CannTrust CEO Talks “Precise” Strategy

Peter Aceto, CEO of CannTrust, tells INN about his entrance to the cannabis space and offers an overview of the cannabis public market.

While he may be a newcomer to the marijuana space Peter Aceto, the CEO of CannTrust Holdings (TSX:TRST) feels pretty comfortable with how fast paced the cannabis industry is.

“I’m used to fast and I’m used to nimble… but the cannabis space is moving so quickly, so rapidly, it’s fascinating and amazing.” the executive told the Investing News Network (INN) in a phone call.

He can’t yet brag about the amount of road shows or pot conferences attended compared to his peers but CannTrust’s chief is starting to see how fast he has to move to keep up.

Aceto previously served as the CEO for online bank Tangerine, now a division of the Bank of Nova Scotia (Scotiabank) (TSX:BNS), a job he said taught him how to be nimble and fast.

The new executive took over the mantle last year from co-founder Eric Paul, who stepped down two-weeks prior from the adult-use legalization in Canada on October 17.

After finishing a quick stint at the Lift & Co. (TSXV:LIFT) Cannabis Business Conference in Vancouver, only to be whisked away back to Toronto right after his panel conversation, Aceto detailed the path CannTrust is in. While other companies may be racing for expansion or taking a slow and methodical approach, he instead wants it to be somewhere in the middle.

When asked about the pace of the industry and the acquisition plans for his company, especially compared with the quick expansion and asset leveraging from licensed producers (LPs) CannTrust is directly competing with, Aceto explains he doesn’t want his company to rush and end up paying the cost later.

“We want to be bold, we want to be aggressive but we want to be thoughtful then precise and we want to make sure that we have the ability to execute on all the things that we do,” said Aceto. “Rushing at the door and spending lots of money for us doesn’t seem like a prudent approach.”

Aceto explains for him, the need of expansion or other mergers and acquisitions is the way to move forward in the global landscape. The company has created joint ventures in Denmark and Australia to deploy its international strategy.

He admits a slow methodical approach will leave CannTrust behind in the LP race. Particularly in 2019, he expects “reckoning” to come for Canadian firms in the cannabis space.

Analysts and observers of the industry are expecting a market compression to settle in the public markets as companies face economic pressures and high scrutiny from investors.

“I would think some big people are going to be held to account for how they’ve allocated their capital and we are trying to find the right balance of being bold and growing and expanding but having focus in our execution.”

NYSE listing comes at a much needed time for the company

After Cronos Group (NASDAQ:CRON,TSX:CRON) became the first Canadian LPs to publicly list in a senior US exchange, the producers moved quickly into these spaces finding bigger platforms for their companies and offering investors a more secure guarantee of their positions.

CannTrust reached the Toronto Stock Exchange (TSX) after uplisting from the Canadian Securities Exchange (CSE) in August 2017. CannTrust took longer than some of its peers to reach a US exchange.

Earlier in January, the company finally confirmed its application for a listing on the New York Stock Exchange (NYSE).

If confirmed the company would join Canopy Growth (NYSE:CGC,TSX:WEED), Aurora Cannabis (NYSE:ACB,TSX:ACB) and Aphria (NYSE:APHA,TSX:APHA) as the only Canadian LPs trading on the NYSE.

In a note to clients published in January, Beacon Securities analyst Russell Stanley praised the company for the potential listing, indicating gaining the attention from the American investor audience would expand the company’s profile.

Stanley holds a “Buy” rating for the company and a one-year price target for its stock in Toronto of C$21. The analyst sees CannTrust stock as “significantly undervalued.”

Based on three analyst targets for the stock, according to analyst research aggregator TipRanks, CannTrust holds an average C$20 price target per share.

Aceto adds the NYSE listing will allow the company to gain exposure with institutional investors, not only in the located in the US but all over the world.

“There’s no doubt in my mind that investors all around the world in particularly institutional investors have an increasing awareness and willingness to enter the cannabis space,” the executive said.

As the race between the leading LPs intensifies, CannTrust continues its path towards growth and with a US listing a raise in its profile.

