The value of cannabis stocks are tied to the stories being told about them. Photo / Getty Images
The value of cannabis stocks are tied to the stories being told about them. Photo / Getty Images
Every PR practitioner believes the work they do makes a tangible impact on their business' or their client's bottom line. The challenge in demonstrating this clearly to an organisation's C-suite and board is that the factors which influence the marketplace are so complex.
There are so many variables at play.Huge marketing campaigns, tales of negative or positive customer experience floating about on social media, supply chain issues in foreign continents, living cost fluctuations affecting consumer purchasing power – all affect share price and make it difficult to attribute which factor caused which shift.
While we believe the positive goodwill or interest we're building is affecting an organisation's commercial performance, it can be painfully hard to separate the impact of our efforts from all that noise.
For that reason, there's one stock I've been watching very closely. The listing of medicinal cannabis research firm Cannasouth on the NZX earlier this year has provided a fascinating case study for the impact of a story on share price. When measuring that impact, it's the purest case study one could hope for because, in terms of their interaction with the public, right now a 'story' is all they have.
Cannasouth isn't selling a product yet, at this stage they're not even sure what sort of products they'll be allowed to sell. Their consumer interaction is nil. They're also not particularly visible with above the line advertising. Currently, their value is driven entirely by the power of their story delivered largely through the media and investor relations.
Here are a few threads of that story: Is their promise worth investing in? Does the market feel that the impending referendum will fall their way? How big do we feel the green rush might be?
The beauty of Cannasouth being the only currently listed company in this space is that we can follow the ebb and flow of the story through their share price, without having to consider their position relative to competitors such as Helius, Rua, etc. They're the perfect control.
On September 3, the Helen Clark Foundation issued a report backing regulation of and access to a legal cannabis market. The report was called 'The Case for Yes'. Cannasouth's stock jumped from 0.41 to 0.75 cents over the next week.
Cannasouth's stock price shot up quickly after the release of 'The Case for Yes' report. Image / File
The Case for Yes is not a market development, it's not consumer behaviour: it's a PR tactic. It's a well-crafted narrative that lent credence to the story of New Zealand's cannabis industry, and we saw that reflected in Cannasouth's share price.
Noting the jump, Jamie Gray published a story on Cannasouth stock in this paper. That story ran on September 10. Here's what Google Trends analytics for Cannasouth looked like over that period:
Reports in the Herald have directly influenced the level of interest in Cannasouth. Photo / File
That graph is demonstrating over that week Kiwis were twice as interested in Cannasouth than at any other point in the last year, even during their IPO.
Just this past week we've seen Cannasouth stock drop precipitously at the same time the Government made its first release of public information on the two referendums to be held at next year's General Election.
Media coverage has also led to significant dips in Cannasouth's fortunes. Photo / File
That release included strict language around the proposed regulations to govern legalised cannabis, including strong restrictions on marketing, cultivation and licensing.
While that may have dampened the enthusiasm of some members of the 'Green Rush', we then saw over the following days strong positive commentary from spokespersons for Cannasouth, Helius and others welcoming the release and the clarity it provides. At the same time Cannasouth stock began to recover.
I'm not saying Cannasouth are proactively driving the twists and turns in the commercial cannabis story that are clearly affecting their share price - although with the right strategic advice they could be. What I am saying is that if you are interested in the drivers of investor behaviour, watch this space.
This story is going to have plot twists aplenty over the next year and the script will be recorded for all to read, in a spiky line punctuated by decimal points.
In the end, it may all come down to which side has the best PR – the Yes or the No.
- Claudia Macdonald is Managing Director of Mango Communications. She is a PRINZ Fellow and board member.
