The continued prevalence of mergers and acquisitions (M&A) and companies operating in the US raising capital in Canada dominated the conversation for the cannabis public space in 2018.

Over this past year, cannabis players also began to gain traction on bigger platforms and started finding emerging opportunities to add value for shareholders.


From conversations on the true value of cannabis plays, a barrage of new listings in the US and the crucial legalization effect in Canada, here the Investing News Network (INN) brings investors a closer look at the significant trends in cannabis for 2018.

US Election 2020 and Cannabis

 
Investing in cannabis? Read what experts have to say about cannabis and the US Election!
 

For a recap on the year and a cannabis overview on a quarter-by-quarter basis in 2018, investors can read up on Q1, Q2 and Q3.

Cannabis overview 2018: Volatility dominates the public space

After the progress and growth seen in 2017, 2018 started by reminding investors just how quickly things can change in the cannabis space.

A massive downturn in the stock market, led by what was largely attributed to a market correction on valuations and share prices, caused pot stocks to hit new lows across the board.

“Even knowing that marijuana is an emerging sector, I was surprised by the extent of the volatility,” Steve Hawkins, director and CEO of Horizons ETFs, the company behind the Horizons Marijuana Life Science Index ETF (TSX:SEED), told INN.

Brayden Sutton, CEO of 1933 Industries (CSE:TGIF), said this slash in the public sector was “overdue” in order to “keep valuations in check and avoid going further into bubble territory.”

Volatility continued early in 2018 after then-Attorney General Jeff Sessions removed the Cole Memo, a piece of government guidance acting as a pillar of protection for the US marijuana industry.

Market watchers were concerned that the change would open the doors for a potential crackdown on the thriving industry. However, the change in policy ended up being a dud, and did not slow down growth in the US marijuana market.

Sessions stepped down from his role in November, with pot stocks rallying based on his departure.

Another dominant volatility theme was the rollercoaster ride for holders of Canadian licensed producer (LP) Tilray (NASDAQ:TLRY).

Tilray, the first Canadian cannabis company to list directly on the NASDAQ without uplisting from Toronto, saw a run up in its share price in September that catapulted the stock to just above US$300.

Due to a limited float of shares, Tilray quickly became a trading asset as opposed to a steady security to purchase. Tilray’s stock chart called into question just how valuable cannabis companies really are.

Thanks in part to its NASDAQ listing and attention in the US marketplace, the company managed to reach a market capitalization of over US$13.5 billion at the height of the rush.

Debate ensued on whether Tilray’s path was beneficial or detrimental to the cannabis public space.

“Tilray’s stock is completely out of control … it’s going to hurt investor confidence in public markets and private markets,” said Nic Easley, CEO of 3C Consulting and a managing partner with Multiverse Capital.

On the other hand, 420 Investor analyst Alan Brochstein wrote that he saw Tilray’s “parabolic spike” as a “big positive.”

Meanwhile, short sellers have become leading players in the volatility seen in 2018 as a whole.

With the goal of betting on the downturn of a stock for profits, short sellers have been pointing out problems or causes for concern for public companies in the sector.

Cannabis stocks have fallen prey to some significant short sellers throughout 2018. Cronos Group (NASDAQ:CRON,TSX:CRON), Aurora Cannabis (NYSE:ACB,TSX:ACB) and Tilray have all been targets of Citron Research.

“Although the hype is big and the prohibition after 100 years is real, it is critical to understand that in the Canadian landscape, there are over 100 licensed producers and there will ultimately be more losers than winners,” an August report from Citron Research shorting Cronos Group to US$3.50 states.

The report caused a 28.41-percent drop in Cronos’ stock price in one day of trading. Cronos’ NASDAQ share price has not reached US$3.50 since the report was made public.

Charles Taerk, president and CEO of Faircourt Asset Management and advisor to the Ninepoint UIT Alternative Health Fund, said short reports will always be out in new sectors where there is a lot of growth and a perceived level of volatility.

