Ascent Industries (CSE:ASNT) announced on Wednesday (November 21) the removal of executives, including its CEO, following the news that Health Canada intends to revoke the company’s federal cannabis licenses.

Shares of the Canadian cannabis company bottomed out on Wednesday following the issued announcement. The stock closed at a price of C$0.18, a 64.71-percent loss from its opening of C$0.28.


Ascent’s licensed producer (LP) subsidiary Agrima Botanicals faced a suspension of its producer’s and dealer’s licenses following an inspection from Health Canada in August.

The company notified shareholders on September 27 after finding out from Health Canada the new status of its licenses.

After the suspension was placed, Ascent was tasked with submitting additional information to challenge the review from the government agency.

Ascent told investors in the September announcement that the failings were seen by Health Canada as related to “record keeping and other compliance requirements.”

On Wednesday, the company said that Health Canada deemed the review unsatisfactory and intends to revoke Agrima Botanicals producer’s and dealer’s licenses.

The LP obtained an Access to Cannabis for Medical Purposes Regulations (ACMPR) license in November of 2017.

Following the review of additional information from Ascent, Health Canada has decided it intends to revoke the licenses of the LP.

In an email statement to the Investing News Network (INN), Health Canada said it informed Agrima Botanicals of its decision last Friday (November 16).

 

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“Health Canada is taking this action because, amongst other reasons, the company has failed to demonstrate that the suspension was unfounded and that the failure that gave rise to the suspension was rectified,” the government agency said.

In its statement to investors on Wednesday, Ascent said it has accepted the resignation of Philip Campbell as CEO and chair of the company; Reid Parr as co-founder, director and COO; and James Poelzer as chief business development officer.

The Vancouver-based company said it intends to “exercise its right to be heard under the Cannabis Act and Cannabis Regulations in order to maintain its licences.”

When reached for comment, Ascent declined to answer questions for this story.

“Health Canada’s review is focused on the period during which the Company was privately held. Health Canada asserts that unauthorized activities with cannabis took place under the Company’s ACMPR license during this period,” Ascent indicated to shareholders on Wednesday.

Deepak Anand, vice president of business development and government relations with regulatory firm Cannabis Compliance, told INN this is a never-before-seen enforcement from the federal agency.

“We haven’t seen this unprecedented move by Health Canada before,” Anand said in an email to INN.

Ascent went public on the Canadian Securities Exchange (CSE) on August 9 after completing an amalgamation with Paget Minerals.

The company closed its first trading day with a price of C$0.47. Ascent currently holds a valuation of just over C$50 million, according to the TMX Group.

 

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Newly appointed Interim CEO Blair Jordan, who acts as CFO for the company, said he and a newly assembled independent committee of the board will give this issue their full attention.

In an interview on YouTube show Midas Letter on October 9, Campbell addressed the original suspension.

“What happened is we had a surprise inspection from Health Canada at Agrima Botanicals, our wholly owned licensed producer, in August, and during that inspection it was clear there were some deficiencies that needed to be addressed,” the now-departed CEO said then.

In addition to its Canadian operations growing marijuana, Ascent holds assets in Nevada, Oregon and a recent entry into the California market.

Ascent has also assembled a European move with a subsidiary that has applied for a wholesaler dealer’s license and a controlled drug license in Denmark.

Despite a dip in the earlier segment of the trading session, shares of Ascent closed again at a price of C$0.18 on Thursday (November 22).

Ascent shares have been on a downturn since the original announcement from Health Canada was disclosed in September, diminishing in value by 33.77 percent since September 27.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Ascent Industries is a client of the Investing News Network. This article is not paid-for content.

 

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Cannabis Market Update: Q3 2020 in Review

Click here to read the previous cannabis update.

During the first few months of investment time in 2021, cannabis faced some volatility alongside optimism about federal changes in the most important market for the drug.

The cannabis business found its stride during Q1 thanks to policy change signals and consolidation.

To find out more, the Investing News Network (INN) asked experts about progress in the market during the first major period of the new year, and which developments investors should watch out for.

 

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Cannabis market update: New York and US potential boost operations

New York state’s legalization of recreational cannabis was a huge Q1 announcement that added pressure to the federal government when it comes to cannabis policy, said George Mancheril, co-founder and CEO of Bespoke Financial, a debt financing business with a particular focus on servicing cannabis businesses.

“It’s going to add to the chorus of voices in the federal scene to basically move sooner rather than later,” he explained to INN.

Following the US election in 2020, the momentum for cannabis businesses went on the upswing, as did company valuations, with the idea of expansion at the heart of it all, according to Mancheril.

Before starting Bespoke Financial, Mancheril learned from traditional investment banks, where he worked on lending, fixed income and debt markets with Goldman Sachs (NYSE:GS) and Guggenheim Partners.

