Cannabis Weekly Round-Up: Rumors of New Alcohol Entry

During the past trading week (August 27 to 31), cannabis stocks went racing thanks to a report of a new alcohol company joining the overall industry.

A closer look into an early candidate for a partnership with the alcohol producer and market updates complete this Cannabis Weekly Round-Up.

Diageo (NYSE:DEO), the alcohol producer behind Guiness beer is eyeing an entry into the growing cannabis market, similar to the entry from Constellation Brands (NYSE:STZ) and Molson Coors Brewing (TSX:TPX.B,NYSE:TAP) according to a report from BNN Bloomberg.

Doug Waterson, CFO and Portfolio Manager with Faircourt Asset Management and Manager of the Ninepoint UIT Alternative Health Fund told the Investing News Network (INN) investors should be aware the potential entry from Diageo does not have to resemble that of its alcohol company peers.

“[T]here are lots of other ways for the companies to work together that might not have that same impact but [can] still be meaningful,” Waterson said. The executive said producer Tilray (NASDAQ:TLRY) is an early leading candidate to be involved in the arrival of Diageo, due to its quality name that “would make a good partner” for a beverage company.

The market agreed with Waterson by giving Tilray shares gains a heavy boost this past week. On Tuesday (August 28) the company released its second quarter financial results and surged over 20 percent during the trading session. Waterson said he attributed a “highly significant portion” of the company’s public gains to speculation of the company being the potential partner of Diageo.

On Friday (August 31) Hiku Brands (CSE:HIKU) retired its stock after obtaining approval from shareholders for an acquisition offer from Canopy Growth (TSX:WEED, NYSE:CGC). The company announced it obtained approval thresholds from 99.4 percent of votes in favor of the deal. “Approximately 52.64 [percent] of the common shares of Hiku were represented in person or by proxy at the meeting,” the company said.

As Canada moves closer towards legalization of recreational cannabis the federal government announced a new measure to track the “movement of cannabis.” Health Canada explained this move was made in order to guarantee the route legal cannabis takes from growing to processing and its final sale. Dubbed as the “Cannabis Tracking System” the government said this system has already been used for medical cannabis.

Minister of Health Ginette Petitpas Taylor said this system will “prevent legal cannabis from being diverted to the illegal market.” The government confirmed this system will not retain individual consumer information.

Market update

Quarterly reporting season is in full swing and as such a variety of companies issued reports for investors to stay up to date on the financials and significant drivers for the company. Two of the leading multi-state US cannabis operators offered investors glowing reports on recent growth and upcoming paths of revenue.

MPX Bioceutical (CSE:MPX) recorded revenues of US$14.5 million during its fiscal Q1 2019, a 224 percent increase from the previous year. Scott Boyes, CEO of the operator said the increase in revenues was due to a “strong performance” in the Arizona assets from the company. As of June 30 the company had a cash balance of C$30.7 million.

During the most recent quarter MPX completed the acquisition of Canveda, a Canadian licensed producer (LP) to solidify its presence in that market as well. MPX said it is working to expand its arrangement with Panaxia Pharmaceutical Industries and manufacture its products at the Owen Sound, Ontario, facility it currently leases. The final products are planned to be marketed in Canada and be exported potentially.

Shares for iAnthus Capital Holdings (CSE:IAN) rose on Wednesday after released its results, reporting US$4.9 million in revenue. During a conference call with investors and shareholders Hadley Ford, CEO of iAnthus, said the company is focussed on three driving markets with recreational use either on the way or likely to be arriving soon: Massachusetts, Florida and New York. The company expects to have three dispensaries in Florida by the end of the year and between five and seven by the end of Q1 2019.

Julius Kalcevich, CFO of iAnthus, said New York is the most eagerly anticipated cannabis market in the US, and the company plans on opening a dispensary across the Barclays Center sometime in mid Q4 2018.

WeedMD (TSXV:WMD) also issued its financial results for its Q2 2018, reporting C$2.1 million in revenue to investors. The company secured three provincial supply agreements for recreational cannabis during the quarter and added an agreement with Shoppers Drug Mart for the sale of medical cannabis through the pharmacy’s online portal, if it obtains its LP status.

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: Nova Scotia Signs Supply Agreements

By Bryan Mc Govern – August 24, 2018

During the past trading week (August 20 to 24), Nova Scotia Liquor (NSLC) revealed which producers will supply the province with cannabis product, sending stocks on a rush.

A recap of one quarterly report from a US cannabis operator listed on the Canadian Securities Exchange and market updates complete this Cannabis Weekly Round-Up.