Sutton said he had predicted some names in the space would rise so much in profile that they would become the target of prominent short sellers.

A new case of short selling has rocked the cannabis market more recently, as research from Quintessential Capital Management and Hindenburg Research has targeted the Latin American acquisitions of Aphria (NYSE:APHA,TSX:APHA).

The short report led analysts to slash their price targets on the stock and even question if the company has lost the trust of the market.

Cannabis overview 2018: Legalization and legal market challenges

On October 17, Canada formally enacted the Cannabis Act, a federal bill that brought the legalization of recreational marijuana sales.

While it was celebrated for its significance and importance for the global cannabis space, legalization brought along a decline for the stock market; companies faced challenges in addition to selloff tactics from a portion of the investor audience.

Hawkins said that seeing “that much momentum was a shock” for him during the run up of the stocks and the eventual downturn following legalization.

While praising legalization as the birth of a new industry, Peter Aceto, CEO of CannTrust Holdings (TSX:TRST), admitted there have been challenges for even the biggest LPs.

“There have been a few initial challenges, including a supply chain that is stretched by overwhelming demand,” Aceto said.

Dealing with new government regulations has been a theme of the cannabis market as more countries continue to explore the adoption of cannabis laws.

Chris Naprawa, president of Khiron Life Sciences (TSXV:KHRN), said the biggest challenge of the industry for him has been dealing with regulations.

“Understanding the rules and regulations … you know, things are evolving very, very quickly and you can’t afford to make mistakes on the regulatory side,” Naprawa said.

Due to the company’s operations in Colombia and the newly unveiled Mexican market, Naprawa is aware of how tricky new market rules can be.

Another difficult element for the Canadian cannabis market has been the marketing allowed for companies selling branded products.

US Election 2020 and Cannabis

 
Investing in cannabis? Read what experts have to say about cannabis and the US Election!
 

Health Canada put in place strict restrictions on the way companies, retailers and promoters of the industry can offer consumers a direct look at products in place.

“We spent a lot of money on branding, we sponsored concerts, events. We can’t do that right now,” Aurora Cannabis CEO Terry Booth said during a panel at the MJBizCon event in November in Las Vegas.

George Kveton, CEO of Invictus MD (TSXV:GENE), told INN that product communication and marketing have been the biggest challenges for him.

“The Cannabis Act outlines strict requirements related to the marketing of cannabis to fulfil a primary goal of keeping cannabis ‘uncool’ and out of the hands of youth (not legal-age adults as defined by each province),” Kveton said.

The executive is supportive of the cause, and added that Invictus “feels an obligation” to educate consumers.

Cannabis overview 2018: M&A and entry of the big players

As the promise of the size and value of the overall cannabis market continues to grow, companies from established marketplaces have started to look at the possibility of gaining a way in.

Rumors of big corporations seeking deals, outright acquisitions and partnerships flooded the public space in 2018 thanks in large part to these companies setting up relationships with cannabis ventures.

Most notably, Constellation Brands (NYSE:STZ), the company behind Corona beer, placed a bet on the industry by investing in Canopy Growth (NYSE:CGC,TSX:WEED) in 2017.

The relationship was heightened this past August, when Constellation added a C$5-billion injection into the Canadian producer. Hawkins called the deal a “validation” for the sector.

“This is an early investment, however one that puts Canopy in the global lead when it comes to brand development and alcohol replacement product,” said Taerk and Doug Waterson, CFO and portfolio manager with Faircourt Asset Management and manager of the Ninepoint UIT Alternative Health Fund.

The Faircourt duo deem the C$5-billion investment the biggest announcement for the cannabis market in 2018 since it confirmed that cannabis is on the radar for large, established businesses.

Dena Jalbert, founder and CEO of Align Business Advisory Services, a firm helping companies with M&A, explained that in most established-player acquisitions of smaller companies, it’s about grabbing “something new that they don’t have and they get to leverage their existing infrastructures.”

