Cannabis Weekly Round-Up: Attorney General Comments on Cannabis Policy

- April 12th, 2019

The Investing News Network rounds up some of the biggest company and market news in the cannabis market for the past trading week.

During the past trading week (April 8 to 12), the US attorney general offered new commentary on how he would like to see marijuana policy move forward in the country.

A confirmation that Canadian banks are looking away from the US cannabis market for now also made headlines this week. Financial updates from two popular multi-state operators (MSOs) caught the attention of the market as well.

Here’s a closer look at some of the biggest news during last week’s trading period.

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New research gives perspective on 2018 deals

A new study from Viridian Capital Advisors, titled “Viridian Cannabis Deal Tracker: 2018 in Review,” shows that merger and acquisition (M&A) activity significantly rose during 2018, with a grand total of 321 business transactions taking place in the marijuana space over the period. Viridian’s report indicates that US$13.9 billion was the total sum raised for marijuana companies that year.

The study lists the top 10 M&A deals completed in 2018, which were all done by four publicly traded marijuana companies. Canadian cannabis producers Aurora Cannabis (NYSE:ACB,TSX:ACB), Canopy Growth (NYSE:CGC,TSX:WEED) and Aphria (NYSE:APHA,TSX:APHA) all made three separate appearances in the ranking.

MJardin Group’s (CSE:MJAR,OTCQX:MJARF) acquisition of GrowForce Holdings completed the list in the 10th spot.

Updates from the US cannabis landscape

Canadian banks are not interested in taking on the risks of participating in deals with US cannabis companies at this time, according to a new report from Bloomberg.

Leading executives from the Bank of Montreal (NYSE:BMO,TSX:BMO) and Toronto-Dominion Bank (TD) (NYSE:TD,TSX:TD) confirmed the banks’ positions regarding business transactions with any company operating in the fractured US market, where marijuana remains illegal at a federal level.

“Depending on what comes out [from policy changes in the US], we’d look at it and make sure it is appropriate for TD in terms of our risk appetite and whether it’s right for our customers,” Bharat Masrani, CEO of TD, said following his bank’s annual meeting.

During a Senate appropriations hearing on Wednesday (April 10), US Attorney General William Barr raised his support for Congress policies to create a federal framework that works with state legalization of cannabis, according to a report from Marijuana Moment.

“Personally, I would still favor one uniform federal rule against marijuana,” Barr said during the hearing. “But if there is not sufficient consensus to obtain that, then I think the way to go is to permit a more federal approach so states can make their own decisions within the framework of the federal law and so we’re not just ignoring the enforcement of federal law.”

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Barr was also asked about the STATES Act, a bipartisan bill reintroduced to Congress on Wednesday, that would offer protection for marijuana companies in legal states from the federal power. However, he said he has not taken a closer look at the bill itself.

He added that, once he obtains comments from the justice department on the bill, he can start working on the path forward for the STATES Act.

Quarterly financial results from popular MSOs

Over the past week, several marijuana MSOs in the US issued quarterly updates to shareholders.

On Thursday (April 11), Trulieve Cannabis (CSE:TRUL,OTC Pink:TCNNF) announced US$35.9 million in revenue for its Q4 2018 and total year revenue of US$102.8 million.

The Florida-based MSO is now projecting its revenue will grow to US$214 million in 2019 thanks to its continued expansion in the sunshine state and other US jurisdictions, such as Massachusetts and California.

Trulieve posted net income of US$10.7 million for the quarter, an increase of 34.67 percent from the same time period last year.

“We will focus on innovating and delivering new products for our customers, such as smokable flower, edibles and nano-emulsions,” Kim Rivers, CEO of Trulieve, said in a press release.

Shares of Trulieve in Canada spiked thanks to the results; however, shareholders saw a week of regression for the company despite the positive quarter. Shares of Trulieve were down 10.6 percent in value as of 12:33 p.m. EST on Friday (April 12).

In a similar fashion, Green Thumb Industries (GTI) (CSE:GTII,OTCQX:GTBIF), which released its quarterly update on Tuesday (April 9), also dropped over the five trading sessions. Shares of Green Thumb were down 11.83 percent as of at 12:30 p.m. EDT on Friday.

The MSO posted revenue of US$20.8 million during Q4 2018 and total annual revenue of $62.5 million. However, it posted net losses for both the quarter and the year of US$3.1 million and US$7.7 million respectively.

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.

