Cannabis Weekly Round-Up: Hemp Play in the US Intensifies

During the past trading week (February 25 to March 1), the hemp market in the US received the entry of two new players in the space.

The introduction of a new actively managed marijuana investment fun and an update from the Alberta retail market also made headlines this week.

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

The benefit of an actively managed marijuana fund

The market for cannabis-centric investment funds with active management are on the up, as a Canadian fund announced top end results for the year and a new fund was launched in the US.

On Tuesday (February 26), Purpose Investments announced the Purpose Marijuana Opportunities Fund (NEO:MJJ) had made returns of 53.43 percent for a one-year period since its inception in January 31, 2018.

Greg Taylor, chief investment officer of Purpose Investments and portfolio manager of the fund, credited the returns to the ability of the fund to pursue “thematic opportunities, such as the rapid product innovation happening now in the US.”

“Passive investing in a new industry, such as marijuana, often means chasing or missing opportunities because the indexes are rebalancing much more slowly than the market itself is moving,” Taylor added.

The value of the fund was credited by Purpose Investments to its active management status. As such, Foothill Capital Management also announced the launch of its a new open-end mutual fund, the “Cannabis Growth Fund” (CANNX).

This new fund will focus on legal plays in the marijuana space, therefore ignoring US plays such as multi-state operators, according to its portfolio manager Korey Bauer.

“It is anticipated that a large number of holdings within the Fund’s portfolio will be securities of Canadian companies,” the prospectus for the Cannabis Growth Fund indicated.

CBD hemp play in the US expands

The hemp market in the US has exploded as more established cannabis firms pursue options in it through the production of cannabidiol (CBD) from hemp.

Canopy Growth (NYSE:CGC,TSX:WEED) and Cresco Labs (CSE:CL,OTC Pink:CRLBF) have unveiled their plans regarding this emerging market.

On Monday (February 25), Cresco confirmed the creation of a brand new subsidiary that will focus on a lineup of CBD-derived from hemp health products. The new franchise will be called “Well Beings.”

“Our wellness-focused offerings… can be distributed nationwide for retailers, grocers, nutrition stores, and online marketplaces, further raising the awareness of cannabinoid-based products and their beneficial properties,” Charlie Bachtell, co-founder and CEO of Cresco said.

Similarly, Canopy made a splash announcement for its upcoming lineup of CBD products. The Canadian firm signed an agreement with Martha Stewart to represent the company’s brand in the US market.

The first product that will come from this relationship, will be an item designed for pets. Canopy will lean on Stewart for her knowledge of consumer products. No specific details of the transaction between Canopy and Stewart were disclosed.

Market update

The California legal cannabis market may be on a collision course, as lawmakers attempt to find a solution for the extension of temporary licenses for legal marijuana businesses.

According to a report from MJBiz Daily, a suggested bill would offer a possible short-term resolution to the issue threatening to damage the supply chain of product in the state:

In particular, the bill would allow licensing authorities to extend existing temporary licenses, thereby letting companies continue doing business as normal while their applications for full annual permits are processed.

However, the three state agencies – California Department of Food and Agriculture (CDFA), Bureau of Cannabis Control (BCC) and Department of Public Health (DPH) – have failed to move quickly enough to process the backlog of provisional or annual license applications. Moreover, the temporary licenses can no longer be renewed or extended.

As a result, some of the companies operating with temporary licenses have watched their permits expire.

Due to the restrictions on timing for the bill, even if approved, this delay would result in thousands of temporary licenses ending, leaving businesses with no legal options.

Meanwhile in Canada, Alberta has continued to increase its status as the leader in the retail marketplace for legal cannabis. The western province counts with the most stores of any province in Canada, 75 total stores.

Alberta reached C$33 million in sales since the start of legalization last October, according to Statistics Canada.

Ontario is set to open the doors to its physical retail market starting in April as the province will allow the set up of 25 initial stores, selected through a lottery.

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.

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

Cannabis Weekly Round-Up: 2 LPs Dominate Recreational Market

By Bryan Mc Govern – February 22, 2019

During the past trading week (February 18 to 22), more cannabis public firms announced deals to get a spot in the Ontario retail market.

An estimation from a Canadian banking institution shows two producers already have control of half the recreational Canadian market and the decision from a licensed producer (LP) also made headlines this week.

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

Canopy Growth (NYSE:CGC,TSX:WEED) and Aurora Cannabis (NYSE:ACB,TSX:ACB) already hold nearly half of the Canadian adult-use cannabis market according to Canaccord Genuity (TSX:CF).

A report from Marijuana Business Daily indicated Canaccord analyst Matt Bottomley estimates these two producers sales volume represents nearly 50 percent of the Canadian market in the first three months of legalization.

“After including estimated contributions from Tilray and Aphria, we believe the top four (licensed producers) in the space could end up representing upwards of 70 [percent] of recreational volumes in the industry out of the gate,” Bottomley wrote in his report.

More LPs find ways to gain spots in Ontario retail market

This week another two public marijuana firms secured deals with winners of the Ontario cannabis retail lottery to set up shops in the province, set to open in April.

Canopy Growth and Fire & Flower Holdings (TSXV:FAF), which made its public debut on Tuesday (February 19), were revealed to have new partnerships with winners of the lottery and will set up branding on these new stores.

Fire & Flower confirmed its two deals will be for stores in Kingston and Ottawa. While applications from the Alcohol and Gaming Commission of Ontario (AGCO) showed a proposal for a Tweed store, a brand of Canopy, in London.

Additionally, a Nova Cannabis store proposal also appears in the AGCO system. Nova Cannabis is a retail brand from Alcanna (TSX:CLIQ), which has an investment from Aurora Cannabis.

Fire & Flower disclosed these deals provide licensing and consulting fees and includes an option for a future purchase of the interest from the applicants themselves for the finished retail locations once the lottery process ends this year.

Last week three marijuana firms unveiled similar deals with lottery winners to aid in the setup of cannabis stores.

Aphria drops partner in the US

On Tuesday, Aphria (NYSE:APHA,TSX:APHA) announced it would not pick up its purchase option for Liberty Health Sciences (CSE:LHS,OTCQX:LHSIF), a multi-state operator (MSO) based in Florida.

The Canadian LP was forced to divest its stake in Liberty due to a clash with security regulators on the legality of its presence in the US market through the investment. Aphria sold a promissory note allowing it to re-acquire its shares in the MSO.

Aphria’s independent board members moved ahead with the decision, securing the company a cash consideration of C$47.4 million of thanks to the early termination.

In a statement to the Investing News Network George Scorsis, CEO of Liberty, said his company has never been “more optimistic about its growth trajectory and the opportunities to create value for its shareholders moving forward.”

These MSO firms are attracting the attention from investors as the US cannabis market continues to expand with new operations.

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.