When asked about the overall M&A market in 2018, Jalbert said some of the deals were pure geography plays where companies acquired assets in different locations.

US Election 2020 and Cannabis

 
Investing in cannabis? Read what experts have to say about cannabis and the US Election!
 

Cannabis overview 2018: Canadian and American markets closer than ever

Despite their differences in restrictions and versatility in the open markets, Canada and the US have never been closer when it comes to the cannabis space.

On one side, there are several LPs pursuing legitimacy and a bigger stage for the growth of these companies through US-based public listings.

Four TSX-listed Canadian LPs have NYSE or NASDAQ listings now, and at least two more have expressed interest and plan to follow suit.

“American investors like to buy American securities listed on the [NYSE] or NASDAQ,” Taerk said.

While these companies pursue US listings they still can’t actually enter the US cannabis market due to the federal status of the drug.

Meanwhile, Canada has become the listing home for Canadian cannabis companies targeting the US market.

Operators of multiple assets scattered across the different states with marijuana-friendly policies have popped up in the public market and in the minds of investors throughout 2018.

These companies are raising capital on the Canadian Securities Exchange (CSE), a smaller listing house in Canada that has elected not to block US issuers despite the unclear status of the drug.

At a federal level, cannabis and its business remain illegal, and the drug is a scheduled substance under the Controlled Substances Act.

However, several states have voted in favor of policies to allow a marketplace to be created.

Due to this dispute between the two levels of government, the TMX Group exchanges have elected to not allow any US operations for their issuers, while the CSE has opened its doors to the business.

“Canadians are leading the capital market race,” Kevin Murphy, CEO of Acreage Holdings (CSE:ACRG), a recently public company on the CSE, said during a panel at MJBizCon in Las Vegas.

Cannabis overview 2018: Investor takeaway

Cannabis investors have matured and have started to challenge where exactly the value is for the companies being hyped in the nascent industry.

Aspects such as branding and retail have picked up in appeal to investors and analysts.

“The global cannabis industry is accelerating but the market stills seems focused on farming and oversimplified capacity based metrics,” wrote Daniel Pearlstein, an analyst with Eight Capital, in January. “We encourage investors to think broader and think of cannabis as an ingredient.”

Overall 2018 has shown investors a cannabis public market that keeps growing and gaining sophistication in the pursuit of legitimacy.

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: 1933 Industries, Khiron Life Sciences, Invictus MD is a client of the Investing News Network. This article is not paid-for content.

The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, reminds investors that a class action lawsuit has been filed in the United States District Court for the District of New Jersey on behalf of investors that purchased Aurora Cannabis, Inc. (NYSE: ACB) securities between February 13, 2020 and September 4, 2020 (the “Class Period”). Investors have until December 1, 2020 to apply to the Court to be appointed as lead plaintiff in the lawsuit.

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The coming together of two Canadian beverage industry leaders will form a unique vertical in the plant-based mineral and cannabis beverage sectors

Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

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The potential for new disease research and treatments is expanding thanks to the global adoption of marijuana for medical purposes.

As more countries open the doors to the use and investigation of cannabis, medical applications for the drug are set to expand — indeed, the substance has already shown much promise.

However, in terms of treating skin cancer patients, currently the promise of cannabis outpaces any medically confirmed results or applications.

Though there may be individual cases crediting the drug, cannabis and its derivatives are not being applied to treat skin cancer — at least not yet. Read on to learn about the current situation and future possibilities.

Skin cancer, cannabis and medical research

According to the American Cancer Society, skin cancer is the most common type of cancer, accounting for over 5 million cases per year. This category holds many different variations, but the main three types are basal cell carcinomas, squamous cell carcinomas and melanomas; the rest are considered rare.