Pelham confirmation gives CannTrust chance to deliver on promise

CannTrust faced questions from investors and analysts as the company was caught in the middle of a bylaw preventing for the development of land for marijuana facilities in Pelham, Ontario.

Pelham serves as the home to CannTrust’s facilities and was the planned location for its phase 3 expansion.

“The most prudent thing to do at this time is take a bit of a pause and work together to solve these issues,” Pelham mayor Dave Augustyn said at the time of the bylaw getting approved.

However, on Tuesday (January 22), the company announced it had secured an agreement with the Ontario town and would move forward with its expansion.

CannTrust received approval for an expansion with a footprint of up to 390,000 square feet instead of the originally planned 600,000 square feet. The Canadian firm assured investors it would still deliver on its forecast of 100,000 kilograms production per year once the phase 3 was completed.

The timeline from CannTrust now indicates its phase 3 expansion will be completed by the third quarter of 2020, with the full capacity to produce being reached by the second half of 2020.

During the Canaccord Genuity Group (TSX:CF) “Growth Investor Day” in Vancouver, Aceto clarified the company and Pelham had come to a mutual understanding. Due to community complaints CannTrust will remodel some of the details of its expansion to prevent lighting issues.

“In order to address local concerns from the emission of light from its facilities, CannTrust is proceeding to add additional fan ventilation so its shades can be completely closed, at minimal incremental cost,” the LP notified to investors.

Aceto said the main concerns raised by the community for all cannabis operations in their community were the increase in density with significant car movement and the smell from the cannabis operations.

Investor takeaway

Aceto won’t waste any time to highlight the aspects of the company he says puts it ahead of others – its growth style, its medical presence in Canada with just over 50,000 patients, and its much promised “innovation” in novel cannabis products.

Now after obtaining its approval from Pelham CannTrust will be closely watched by investors to deliver on its promise of final production numbers.

“I think CannTrust value come is way beyond our ability to grow 50,000 kilograms or a 100,000 kilograms or even 200,000 kilograms,” he told INN.

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: 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.

Featured
WHY: Rosen Law Firm, a global investor rights law firm, announces an investigation of potential securities claims on behalf of shareholders of Cronos Group Inc. resulting from allegations that Cronos may have issued materially misleading business information to the investing public. SO WHAT: If you purchased Cronos securities you may be entitled to compensation without payment of any out of pocket fees or costs ...

-

WHY: Rosen Law Firm, a global investor rights law firm, announces an investigation of potential securities claims on behalf of shareholders of Cronos Group Inc. (NASDAQ: CRON) resulting from allegations that Cronos may have issued materially misleading business information to the investing public.

read more Show less
Cresco Labs a vertically integrated multistate operator and the number one U.S. wholesaler of branded cannabis products, announced today the closing of the Company’s previously announced acquisition of Bay, LLC dba Cure Pennsylvania . This press release features multimedia. View the full release here: Cresco Labs closes acquisition of three Cure Penn dispensaries in Pennsylvania Transaction Highlights Three ...

Cresco Labs (CSE:CL) (OTCQX:CRLBF) ("Cresco Labs" or "the Company"), a vertically integrated multistate operator and the number one U.S. wholesaler of branded cannabis products, announced today the closing of the Company's previously announced acquisition of Bay, LLC d/b/a Cure Pennsylvania ("Cure Penn" or the "Transaction").

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211125005708/en/

read more Show less
Company's 38th dispensary in Florida is its first location in Hernando County Curaleaf Holdings, Inc. a leading international provider of consumer products in cannabis, today announced the opening of Curaleaf Spring Hill, the Company's 113th dispensary nationwide and its 38 th in the sunshine state. The new Spring Hill location at 4287 Mariner Blvd. is the Company's fifth dispensary to open in Florida in ...

Company's 38th dispensary in Florida is its first location in Hernando County

Curaleaf Holdings, Inc. (CSE: CURA OTCQX: CURLF) ("Curaleaf" or the "Company"), a leading international provider of consumer products in cannabis, today announced the opening of Curaleaf Spring Hill, the Company's 113th dispensary nationwide and its 38 th in the sunshine state.

read more Show less
text saying "top stories this week"

Catch up and get informed with this week's content highlights from Charlotte McLeod, our editorial director.

