During the past trading week (February 10 to 14), another Canadian cannabis player made significant staff cuts as the trend of streamlining continues to sweep across the sector.

Aurora Cannabis (NYSE:ACB,TSX:ACB) revealed a drop in its marijuana production in some middling quarterly results, while Canopy Growth (NYSE:CGC,TSX:WEED) soared following some surprisingly solid numbers in its quarterly report.

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


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Supreme makes cuts to corporate, operational staff

Like others in the space, The Supreme Cannabis Company (TSX:FIRE,OTCQX:SPRWF) decided to let go of some of its staff in an effort to cut costs amid market uncertainty.

The cannabis firm told investors on Tuesday (February 11) it planned to cut a total of 15 percent of its workforce across the company. About a third of its corporate-level staff will be let go, while 13 percent of operational positions are getting the cut, Supreme said.

“Recent staff reductions were an extremely difficult decision for myself and the Board,” Interim CEO Colin Moore said in a statement, “but I believe them to be necessary to create a more agile, focused and profitable organization for the long-term benefit of all of Supreme Cannabis’ stakeholders.”

In doing so, Supreme joins a host of other marijuana businesses, including Tilray (NASDAQ:TLRY), Aurora and Sundial Growers (NASDAQ:SNDL), which have also made recent reductions in search of profitability.

While the cuts have led to drops in value, Purpose Investments Portfolio Manager Nawan Butt told the Investing News Network (INN) the cuts will ultimately be a net positive for the companies.

“I think this is the sort of soft catalyst that you need for these licensed producers to refocus their efforts to become profitable and make this industry sustainable and viable in the long term, rather than just being an accumulation of assets at wild valuations,” Butt told INN.

On Friday (February 14), Supreme announced its Q2 2020 results, revealing a decrease in net revenue of 21 percent quarter-over-quarter to C$9.1 million in its most recent quarter from C$11.4 million in Q1 2020. Supreme attributed the drop to its transition away from the wholesale market and towards the recreational industry.

Aurora pivots to higher quality cannabis, reports lower harvest in Q2 2020

Elsewhere in the Canadian cannabis landscape, Aurora reported a 26 percent drop in its cannabis production in its Q2 2020 results due to a switch to high-quality strains with a lower yield, the company said.

The Alberta-based producer also doubled its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss as well to C$80.2 million this past quarter compared to C$39.7 million Q1 2020.


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Michael Singer, interim CEO at the firm, said in an earnings call on Thursday (February 13) that shifting consumer needs, a nearly non-existent retail segment and provincial inventory changes have put a damper on cannabis in Canada as a whole.

The results follow shortly after the firm announced some cost-cutting initiatives last week, including millions of dollars in write downs and reductions to capital expenditures.

Along with the streamlining, the producer also lost former CEO Terry Booth as he retired from his role at helm of the company.

Aurora said the headwinds facing the sector are likely to stunt its quarterly growth moving into Q3.

“Due to several short-term factors, there is likely to be a slower than previously expected rate of industry growth in the near-term,” Aurora said, adding that revenue will probably see little to no sequential growth.

Canopy Growth surprises investors with increased revenue

Another cannabis firm is having a better time in the open markets after releasing some unanticipated results.

On Friday, Canopy Growth reported C$123.8 million in net revenue in its Q3 2020, a 62 percent increase quarter-over-quarter when compared to the C$76.6 million reported in the second quarter of its fiscal 2020 year.

Shares leapt over 20 percent from market close on Thursday to early in the trading session on Friday. As of 9:42 a.m. EST, prices are at C$31.34.

The firm tightened its losses as well, reporting C$92 million in EBITDA losses, C$64 million narrower than its Q2, in which they had an EBITDA loss of C$155.7 million.

Canopy attributed the positive results to an increase in sales, lower operating expenses and higher gross margins. David Klein, CEO of Canopy, said in a statement the company was successful in driving growth through strategic acquisitions and international operations.

“We have a lot of work to do. We are eager to capitalize on the opportunity to create an unassailable position through a tight focus on the consumer and on critical markets,” Klein added.


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Canopy will also be making strides to streamline its operations, according to CFO Mike Lee.

“We plan to take further steps to reduce our costs and right-size our business to ensure that we can generate a healthy margin profile and cash generation in the coming years,” Lee said.

Market updates

The beleaguered CannTrust Holdings (NYSE:CTST,TSX:TRST) told investors it has finally selected a new CEO after former leader Peter Aceto was fired when it was discovered that executives at the firm knew of illegal growing operations at its cultivation facilities last summer.

Greg Guyatt, CannTrust’s current CFO, will now take his place at the head of the company. CannTrust also announced its remediation activities at its Vaughan facility will be completed sometime in the second quarter of 2020.

The move is an effort to have its cultivation and production licenses reinstated by Health Canada after they were suspended following an investigation by the federal agency.

CannTrust has also received an extension from the New York Stock Exchange after the bourse warned CannTrust it risked being delisted due to its low share price in December. The firm now has until mid April to file its backlog of financial statements.

In the US, Curaleaf Holdings (CSE:CURA,OTCQX:CURLF) confirmed that its acquisition of the privately held GR Companies, aka Grassroots, is nearing completion after the expiration of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 waiting period.

The deal is now expected to close in spring this year, subject to customary closing conditions. It was first announced in July 2019.

“Upon closing, Curaleaf will gain a strong foothold across key states in the Midwest, increasing access for patients and customers to our industry leading brands,” said Joseph Lusardi, CEO of Curaleaf, in a statement.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

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

Editorial Disclosure: 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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Cannabis Market Update: Q3 2020 in Review

Click here to read the previous cannabis 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 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, where he worked on 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 seeing a return to form by way of the excitement for an ongoing opening process in the US.

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


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“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.”

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 environment 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 current 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 potential, 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 to work on 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 at the moment.


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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 Canadians 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 an increase to their already thriving operations.

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