During the past trading week (March 11 to 15), business consolidation continued its hold of the cannabis space as two Canadian firms are looking to join forces.

The future of hemp regulation in the US market made headlines this week, while a flashy new hire for the cannabis industry also caught the attention of the market.

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

 

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Hexo makes splashy purchase, gains potential retail play

Canadian licensed producer Hexo (NYSE-A:HEXO,TSX:HEXO) announced its intention to acquire Newstrike Brands (TSXV:HIP,OTC Pink:NWKRF), in an all-share agreement worth approximately C$263 million.

While the acquisition is being described as a move to increase the production capabilities of Hexo and to gain a relationship with Canadian rock-band The Tragically Hip, shareholders of Newstrike, through this purchase Hexo is also obtaining a stake in the Ontario retail market.

Newstrike Brands has a deal in place with Inner Spirit Holdings (CSE:ISH) to set up “experiential hubs” in the stores operated by the retailer.

In February Newstrike and Inner Spirit reached an agreement with an operator for a license to open one of the first 25 dispensaries in Ontario.

“We welcome and look forward to working with the HEXO team and building on the foundation that has been put in place,” Darren Bondar, president and CEO of Inner Spirit told the Investing News Network (INN).

PM Rendon, spokesperson for Newstrike, told INN the partnership with Inner Spirit “will continue as before” after the Hexo acquisition is completed.

The state of hemp regulation with FDA leader departing

With the upcoming departure of US Food and Drug Administration (FDA) Commissioner Scott Gottlieb, the future for the regulations on hemp-derived products in the health and wellness market is muddled.

“Most believed that the path forward under Gottlieb’s FDA would allow for CBD to be sold as nutritional supplements under certain conditions but that the FDA would play a greater role on the regulatory side,” Alan Brochstein, cannabis analyst with 420 Investor wrote in his weekly note to investors.

The analyst called Gottlieb’s decision to step down “disappointing” as he expected the FDA to set up guidelines and rulings on these hemp products.

 

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While uncertainty rises as a new head of the FDA will have to be selected, Preet Marwaha, CEO and founder of Blue Sky Biologicals, a hemp focused company, told INN one way or another the FDA has to set up guidelines and aid in the regulation duties.

Bruce Linton, co-CEO of Canopy Growth (NYSE:CGC,TSX:WEED), another executive with a high stake in the development of the hemp market, said states can’t wait for the FDA to confirm the expectation of the market and instead must step up to the regulation task.

Market update

Aurora Cannabis (NYSE:ACB,TSX:ACB) secured another vote of confidence from the established market thanks to the hiring of Nelson Peltz, founder and CEO of the Trian Fund Management in New York, as a strategic advisor.

Peltz is a legacy hire for Aurora and according to analysts opens the door for the marijuana firm to explore deals with large corporations in the beverage or consumer packaged goods markets.

Aurora is granting Peltz with the option to buy approximately 20 million shares of the company for an an adjusted price of C$10.34 per share.

Confidence in the performance of Cronos Group (NASDAQ:CRON,TSX:CRON) took a hit in the past week as a new research report from Bank of Montreal (TSX:BMO) downgraded the stock to a “Sell” position.

Tamy Chen, BMO Capital analyst covering the cannabis space, wrote the valuation for the firm is elevated from the current state of the company’s operations.

A report from The Street indicated this is not the first time the company has seen a change in sentiment from analysts. In February GMP Securities downgraded the stock from a “Buy” to a “Hold” rating.

On Monday (March 11) The Green Organic Dutchman Holdings (TGOD) (TSX:TGOD,OTCQX:TGODF) announced a wide ranging deal based on extraction services with Valens GroWorks (CSE:VGW,OTCQB:VGWCF) intended to accelerate the hemp strategy for TGOD in Canada.

“TGOD will supply Valens with significant quantities of cannabis and hemp and Valens will provide extraction purification services processing the cannabis and hemp into premium quality resins and distillates,” the company indicated to shareholders.

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: Inner Spirit Holdings and Valens GroWorks are clients of the Investing News Network. This article is not paid-for content.

 

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

Cannabis Weekly Round-Up: Cowen Makes Aurora Cannabis New Top Pick

By Bryan Mc Govern, March 8, 2018

During the past trading week (March 4 to 8), a Wall Street research firm crowned a new top pick for the cannabis market.