Top Stories This Week: Powell Gets Fed Nomination, Using Gold in a Market Correction youtu.be

We're back after a break last week with quite a bit to cover in the gold space.

After running up past the US$1,860 per ounce mark midway through November, the yellow metal has taken a tumble. At the time of this writing on Friday (November 26) afternoon, it was sitting just under US$1,790.

Gold's losses this week have been attributed to elements like a stronger US dollar and better Treasury yields, although Jerome Powell's US Federal Reserve chair renomination has pulled other factors into play — some market watchers believe he may move to taper and raise interest rates faster than anticipated.


If the Fed follows its previously laid out timeline for tapering, it will wrap up in mid-2022; the central bank has said it won't raise rates until after that. It has also emphasized that its roadmap may change if necessary.

Looking at the larger picture for gold, I heard recently from Nick Barisheff of BMG Group, who believes the stock market is due for a major correction.

"The market is due for a major correction. What will cause it and when it will happen is anybody's guess — it could be tomorrow, it could be six months from now" — Nick Barisheff, BMG Group

It's impossible to know when this correction will happen, but Nick emphasized the importance of acting before it's too late. He pointed out that investors are typically slow to get out of the market once a crash actually begins — they wait for a turnaround, and by the time it's clear there won't be one, they've experienced big losses.

In his opinion, the solution is to get out of the stock market early and transfer money into gold.

Here's how Nick explained it:

"Instead of taking your money off the table and going into cash … you go to gold (because cash is devaluing daily). Gold will at least hold its own and probably appreciate … so by sitting it out in gold you can wait until the market finishes correcting and then buy back in" — Nick Barisheff, BMG Group

With gold's future in mind, we asked our Twitter followers this week what price they think the metal will be at the end of 2021. By the time the poll closed, most respondents had voted for the US$1,800 to US$1,900 range.

We'll be asking another question on Twitter next week, so make sure to follow us @INN_Resource or follow me @Charlotte_McL to share your thoughts.

Finally, in the cannabis space, INN's Bryan Mc Govern spoke with Dan Ahrens of AdvisorShares to get his thoughts on 2021 trends and what's ahead in 2022.

Dan was candid, and said if he had to choose one word to describe the cannabis market in 2021, it would be "painful." Like many others, he's been disappointed in the industry's performance — while positivity initially ran high due to excitement about potential federal changes in the US, ultimately progress has been slow.

"Cannabis started with a big run-up in January and February ... and things dragged from there" — Dan Ahrens, AdvisorShares

Still, Dan has hope for 2022 and said it will be a "huge year" for cannabis. He believes US reforms will come sooner rather than later, and in his opinion those widely anticipated changes will bring a wave of M&A activity.

Specifically, he expects to see alcohol, tobacco and other consumer packaged goods companies making deals with cannabis players, not just cannabis entities doing transactions with each other.

"Those big alcohol companies, tobacco companies, other consumer packaged goods product companies — they're waiting. They're waiting on the US" — Dan Ahrens, AdvisorShares

Want more YouTube content? Check out our YouTube playlist At Home With INN, which features interviews with experts in the resource space. If there's someone you'd like to see us interview, please send an email to cmcleod@investingnews.com.

And don't forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Charlotte McLeod, 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.

gold bars

2020 was a banner year for gold-backed ETF inflows, but interest has lagged this year as investors become more comfortable taking risks.

In 2020, gold-backed exchange-traded fund (ETF) inflows ballooned to an impressive 877 tonnes, marking the largest one year intake in ETF history.

Investor appetite was fueled by economic stimulus mixed with concerns about COVID-19 closures, which together brought risk-averse buyers to the yellow metal in droves, propelling investment demand.

"Over the first three quarters of 2020, gold ETFs accounted for almost two-thirds of total investment demand," notes a monthly ETF report released by the World Gold Council (WGC) in January.


"This is significantly higher than any previous full year. Gold ETF demand was also equivalent to a quarter of the average annual gold mine production over the past five years."