Melanomas develop in specific areas like the neck and face and can be more serious than their counterparts. Basal and squamous cancer cells, on the other hand, develop based on a person’s sun exposure and mostly appear on the head and neck.

The Canadian Cancer Society states that treatments for non-melanoma skin cancer include surgery, radiation therapy, photodynamic therapy and drug therapy, including the use of topicals.

In the future, cannabis and cancer could be paired up as more research across the globe begins to take place and companies look for new medications and formulations, boosted by the early successes of the drug.

Changes are happening slowly, with one serious improvement being when GW Pharmaceuticals (NASDAQ:GWPH) obtained approval in the US for its cannabidiol (CBD) solution, which treats seizures associated with Lennox-Gastaut syndrome or Dravet syndrome in toddlers.

After going through its clinical trials, the company’s Epidiolex drug received approval from the US Food and Drug Administration, signaling that top medical agencies are ready to confirm the medical prowess of cannabis and its derivatives for the benefit of patients.

Cannabis entering the skincare space

Looking more specifically at cannabis and skin ailments, the National Eczema Association has vouched for CBD as an option in the treatment of eczema, a skin disease that affects over 30 million people in the US.

“It has long been observed that cannabinoids possess anti-inflammatory, antimicrobial and anti-itch qualities,” the Independent reported.

A study from the the University of Colorado School of Medicine is looking further into the use of CBD for patients with psoriasis or eczema who have tried using topical steroids or topical immunomodulators.

Robert Dellavalle, professor of dermatology with the University of Colorado, told Inside Science that CBD products are growing in popularity, but the results are not being collected as properly as they could be.

“I believe it’s a wide-open horizon with tremendous potential that needs to be investigated, but there are a number of regulatory hurdles that need to be overcome and that’s where we are,” he said.

A medical study from the University of Colorado’s Anschutz Medical Campus shows the anti-inflammatory sensibilities of cannabinoids are the main reason why cannabis may be potent in combating skin diseases.

As part of its guide for healthcare practitioners, Tilray (NASDAQ:TLRY) indicates that medical cannabis could aid patients with inflammatory skin diseases such as dermatitis, psoriasis and pruritus.

“And while this research is still relatively formative, the results achieved so far clearly indicate its value and the promising potential of cannabis as effective medicine,” Tilray states.

Dave Berg, chief technology officer for software company Strainprint, told the Investing News Network the lack of sophisticated research has impacted the development of novel therapies for patients using cannabis.

“It’s been very difficult for people to study cannabis in a clinical way, but there’s been a ton observational data … There’s no really strong observational data set that allows us to make proper decisions,” Berg said.

In an effort to increase the research options available for cannabis, the Canadian federal government announced in 2018 that it would spend C$10 million over five years in order to assess the impact of cannabis use on the mental health of Canadians.

The government also promised C$10 million to the Canadian Center on Substance Use and Addiction for research purposes.

CBD skincare products getting traction

Amid developments geared at solving specific skin issues, more general CBD skincare products are also gaining popularity among many consumers.

For example, the introduction of cosmetics with cannabis elements, supported by Canadian licensed producers, is another upcoming element for the skin treatment segment of consumers. While not medical, this avenue does offer more options in terms of cannabis uses.

The endorsement from consumers for CBD ointments and other topicals for skincare has been documented with multiple products launched in the fractured US cannabis market.

One downside of the growth in these products is that it has led companies to make more and more claims about how these items can help with skin conditions. One study from the Journal of the American Medical Association warns that CBD products are often mislabeled online.

Takeaway on cannabis and skin cancer

In order for skin cancer patients to see the potential benefits from treatment with medical cannabis, much still has to change in Canada and abroad.

As the medical and recreational sections of the cannabis space continue drifting apart thanks to legalization efforts, the medical space should get more time to properly research and investigate the drug’s applications.

The early position CBD has gained in terms of skin maintenance and treatment could lead to further research on its impact on more serious diseases.