The Investing News Network (INN) also wrapped up its coverage from the show floor of MJBizCon INT’L with a couple of exclusive interviews and panel recaps for investors who may have missed the event.

Nova Scotia awards supply agreements

On Friday (August 24), the NSLC revealed the 14 cannabis licensed producers (LPs) that will provide Nova Scotia with legal cannabis product when adult-use sales kick off on October 17. Twelve of them are public or have a direct connection to the public markets.

“With these first purchase orders, the NSLC will carry 282 cannabis products and 21 accessories. Recreational cannabis for recreational use will come in five formats: flower, seeds, pre-rolls, oil and gel caps,” the NSLC said.

The province ordered 78 strains total to satisfy its market, and the first purchase order will result in 3.75 million grams of legal cannabis product. Over the first year of sales, the NSLC expects to order close to 15 million grams. “We have carefully selected the strains and will adjust our inventory based on customer preference,” said Bret Mitchell, NSLC president and CEO.

Here’s a list of all the LPs picked by Nova Scotia with a presence in the public markets:

• Aphria (TSX:APH)
• Aurora Cannabis (TSX:ACB)
• CannTrust (TSX:TRST)
• Canopy Growth (TSX:WEED,NYSE:CGC)
• Peace Naturals Project / Cronos Group (TSX:CRON,NASDAQ:CRON)
• MedReleaf / Aurora
• Organigram (TSXV:OGI)
• TerrAscend (CSE:TER)
• Tilray Canada (NASDAQ:TLRY)
• 7ACRES / The Supreme Cannabis Company (TSXV:FIRE)
• Up Cannabis / Newstrike Brands (TSXV:HIP)
• WeedMD (TSXV:WMD)

Tim Emberg, vice president of sales and commercial operations for Organigram, one of the producers tapped to supply the province with product, said the company will give 41 product types and will offer “access to almost 100 percent of our total product offerings.”

In Friday’s trading session, some of the producers awarded supply agreements enjoyed a rush just before the end of the week. Supreme Cannabis, Cronos, Aphria and Canopy were some of the top gainers thanks to the agreements, and as of 12:30 p.m. EST they had seen share price increases of 12.67, 10.13, 8.15 and 6.48 percent, respectively.

Exclusive MJBizCon INT’L interviews

Following a panel at the cannabis investing crash course during MJBizCON INT’L, iAnthus Capital Holdings (CSE:IAN) Director and CEO Hadley Ford told INN about the strategy for the US-focused operator and the general trends for the market below the border.

“We look at it as an addressable market and that’s defined by the states,” Ford said. “We look at the general population. What program is in place in that state? How big is their addressable market?”

In an exclusive talk with INN, Micah Tapman, managing director at Canopy Ventures, said he’s not as enthusiastic about the wide-ranging predictions and hype surrounding the cannabis market. His fund invests in areas like retail technology and supply chain tools for the cannabis business.

When asked his advice for investors in the public space, Tapman said he would be shorting “everything” right now. “I can’t imagine that the reality is going to match the expectations of people who put money into the public market,” Tapman said. “I don’t see that reality being close to the dream that people are sort of talking about.”

Other market updates

As quarterly report season is in full swing, various cannabis companies have presented results to shareholders. One such company this week was CannaRoyalty (CSE:CRZ,OTCQX:CNNRF), which reported C$3.5 million in revenue for Q2 2018.

The California brand operator highlighted that its strong results were due to its recent acquisitions of Kaya Management and Alta Supply. Afzal Hasan, president and general counsel of the company, told INN the plan is to merge Alta Supply and River Distribution once the acquisition for the latter is complete.

The US cannabis market came into focus this week as well thanks to a new report from investment banking and equity research firm Eight Capital. The firm kicked off coverage of Green Thumb Industries (CSE:GTII) and MedMen Enterprises (CSE:MMEN), with both receiving “buy” ratings and price targets of C$17 and C$7, respectively.

“We favor vertically integrated players operating in multiple states that will create scale coupled with a first mover advantage,” the report states. Eight Capital shared with investors that it also favors the Florida and New York options as “major market opportunities.”

According to the report, a mature US market will be worth over US$60 billion. “Major political action with respect to the reconciliation of state and federal law has the potential to significantly de-risk the sector and present a more favourable business and investment climate in a massive growth market, in our view,” the report states.

Don’t forget to look for our coverage of MJBizCon INT’L, with show notes from the floor and exclusive interviews on INN. You can also 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: The Supreme Cannabis Company is a client of the Investing News Network. This article is not paid-for content.