An off-hand comment from a top grocery store executive about the potential to sell cannabis in the future made headlines this week, while comments and predictions from a portfolio manager in the marijuana space also caught the attention of the market.

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

 

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New York-based financial institution Cowen (NASDAQ:COWN) upended the leadership status of the cannabis stock market thanks to a new investor report, indicating Aurora Cannabis (NYSE:ACB,TSX:ACB) is its brand new top pick in the space, over its previous pick Canopy Growth (NYSE:CGC,TSX:WEED).

According to a report from Yahoo Finance News, Cowen slapped ACB with a price target of US$14.

Over a five-day trading period, Aurora’s shares jumped 6.44 percent in New York and 7.55 percent in Toronto, as of 12:00 p.m. EST on Friday (March 8).

Conversations with portfolio managers in cannabis market

During the week, the Investing News Network chatted with two portfolio managers for actively managed investment funds focussed on the marijuana stock market.

As part of the launch for the Cannabis Growth Fund Korey Bauer, managing director with American firm Foothill Capital Management, told INN he expects to see a “breakaway” between leaders and laggers in the cannabis space.

He explained for the fund he will focus on cannabis stocks in legal markets, therefore leaving US multi-state operators out of the investing picture, at least for now.

“With some of these multi-state operators, no question they are taking up some quite a bit of market share pretty quickly,” Bauer said. “I do think that’s going to make it a little bit more challenging for some of these Canadian companies to breach into the US.”

 

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Meanwhile in the Canadian market, Greg Taylor, chief investment officer of Purpose Investments and portfolio manager of the Purpose Marijuana Opportunities Fund (NEO:MJJ), told INN he is still expecting to see a lot of volatility in the cannabis space.

“It’s going to be important to run nimble, make sure that you’re not just blindly buying stocks in the sector and not watching them, because there are going to be sudden moves which might catch people off guard,” Taylor told INN of his investment strategy for the fund.

Based on the evolution of the cannabis market, Taylor expects to see changes in management teams from firms in the space to leaders capable of bringing products to market effectively, growing at a low cost and maintaining investor confidence.

Whole Foods acknowledges potential of future cannabis sales

During a panel conversation with The Texas Tribune, John Mackey, CEO of Whole Foods Market, an Amazon (NASDAQ:AMZN) company, explained he could see a future in which due to market demands his grocery store chain could carry cannabis products, if the laws allowed it.

Speaking about the Texas-law, Mackey said “chances are good that grocery stores will be selling” marijuana products. According to its list of stores by states, there are 34 Whole Foods Market locations in Texas.

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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Cannabis Market Update: Q3 2020 in Review

Click here to read the previous cannabis market 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 US 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, working in the 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 undergoing a return to form as excitement about the US opening up increases.

The expert explained that there is likely to be a windfall of capital in the wake of major federal changes in US 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.

“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.”

 

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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 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 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, 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 for 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.

 

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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 Canadian companies 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 future positivity for already thriving operations.

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All interested parties can join the conference call by dialing 1-888-231-8191 or 1-647-427-7450, conference ID: 4880609. Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until May 20, 2021 . To access the archived conference call, please dial 1-855-859-2056 and enter the encore code 4880609.

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Appointment of Dr. Kelmendi, Assistant Professor of Psychiatry at Yale University and co-founder of the Yale Psychedelic Science Group, brings another experienced medical professional to Lobe’s advisory team.

 Lobe Sciences Ltd. (CSE: LOBE) (OTC Pink: GTSIF) (“Lobe” or the “Company”) is pleased to announce the appointment of Benjamin Kelmendi, MD, Assistant Professor of Psychiatry at Yale University School of Medicine, to its Scientific Advisory Board.

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Ayurcann Holdings Corp. ( CSE: AYUR ) (the “ Company ” or ” Ayurcann “), a Canadian extraction company specializing in the processing of cannabis and hemp for the production of oils and various derivative products, is pleased to unveil further details of its Phase 2 expansion plans.

Ayurcann has commenced trading on the Canadian Securities Exchange (” CSE “) on April 8, 2021 and subsequently announced a private placement of up to $500,000 (” Financing “), as per the Company’s press release dated April 12, 2021. The proceeds of the Financing are intended to be used to further pursue Phase 2 of the expansion of the production capacity of the Company’s Pickering facility.

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