Cannabis Weekly Round-Up: Aurora Sells Alcanna Stake, Beleave Seeks Creditor Protection
Aurora Cannabis purchased its stake in Alcanna for C$138 million in 2018; it is now selling it for C$27.6 million.
In the cannabis space this week, a key player announced plans to sell its stake in an alcohol and cannabis retailer, while the reaction to another firm’s latest quarterly results continued.
Meanwhile, one more company joined the growing list of marijuana market participants that have had to file for creditor protection in recent months.
Read on for a closer look at some of the biggest cannabis news over the last five days.
Aurora selling Alcanna stake for C$27.6 million
News hit this week that Aurora Cannabis (TSX:ACB,NYSE:ACB) is selling its 23 percent stake in Alcanna (TSX:CLIQ,OTC Pink:LQSIF) for C$27.6 million. The secondary bought-deal offering, which is expected to close later this month, will see Aurora sell its 9.2 million common shares of Alcanna for C$3 each.
Alcanna is one of North America’s largest private sector retailers of alcohol, and also operates 31 cannabis retail stores. Aurora purchased its stake in the company for C$138 million in 2018, comprised of an initial investment of C$103.5 million plus an additional investment of C$34.5 million.
The goal of the partnership was for Alcanna to “establish and launch a leading brand of cannabis retail outlets.” The company’s 31 cannabis retail stores have been opened since the relationship was set up.
Douglas Miehm of RBC Capital Markets said in a note this week that Aurora could use the money from the sale of its Alcanna interest for “core internal growth initiatives.” This could potentially allow it to avoid diluting its shares for future financing needs.
Aurora was in the spotlight last month as well, with its share price spiking in mid-May on the release of its most recent quarterly results. It continued to attract attention after announcing its long-awaited entry into the US market via the purchase of Reliva, a firm that sells hemp-derived cannabidiol products.
The company is in the midst of a major restructuring effort that was announced several months ago. Michael Singer, chairman and interim CEO at Aurora, said in May that it is beginning to bear fruit.
Analysts react to Canopy’s quarterly results
As a quick recap, the company’s net revenue came in at C$107.9 million for the quarter, down 13 percent from the previous quarter, but up 15 percent from the year-ago period. Canopy also reported a net loss for the quarter of C$1.3 billion and an adjusted EBITDA loss of C$102 million.
According to BNN Bloomberg, analysts at a variety of firms issued downgrades for Canopy on Monday (June 1). Although for the most part experts seem to think the company will eventually be able to turn itself around, they are less optimistic in the short term.
Click here to skip to the Investing News Network’s overview of the reaction Canopy Growth’s results.
CIBC’s John Zamparo and Seth Rubin said as much in their note to investors, commenting that while they believe Canopy’s strategy is sound, it will take time to execute, and they see limited near-term upside opportunities due to the company’s high valuation.
“We do not doubt Canopy’s successful future in this industry: we find its management team is best-in-class, balance sheet quality is matched by only one other competitor, and the strategic partnership with Constellation Brands (NYSE:STZ) is as valuable as ever,” they explained.
“But we believe the stock lacks positive catalysts in the near future, and expect more attractive entry points following expected progress on significant operational initiatives.”
Beleave files for creditor protection
Beleave and Hegedus Consulting Services have agreed to a debtor-in-possession loan to fund CCAA proceedings, and Hegedus has agreed to make a stalking horse bid for Beleave.
Against the backdrop of a troubled cannabis market, a number of other marijuana firms have received creditor protection this year. Included on the list are names such as Invictus MD Strategies (TSXV:GENE.H) in February, CannTrust Holdings in March, James E. Wagner Cultivation (TSXV:JWCA.H) in April and Green Growth Brands (CSE:GGB,OTC Pink:GGBXF) in May.
This week, Green Growth had its asset sale plan approved by Ontario Superior Court of Justice, while Trichome Financial (CSE:TFC) received approval from the same court to complete its purchase of James E. Wagner. Trichome’s transaction is expected to close on June 30 for total consideration of C$13 million.
Cannabis company news
Once again, this week’s cannabis company news was largely dominated by quarterly results releases, though some market participants did put out other types of announcements.
- Marijuana-focused venture capital firm Canopy Rivers (TSX:RIV,OTC Pink:CNPOF) shared its latest quarterly results. In a note, CIBC said the next 12 months should be “attractive” for the company, citing the recent licensing at PharmHouse, which it says is Canopy Rivers’ top asset. Canopy Rivers is CIBC’s top pick in the cannabis sector right now.
- Chemesis International (CSE:CSI,OTCQB:CADMF) also put out its results for the most recent quarter, reporting revenue of C$4.5 million; that’s compared to C$944,457 in the previous quarter. The company said the favorable resolution of an injunction in Puerto Rico, plus better sales due to COVID-19 buying, were responsible for the increase.
- HEXO’s (TSX:HEXO,NYSE:HEXO) cannabis manufacturing and processing facility in Belleville, Ontario, has received its Health Canada license amendment. According to the company, the amendment will allow it to “significantly” increase its processing capacity, achieve better economies of scale and roll out more Cannabis 2.0 products.
- Planet 13 Holdings (CSE:PLTH,OTCQB:PLNHF) is another cannabis company that released its most recent quarterly results this week. The company reported revenue of US$16.8 million, a net loss of US$1.4 million and adjusted EBITDA of US$2.5 million. Co-CEO Larry Scheffler said that the numbers came “despite a sharp COVID-19 related drop-off in traffic in the latter half of March.”
- Extraction company Valens GroWorks (TSX:VLNS,OTCQX:VLNCF) had a busy week, sharing three different pieces of news. It entered into a C$40 million debt facility, signed a custom manufacturing deal with TREC Brands and announced a custom manufacturing agreement with Verse Cannabis.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Chemesis International is a client of the Investing News Network. This article is not paid-for content.