In the cannabis space this week, one major player stole the show, making headlines with its much-awaited entry into the US market. 

Aside from that, marijuana companies continue to release their latest quarterly earnings, with one market watcher speculating that this latest round of numbers marks an “inflection point” — he thinks industry dominance could shift to the US moving forward.

Read on for a closer look at some of the biggest cannabis news over the last five days.


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Major share price surge for Aurora Cannabis

Aurora Cannabis (TSX:ACB,NYSE:ACB) released its latest quarterly results last Thursday (May 14), and has had a steady presence in the headlines since then.

The company’s share price initially spiked after it published numbers from its third fiscal quarter; it rose from last Thursday’s TSX close of C$9.20 to end at C$15.35 last Friday (May 15).

Its surge has continued this week, and as of this Friday (May 22) at 11:55 a.m. EDT, Aurora was up about 150 percent from last Thursday’s close.

During the latest quarter, the company brought in net revenue, excluding provisions, of C$78.4 million; that’s up 18 percent from the previous quarter. Adjusted EBITDA came in at a loss of C$50.9 million, but Aurora said it is on track to achieve positive adjusted EBITDA in its first fiscal quarter for 2021. 

Speaking to BNN Bloomberg, Michael Singer, chairman and interim CEO at the company, said that Aurora’s major restructuring effort several months ago is beginning to bear fruit. He also said that his team has been looking at the US market, describing it as an area that can’t be ignored. 

Aurora followed up on that last statement sooner than some may have expected, announcing this past Wednesday (May 20) that it will be entering the US cannabis industry with the acquisition of Reliva, a company that sells hemp-derived cannabidiol (CBD) products.

Reliva’s offerings include topicals, tinctures, gummies and more, and its products are sold in over 20,000 stores in the US; Aurora will pay US$40 million in the all-share deal.


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As Aurora’s share price action indicates, investors have reacted enthusiastically to the deal. Analysts have responded positively as well, though with a little more caution — while CIBC analysts John Zamparo and Seth Rubin said in a note that they are positive on the deal, they also reminded market participants that the American CBD space is crowded.

“The worry on U.S. CBD is a saturated playing field could mean pricing declines and proliferating competition. Still, we view the deal positively, but the stock’s reaction both pre-market (+30%) and in the past week limits valuation upside in our view,” they said.

It’s worth noting that the response from experts to Aurora’s quarterly results last week was also cautious. CIBC’s Zamparo and Rubin noted that the company has “a long way to go to reach positive EBITDA,” though they said it has made “material progress” in a number of areas.

Rahul Sarugaser and Michael W. Freeman of Raymond James came down harder on Aurora, contrasting it with Organigram Holdings (TSX:OGI,NASDAQ:OGI) and Village Farms International (TSX:VFF,NASDAQ:VFF) in their own extensive note. In their opinion, the other two companies are stronger options that are better operated and consistently EBITDA positive.

Quarterly earnings spark US versus Canada comparison

Aurora’s results also sparked a comparison this week between the recent performance of Canadian and American cannabis companies in general.

In a Sunday (May 17) article, BNN Bloomberg said that US firms are “notably outperforming their struggling Canadian counterparts,” but their valuations are not benefting. The news outlet offered up the latest quarterly results from Aurora and Green Thumb Industries (CSE:GTII,OTCQX:GTBIF) as proof.

Green Thumb saw a modest 17 percent increase after becoming the first US marijuana company to bring in revenue of over US$100 million, while Aurora enjoyed a massive share price boost, as detailed above.

“I think this is an inflection point where the U.S. market is becoming the dominant market in the global marijuana space,” said Mark Noble, executive vice president of strategy at Horizons ETFs Management.


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“I think the only thing that’s really keeping these stocks from overtaking the Canadian LPs is the fact that they’re not listed on the U.S. stock market,” he added to BNN Bloomberg.

As those involved in the cannabis space will know, the NYSE and NASDAQ, which are major American stock exchanges, do not allow companies with operations in the US to list because the drug is still federally illegal. Canada’s TSX and TSXV have the same rule. Cannabis companies working in the US must instead list on the countries’ smaller exchanges.

Cannabis company news

  • The Green Organic Dutchman Holdings (TSX:TGOD,OTCQX:TGODF) signed a supply deal this week with a subsidiary of Shoppers Drug Mart. Under the three year agreement, the company will provide Shoppers with “a broad portfolio of certified organic medical cannabis products.”
  • Harvest Health and Recreation (CSE:HARV,OTCQX:HRVSF) released its latest quarterly results, reporting US$45 million in revenue, which is an increase of 134 percent year-on-year. Adjusted EBITDA, excluding biological adjustments, came to a loss of US$3.9 million, but the company said it is on track to record positive adjusted EBITDA in the second half of 2020.
  • HEXO (TSX:HEXO,NYSE:HEXO) closed an underwritten public offering for C$57.5 million on Thursday (May 21), selling 63,940,000 units for C$0.09 each. The money will be used for working capital and other general corporate purposes. In addition, HEXO announced that its share price no longer meets the NYSE’s listing requirements; it may be delisted if it does not regain compliance.
  • Green Growth Brands (CSE:GGB,OTCQB:GGBXF) filed for insolvency protection on Wednesday, citing “a severe liquidity crisis” due to debt, which it says was exacerbated by conditions brought on by the COVID-19 outbreak. The company, which is known for its failed takeover bid for Aphria (TSX:APHA,NYSE:APHA), has seen a major share price drop over the last year or so.
  • In its results for the most recent quarter, Trulieve Cannabis (CSE:TRUL,OTCQX:TCNNF) reported record revenue of US$96.1 million, up 116 percent from the previous year, along with adjusted EBITDA of US$49.4 million. Also this week, the company opened its 50th store in the US; of those 50 locations, 48 are in Florida.

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

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.


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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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