The Investing News Network rounds up some of the biggest company and market news in the cannabis market for the past trading week.
During the past trading week (April 15 to 19), a shocking deal between a Canadian marijuana leader and an emerging US multi-state operator (MSO) was brokered.
The launch of new public funds covering the US cannabis space made headlines this week as well, while the impact of another short seller report also caught the attention of the market.
Here’s a closer look at some of the biggest news during last week’s trading period.
Continuing with the trend of rampant merger and acquisition activity in the marijuana space, this past week Canadian cannabis leader Canopy Growth (NYSE:CGC,TSX:WEED) confirmed the latest blockbuster deal in the industry.
The firm is looking to secure the rights to buy US-based MSO Acreage Holdings (CSE:ACGR.U,OTCQX:ACRGF) in a deal worth approximately US$3.4 billion. The acquisition will go through only once marijuana becomes legal at a federal level in the US.
If approved, the deal would see Canopy issue a payment of US$300 million, or around US$2.55 per Acreage share. Additionally, holders of the MSO would get 0.5818 of a Canopy common share per Acreage share that they own.
Kevin Murphy, CEO and chairman of Acreage Holdings, said this deal will allow his firm to access the vast resources of the Canadian company. He also indicated that it will provide some relief as the ramp up for an MSO is a challenging road.
“At the same time, a confluence of factors are making it much more difficult for a multi-state operator to achieve its full potential, including the enormous amount of cash required to scale,” he said.
The deal must be approved by shareholders of both companies.
New funds launch offering exposure to burgeoning US cannabis space
Competing exchange-traded fund (ETF) firms Evolve Funds Group and Horizons ETFs Management (Canada) both launched new funds covering the US cannabis market.
While key differences exist between the two funds, mainly the decision of Evolve to provide active management for its fund, both ETFs went public on the NEO Exchange in Toronto this week.
Steve Hawkins, president and CEO of Horizons ETFs, said he anticipates investors will keep looking for investments in the US as the country keeps its path of easing regulations on the drug.
New bank and short sellers reports
Christopher Carey, an analyst with the bank, made HEXO (NYSEAMERICAN:HEXO,TSX:HEXO) his top pick and assigned the Canadian producer a “buy” rating and a US$10 price target.
Fellow Canadian firms Aurora Cannabis (NYSE:ACB,TSX:ACB) and Canopy Growth also received “buy” ratings and price targets of US$11 and US$52, respectively.
The last assessment from the analyst was for Cronos Group (NASDAQ:CRON,TSX:CRON), to which Carey gave an “underperform” rating and a target of US$13.
On a different note, shares of Village Farms International (NASDAQ:VFF,TSX:VFF) were targeted this week by short seller Andrew Left from Citron Research.
Left published a report calling out the firm for the leap its stock has seen so far in 2019 based on a joint venture for marijuana operations in Delta, BC, alongside Emerald Health Therapeutics (TSXV:EMH,OTCQX:EMHTF).
Before the short seller report went public, shares of Village Farms had enjoyed a 222.22 percent rise in New York and 256.28 percent in Toronto. The company finished the trading week at US$11.92 and C$15.99. Left indicated in his report that the stock will go down to US$1.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Acreage Holdings is a client of the Investing News Network. This article is not paid-for content.
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.