Indoor ag – growing crops in warehouses, container farms and greenhouses – has become an attractive private investment sector over recent years. In the past two years alone, private investors have invested more than $2.5bn in the sector. High profile investors in the space include Amazon, Bain Capital Ventures, Cargill and Walmart. But what about indoor ag in the stock market?

Traditionally, the next step for a fast growing company is to list on public markets, and many indoor ag firms have chosen to do just that. For many, the mechanism that they utilized was a special purpose acquisition corporation (SPAC). Listed entities can acquire private indoor ag companies, side stepping the usual rigors of the initial listing process. It speeds up the path to becoming a listed company. As SPACs saw a renaissance, and interest rates remained low, so indoor ag companies benefited by listing in increasing numbers.

Amidst the optimism and overall upward growth of the industry, at Contain, we have been tracking the companies listed through our stock market index, and since the initial surge of listings, they have consistently underperformed the broader market index.

The SPAC Bubble Bursts

By mid 2022, the SPAC bubble burst and the euphoria that surrounded the indoor ag sector faded. The sector’s underperformance has most widely been linked to its poor profitability. There’s no doubting that the listed sector has struggled with widespread losses. It has seen numerous bankruptcies, from companies like Portuguese Agricool and Dutch Glowfarms, layoffs and earnings misses. Thanks to high initial capital costs and an energy-driven increase in operating costs over the past year, indoor agriculture is especially vulnerable to the withdrawal of capital lines from loss making firms. But this is only part of the story, as there are plenty of profitable sectors that have also struggled. Media outlet CNBC recently described how the tech sector lost $7.4 trillion in market value over the past year, for example.

The Contain Indoor Ag Stock Index™ follows the returns of a portfolio of controlled environment agriculture related listed stocks. It tracks the performance of indoor ag in the stock market. The index is mostly US listed, but it also includes European, Canadian and Japanese exchange listed stocks. Stocks that are focused only on cannabis are excluded.  In this briefing paper, we cover the index composition, performance and other attributes.