Nawan Butt, portfolio manager with Purpose Investments, agrees with Mancheril. The financial expert told INN the ongoing legalization process seen in the US market is leading to expansion.

“It’s becoming more of a national move, then small pockets of proliferation. That’s very exciting about cannabis right now,” said Butt, who co-manages the Purpose Marijuana Opportunities Fund (NEO:MJJ).

This proliferation effect is causing a change in valuations and enthusiasm for US-based operations. Mancheril told INN that by the end of Q1, multi-state operators (MSOs) had raised approximately US$3.3 billion.

The cannabis lender said he sees the industry as having grown from the woes of 2019; it is now seeing a return to form by way of the excitement for an ongoing opening process in the US.

The expert explained that there is likely to be a windfall of capital in the wake of major federal changes for cannabis policy, although the timeline for these changes is becoming increasingly hard to predict.

Leading up to that capital influx, Mancheril said he wants to see operators really drill down on the value of desired assets and whether they make sense.

 

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“What I’d hope is that we continue to see bullish sentiment, but with some measure of responsibility, and let’s not just get over ahead of ourselves,” Mancheril told INN. “The idea is let’s minimize the volatility and continue growing responsibly.”

As far as struggles go, Butt explained that the cannabis industry has cemented itself as a growth-type sector, and as such there are macro environment pressures affecting the way these assets operate.

“We’ve seen this preference for cash flows at growth in the current or in the near future, rather than in the far future, and that’s what we’re seeing as far as valuations go in the broad market,” Butt said.

Cannabis market update: Volatility continues to rule as industry foundations build

Despite the industry’s current potential and the growing pains it has gone through as a whole in both the US and Canada, volatility remains a key factor in the cannabis investment scene.

Butt explained that the current shareholder base, which is dominated by hedge funds and retail investors, still lacks enough institutional support to avoid the day-to-day volatility cannabis has come to be known for.

These two investor groups, Butt said, can be easily spooked and excited by the news of the day when it comes to their investments.

“A lot of these institutions’ strategies are not about short-term profits, but they’re about long-term sustainability of the businesses themselves,” Butt said.

“That’s why you see a lot of volatility in the space, and that’s essentially what we’ve seen over the past, I’d say, three to two months as well,” he added.

That means investors shouldn’t expect an end to volatility anytime soon.

“It’s not about whether we continue to expect volatility, because we do,” Butt said. “We really think that the volatility will be taken out when the shareholder base becomes more institutional, but it’s really about understanding why there is volatility in the first place.”

Cannabis market update: Canadians talk up US business potential, but questions remain

A surge of mergers and acquisitions has taken over the Canadian cannabis sector recently as more producers see potential in America.

One of the biggest announcements in this regard came when Organigram Holdings (NASDAQ:OGI,TSX:OGI) secured a C$221 million investment deal from British American Tobacco (NYSE:BTI,LSE:BATS).

Using the funds, the two will work in tandem to develop new branded products designed to work on the international stage, including in the US. Organigram CEO Greg Engel previously told INN that the US represents a critical opportunity for Canadian companies, but the entry point isn’t as clean as it could be at the moment.

 

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While the long-term potential may be exciting for investors, Butt told INN he’s still unsure how the approach will work for Canadian companies.

The Purpose Investments expert said there will be plenty of space for the biggest Canadian names to pursue US market entries, beyond the initial hemp-derived CBD moves some operators have mde, since the US represents the biggest market in the world.

“But there’s just way too many unknowns right now to say exactly what that participation is going to look like, or when that participation will happen,” he said.

“What we do know is that currently the US MSOs are in a wonderful sort of position to expand on their market leadership that they have. And it will be tough for Canadians to come in and compete with them,” Butt said.

Canadian players still retain the upper hand at times in terms of valuation, which is confusing for both Butt and Dan Ahrens, chief operating officer and portfolio manager at AdvisorShares.

“The performance in quarterly earnings of US companies has been rather spectacular. They’ve knocked it out of the park in most instances,” Ahrens told INN.

Butt praised the recent performance reports from MSOs across the board, pointing to year-over-year growth lines and projections for continued positive performance.

In his view, share prices still don’t reflect company value. “Those are really being discounted at this point,” Butt told INN.

“We’ve seen the Canadian licensed producers be really hot stock performance-wise, outpacing the US (MSOs), and I’ll say it’s rather nonsensical to me,” said Ahrens, who oversees the AdvisorShares Pure Cannabis ETF (ARCA:YOLO) and the recently launched AdvisorShares Pure US Cannabis ETF (ARCA:MSOS).

Cannabis market update: Investor takeaway

The cannabis investment proposition finds itself at an interesting moment in time, as the entire sector eagerly awaits confirmation in the US at the federal level.

While for the Canadians waiting on the sidelines, this development may feel like a major necessity to address current financial struggles, for US-based operators, the heat around the corner could represent an increase to their already thriving operations.

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