What’s more, GW Pharmaceuticals’ success, along with increased awareness of the medical benefits of cannabis, is moving the needle on research efforts geared at finding out how capable the drug will be in the medical space.

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The growth of the cannabis industry has made it possible for companies to offer many different investment opportunities through the major exchanges in Canada.

Previously known as the Canadian Venture Exchange, the TSX Venture Exchange is the sibling of Canada’s main listings board, the larger Toronto Stock Exchange.

For those interested in investing in cannabis companies, this exchange offers a variety of cannabis-related businesses, from growers to biotech companies looking for cannabinoid therapies.

Here the Investing News Network offers investors a growing list of all cannabis-related companies listed on the TSXV. Read on to learn more about them and their businesses.

48North (TSXV:NRTH)

This company is a marijuana producer looking to offer a variety of products for the recreational market in Canada, including for the health and wellness industry. 48North is a licensed outdoor grower of cannabis.

Auxly Cannabis Group (TSXV:XLY,OTCQX:CBWTF)

Created by Chuck Rifici, co-founder of Tweed, Auxly Cannabis Group operates as a cannabis streaming investment firm looking to boost various plays related to the sector.

Avricore Health (TSXV:AVCR)

While Avricore Health operates as a healthcare technology company, in 2017 the firm made a deal with Emerald Health Therapeutics (TSXV:EMH,OTCQX:EMHTF) for the right to develop and sell endocannabinoid products in Canada to licensed pharmacies.

CanadaBis Capital (TSXV:CANB)

This cannabis company is targeting the Canadian market through a business model that is focused on cultivation, research, product development, retail and hemp.

Emerald Health Therapeutics

This Canadian cannabis company holds a variety of growing assets in the country. The firm holds a 50/50 joint venture for the management of a grower in BC with Village Farms International (TSX:VFF,NASDAQ:VFF).

EnWave (TSXV:ENW,OTC Pink:NWVCF)

EnWave is a technology company that has centered itself in the cannabis business thanks to its Radiant Energy Vacuum drying technology for organic materials. It effectively decreases the time from the harvest to the sale of cannabis products.

Elixxer (TSXV:ELXR,OTCQB:ELIXF)

Through its partners, investment firm Elixxer presently has significant interests in Australia, Jamaica, Switzerland, Italy and Canada.

Eve & Co. (TSXV:EVE,OTCQX:EEVVF)

Eve & Co. is a Canadian cannabis producer that, thanks to its subsidiary Natural MedCo, is targeting female consumers, specifically with premier brands.

Experion Holdings (TSXV:EXP,OTCQB:EXPFF)

Formerly known as Viridium Pacific Group, this cannabis investment firm holds a portfolio of assets, including its licensed producer Experion Biotechnologies in BC.

The Flowr Corporation (TSXV:FLWR,OTC Pink:FLWPF)

The Flowr Corporation is a vertically integrated cannabis company working on the cultivation and sale of medical and recreational marijuana in Canada.

FluroTech (TSXV:TEST,OTCQB:FLURF)

FluroTech is a technology company working on a cost-effective testing platform for the cannabis industry at large. The company’s proprietary CompleTest employs fluorescence spectroscopy technology to measure the specific contents of the product.

GTEC Holdings (TSXV:GETC,OTCQB:GGTTF)

This Kelowna-based cannabis company is vertically integrated, with operations in the cultivation, extraction and analytical testing sectors. The company is also pursuing retail operations through various investments.

Harvest One Cannabis (TSXV:HVT,OTCQX:HRVOF)

Harvest One Cannabis is a cannabis company with production and assets spread across Canada, Europe, Israel and Australia. The company gains its reach thanks to its three subsidiaries: United Greeneries, Satipharm and Dream Products.

Hill Street Beverage Company (TSXV:BEER)

This beverage maker has made its name thanks to its development of non-alcoholic beverages. Now the firm will offer consumers cannabis-infused drinks.

