Cannabis Weekly Round-Up: Illinois Opens Recreational Market

During the past trading week (December 30 to January 3), Illinois kicked off the new year with the first legal sales of recreational cannabis, raking in millions on the first day.

A cannabis firm confirmed that its takeover deal with a major US-based multi-state operator (MSO) is in the final stretches, and a player in the Canadian marijuana space filed updated audited financial statements following a series of missteps at the company.

Here’s a closer look at some of the biggest cannabis news over the week.

Illinois makes millions on first day of legal cannabis

Cannabis consumers in Illinois got the chance to start 2020 off with the first purchases of legal recreational marijuana in the state when legalization went into effect on Wednesday (January 1).

There were over 77,000 transactions for the first day with nearly US$3.2 million in sales, said Toi Hutchinson, Illinois Governor J. B. Pritzker’s senior advisor for cannabis control, during a press conference on Thursday (January 2).

The first sale in the state took place at one of Cresco Labs’ (CSE:CL,OTCQX:CRLBF) dispensaries, according to the Illinois-based MSO, once retail locations opened on the morning of new year’s day.

The firm said it served over 3,000 people on Wednesday though its five retail stores, with an average ticket price of US$135.

Charlie Bachtell, Cresco Labs’ CEO, said in a statement that the new era of cannabis legalization will help bring about social equity and will create new ownership opportunities across the state.

“With 13 million residents and 100 million annual tourists, Illinois is predicted to be one of the largest recreational cannabis markets in the United States,” Bachtell said.

Illinois’ large addressable market and robust tourism industry have been said to be major drivers of growth for cannabis in the state. A report from research firm Brightfield Group states that Illinois’ marijuana market could rival that of Colorado once it gets going in earnest, and Marijuana Business Daily estimates the state could generate up to US$2.5 billion a year from cannabis sales.

Fellow Illinois native Green Thumb Industries (GTI) (CSE:GTII,OTCQX:GTBIF) also provided investors with an overview of its first day in the recreational cannabis market.

In a statement, GTI CEO Ben Kovler said the company’s line of stores in Illinois served thousands of people, and that the firm opened the first adult-use-only store in Illinois.

Illinois took its first step in adult-use cannabis legalization back in June, when Pritzker signed the Cannabis Regulation and Tax Act.

It was implemented “in the interest of allowing law enforcement to focus on violent and property crimes, generating revenue for education, substance abuse prevention and treatment, freeing public resources to invest in communities and other public purposes, and individual freedom.”

In a historic move, Illinois became the first state to legalize adult use of the drug through its legislature instead of via a citizen-led initiative.

Legalization comes after Pritzker announced on Tuesday (December 31) that over 11,000 low-level marijuana charges were pardoned in the first wave of expungements as a part of the new cannabis law.

Origin House, HEXO make significant moves over holidays

Two cannabis players took the slow period over the holidays to tell investors about critical movements.

Origin House (CSE:OH,OTCQX:ORHOF) confirmed on Tuesday that over 99 percent of its shareholders have voted in favor of its acquisition by Cresco Labs.

“Today, our shareholders have demonstrated that they are solidly behind our proposed arrangement with Cresco Labs,” said CEO Marc Lustig in a statement.

The news comes after the MSO revealed that the deal, first announced in April, would be reduced through a non-brokered financing on the part of Origin House. The transaction is expected to close soon after the firm files an order for approval with the Ontario Superior Court of Justice on January 6.

For its part, HEXO (NYSE:HEXO,TSX:HEXO) walked back financial statements for its fiscal 2019 year after discovering that a deferred tax liability went unaccounted for.

The company said its deferred tax liability was overstated by C$14.3 million after realizing a tax asset from one of its subsidiaries wasn’t considered against a deferred tax liability from a separate subsidiary.

HEXO said it first believed the two tax positions couldn’t be used to offset each other since they were generated in separate entities.

With the error adjusted, the company said its new net loss for the fiscal 2019 year is C$69.6 million, down from the C$81.6 million originally reported.

Market updates

On Thursday, Tilray (NASDAQ:TLRY) took steps to establish itself in the Middle East with a strategic agreement with Canndoc, a subsidiary of Israel-based InterCure (TLV:INCR). Through its own subsidiary, Tilray Portugal Unipessoal, Tilray plans to export 2.5 tons of medical cannabis to Israel from Portugal this month, becoming the first cannabis company to do so.

“To be able to import medical cannabis into Israel for patients in need is truly a historic moment not only for Tilray, but the whole industry,” said Brendan Kennedy, Tilray’s CEO, in a statement.

As of Wednesday, people in Quebec under the age of 21 won’t be able to purchase recreational cannabis, creating some of the most strict cannabis laws in the country. Other provinces in Canada have an age limit set at 18 or 19 years of age to buy and use the drug.

The news comes after Quebec banned edible cannabis-infused products in July in the hopes of preventing cannabis use by children.

At the time, the Quebec Cannabis Industry Association called the move “a shot across the bow for all Quebec businesses,” as it raised concerns for cannabis companies about the sale of edible products in the province.

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