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** This article is updated each week. Please scroll to the top for the most recent information**

Cannabis Weekly Round-Up: Ontario Launches Retail Sales

By Bryan Mc Govern, March 5, 2019

During the past trading week (April 1 to 5), the Ontario marijuana retail market opened its doors to consumers.

A blockbuster acquisition in the California market made headlines this week, while some recent quarterly updates also caught the attention of the market.

Here’s a closer look at some of the biggest news during last week’s trading period.

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Ontario opens the doors to retail shops

On Monday (April 1), Ontario finally kicked off the start of retail sales. A report from BNN Bloomberg shows that, on average, seven of the first 10 opening stores secured sales of C$50,913.

“When you think of what the stores in other parts of the country looked like, compared to what we’re seeing in Ontario, Ontario is just on a bigger scale,” Gary Cohen, CEO of retail software company Cova, told BNN Bloomberg.

Investors are set to participate in the growth of this market as several publicly traded marijuana companies have gained stakes in the space.

Out of the initial 25 stores set to begin sales in April, 11 are confirmed to have some kind of agreement with a public firm.

The Investing News Network (INN) talked to experts and companies about the position that public firms, including those involving licensed producers (LPs) of marijuana, will now have in this market.

Bruce Linton, co-CEO of Canopy Growth (NYSE:CGC,TSX:WEED), confirmed that Canopy is only lending its branding for a Tweed store in London and a Tokyo Smoke shop in Toronto.

“The [Ontario] government was mindful that the whole system not be vertically integrated, and some of that probably was the capital that some of the LPs would have,” Karl Littler, senior vice president of public affairs with the Retail Council of Canada, told INN.

However, LPs made an entrance through strategic agreements — including branding deals and investments in retail companies — that secured their partnerships with the license holders.

“It’s an unintended consequence, but I would say not entirely unexpected,” Brenna Boonstra, director of quality and regulatory consulting with Cannabis Compliance, told INN.

Cresco Labs upgrades market position in California through purchase

Cresco Labs (CSE:CL,OTCQX:CRLBF) confirmed a deal to acquire Origin House (CSE:OH,OTCQX:ORHOF) for C$1.1 billion in an all-shares deal.

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Origin House shareholders will receive 0.8428 of a Cresco Labs share per every Origin House common share held, according to an investor presentation. This implies a 25.9 percent premium.

“Origin House is one of the only cannabis players that figured this out early and took a pure play approach to the market as a base for national and international expansion,” Charlie Bachtell, CEO of Cresco Labs, said during a conference call on Tuesday (April 2).

Joe Caltabiano, president and co-founder of the multi-state operator (MSO), said once the company’s expansion in Florida clears and it receives its license in Michigan, it will have a presence in 11 states. The company will then have a dominant market share in California, Pennsylvania, Ohio and Illinois.

Charles Taerk, president and CEO of Faircourt Asset Management, told INN that this deal has the potential to create the “most dominant” MSO in the California market.

“Origin House’s vast distribution network will accelerate Cresco Labs’ entrance into California, providing access to over 500 dispensaries (approximately 60 percent of the market penetration),” PI Financial analyst Jason Zandberg wrote in his latest research note.

Market update

Canadian firms Aurora Cannabis (NYSE:ACB,TSX:ACB) and Aphria (NYSE:APHA,TSX:APHA) each had a victory in the European market this week. Both producers were picked by the German government to receive licenses to grow medical marijuana in the country.

According to a report from the Canadian Press, research firm Brightfield Group expects Germany’s medical cannabis market to be worth US$2.7 billion in 2023.

Only three companies were selected for the approvals, with German-based Demecan rounding out the group. This company has a partnership with Wayland Group (CSE:WAYL,OTCQB:MRRCF).

Meanwhile, Florida-based MSO Trulieve Cannabis (CSE:TRUL,OTC Pink:TCNNF) received the praise of Beacon Securities analyst Russell Stanley last week in a research note.

The analyst expressed a bullish sentiment on the company, reaffirming his buy rating on the stock and giving the company a one year price target of C$28 per share.

“We view Trulieve’s continued expansion of its product suite positively, and note that it demonstrates TRUL’s position as the partner-of-choice for branded product companies seeking shelf space in Florida, given Trulieve’s 60 per cent-plus market share by volume,” Stanley wrote, as per a report from Cantech Letter.

Lastly, INN recapped the month of March in a video update, highlighting the biggest news of last month. Watch the video below for more on what happened last month:

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: Wayland Group 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.

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