INDIVA (TSXV:NDVA,OTCQX:NDVAF)

INDIVA is a company focused on the supply of medical cannabis. Through an acquisition, it holds a licensed producer with an indoor cannabis facility in Ontario.

Khiron Life Sciences (TSXV:KHRN,OTCQB:KHRNF)

Khiron Life Sciences is a Colombia-based cannabis company raising capital in Canada. The firm has declared that it will seek to expand its presence through Latin America, including Mexico.

Meta Growth (TSXV:META)

This company is a retail operator managing cannabis shops across Canada. Meta Growth manages two recreational store brands: Meta Cannabis Supply and NewLeaf Cannabis.

Namaste Technologies (TSXV:N,OTCQB:NXTTF)

After a tumultuous management change, Namaste Technologies has centered back on its investments and the development of its marijuana play, which includes its online platform of cannabis consumer information.

Naturally Splendid Enterprises (TSXV:NSP,OTCQB:NSPDF)

Naturally Splendid Enterprises is a biotech company developing hemp products for consumers in the health and wellness space. It plans to pursue a stake in the edible cannabidiol market as well.

Pharmacielo (TSXV:PCLO,OTCQX:PCLOF)

Pharmacielo is another cannabis company originally from Colombia raising capital in the Canadian markets. The company is headquartered in Canada, but operates part of its marijuana growing in Colombia.

Radient Technologies (TSXV:RTI,OTCQX:RDDTF)

Radient Technologies is an extraction technology company that has dabbled in the cannabis sector thanks to a partnership with licensed producer Aurora Cannabis (TSX:ACB,NYSE:ACB).

Relevium Technologies (TSXV:RLV,OTC Pink:RLLVF)

Thanks to its subsidiary Biocannabix, this company has a cannabis play in the development of pharmaceutical-grade products infused with cannabinoid formulations.

SugarBud Craft Growers (TSXV:SUGR)

Like some other Canadian cannabis producers, this Alberta company specializes in growing and developing craft-style premium cannabis products.

Target Capital (TSXV:TCI)

Doing business as CBi2 Capital, this Alberta-based company’s investment strategy focuses on developing and managing a diversified portfolio of predominantly early stage cannabis opportunities.

Tetra Bio-Pharma (TSXV:TBP,OTCQB:TBPMF)

Tetra Bio-Pharma is researching and developing medicines based on cannabis and its elements.

Therma Bright (TSXV:THRM)

Therma Bright is a medical device company that has a subsidiary seeking to carve up a space in the technology space for medical and recreational marijuana thanks to its pain relief device.

WeedMD (TSXV:WMD,OTCQX:WDDMF)

WeedMD is another Canadian cannabis producer making product for the medical and recreational markets in Canada. Its subsidiaries include WeedMD Rx and CX Industries.

YSS (TSXV:YSS,OTC Pink:YSSCF)

YSS operates as an adult-use cannabis retailer with 17 stores in Canada.

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Bronstein, Gewirtz & Grossman, LLC reminds investors that a class action lawsuit has been filed against the following publicly-traded companies. You can review a copy of the Complaints by visiting the links below or you may contact Peretz Bronstein, Esq. or his Investor Relations Analyst, Yael Hurwitz of Bronstein, Gewirtz & Grossman, LLC at 212-697-6484. If you suffered a loss, you can request that the Court appoint you as lead plaintiff. Your ability to share in any recovery doesn’t require that you serve as a lead plaintiff. A lead plaintiff acts on behalf of all other class members in directing the litigation. The lead plaintiff can select a law firm of its choice. An investor’s ability to share in any potential future recovery is not dependent upon serving as lead plaintiff

Tactile Systems Technology (NASDAQ:TCMD)
Class Period:
May 7, 2018 – June 8, 2020
Deadline: November 30, 2020
For more info: www.bgandg.com/tcmd

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