Since then, gold ETF demand has waned as investors become more comfortable taking risks. So far, 2021 has seen outflows of 269.1 tonnes compared to 87.6 tonnes of inflows. Of the first 10 months of the year, six registered net outflows from the ETF segment.

In fact, a large part of gold's muted Q3 price performance has been attributed to a 7 percent decline in demand coming largely from the ETF segment. This trend continued in October, when gold ETF holdings shed 25.5 tonnes.

"Global gold ETF holdings fell to 3,567 tonnes (US$203 billion) during the month — notching year-to-date low levels — as investor appetite for gold diminished in the ETF space following price declines in August and September," an October WGC gold ETF report states.

After two months of pressure pushed the gold price to a six month low at the end of September, October saw the metal begin to rebound from the US$1,750 per ounce range to US$1,819.

Adam Perlaky, senior analyst at the WGC, told the Investing News Network (INN) that gold's price positivity in October was largely driven by growing inflationary tones.

"In recent years, gold has been inversely correlated with nominal interest rates, and yet gold strengthened during the month despite higher nominal rates," he said via email. "This is likely a result of rising inflation expectations, though changes in the relative move in interest rates may have had an impact."

He added, "Though higher rates could be a headwind for gold, broader concerns of inflation and a potential recession highlight gold's value as an effective portfolio hedge."

The role of gold amid uncertainty

Gold's use as a hedge against inflation is likely to come into focus in the coming months, a sentiment that was echoed by Juan Carlos Artigas, head of research at the WGC.

Artigas explained that while some are of the belief that the "elements of high inflation we've seen so far are transitory" and will dissipate, there will be longer-term reverberations from the current inflation, and potential secondary effects from the fiscal and monetary policies that were put in place to restart the economy.

In mid-November, JP Morgan (NYSE:JPM) said it anticipates that the US Federal Reserve will raise rates in September 2022 by 0.25 percent, followed by 25 basis point increases on a quarterly basis until real rates hit zero.

"Gold still can face headwinds from potentially higher interest rates," said Artigas.

"(The) opportunity cost of holding gold is one of the drivers of performance, and especially in the short and the medium term, interest rates tend to influence gold's behavior significantly, especially in a period where investors are looking to understand how central banks will behave."

However, as the head of research at the WGC pointed out, there are also some tailwinds that could move gold higher, including inflation that may not be transient, but more structural.

He also pointed out that interest rates are still historically very low, which has pushed investors to make their portfolios more risky. Hedging against this type of exposure is positive for gold's investment side. Additionally, on the consumer side, US infrastructure spending could also serve as a catalyst to more gold upside.

"What we know historically is that better economic growth tends to support consumption of gold, whether it is in the form of jewelry or technology, and 2021 is a good example of that, where you saw the contraction in gold-backed ETF holdings, you (also) saw an increase in demand coming from jewelry, technology and even bar and coin investment," Artigas commented to INN.

Another factor the researcher is watching is central bank gold holdings, which are on track for a 12th consecutive year of inflows. Artigas noted that a 2021 survey of central bankers conducted by the WGC found that the monetary institutes are interested in "expanding the role that gold has in foreign reserves."

"We do expect central banks to continue to be net buyers," he said, adding, "We have seen investors, especially more strategic longer-term investors, taking advantage of the price pullback that we saw in previous months as an opportunity to add gold to their portfolios."

For investors wanting to look at the strategic role gold has played throughout history, the WGC recently released a five part documentary series titled The Golden Thread.

The price of gold was at the US$1,790 level on November 25.

Don't forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Georgia Williams, 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.

MARKETS

Markets
TSX21125.90-487.28
TSXV944.05-31.53
DOW34899.34-905.04
S&P 5004594.62-106.84
NASD15491.66-353.57
ASX7279.30-128.00

COMMODITIES

Commodities
Gold1792.600.00
Silver23.130.00
Copper4.29-0.18
Palladium1751.490.00
Platinum955.500.00
Oil68.17-10.22
Heating Oil2.09-0.29
Natural Gas5.49+0.43

DOWNLOAD FREE REPORTS