted 28% in the stock market today, after short-seller Citron Research raised questions about the size of its distribution agreements in Canada, transparency surrounding a product recall this year and the timing of a round of fundraising.

Canopy Growth (CGC) fell 4%. Tilray (TLRY) gave up 4.9%. Green Thumb, which trades over the counter, slipped 1.7% in more than five times the normal volume.

Green Thumb: No Bubble In Marijuana Stocks

During Green Thumb's earnings call late Tuesday, Kovler cautioned against comparisons to a marijuana industry bubble.

"There is a tidal wave of consumer demand, and this is real," he said. "This is not like the internet in the late '90s, where people thought the demand was coming.

"The demand for cannabis is here," he continued, "and the consumer wants trusted, reliable brands and products as a substitute for alcohol and opioids, and more and more, as a supplement to enhance and elevate his or her daily life."

Kovler also said the Illinois market is at the beginning of an "inflective" period, while the market in California couldn't be ignored.

He added that the company was actively studying the international market, but remained "pretty heads-down in the U.S."

Part of the recent euphoria in marijuana stocks was stoked by the planned $3.8 billion investment in Canopy Growth from Corona parent Constellation Brands (STZ). Goldman Sachs(GS), where Cooperman was once a partner, advised Constellation on that transaction. Bank of America Merrill Lynch is providing the financing.

And before that, Acreage Holdings, another U.S. cannabis company, said in July that it landed $119 million in new funding. Tilray, the first pure-play marijuana IPO on a major U.S. exchange, said its debut raised $163.6 million in net proceeds.

Green Thumb went public in Canada via a reverse takeover in June. The company has eight manufacturing facilities and licenses for 59 retail locations across eight markets. During the second quarter, the company's revenue nearly tripled — surging 291% — to $13.6 million. Net income was positive.

Cooperman Looks Past Omega

Cooperman was present on Green Thumb's second-quarter earnings conference call on Tuesday, during which he congratulated the company on its launch. He asked management several questions.

The first pertained to a bill in Illinois, signed into law on Tuesday, that would enable access to medical marijuana as a replacement for opioids such as Vicodin and OxyContin. The others were about Constellation's investment in Canopy, and the opportunities in California and internationally.

According to the Wall Street Journal, Cooperman said he was winding down Omega due to his age, 75, and an effort to reduce stress.

"I don't want to spend the rest of my life chasing the S&P 500 and focused on generating returns on investor capital," he said in a letter to clients cited by the Journal.

Last year, Omega agreed to pay roughly $5 million to settle allegations from the SEC that the firm ran afoul of insider-trading rules. According to a regulatory filing in August, Omega's biggest holdings included First Data (FDC) and Ocwen Financial (OCN).

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