Round-Up: Arcview Investor Forum Vancouver

The Investing News Network offers a recap of some of the highlights from the 2019 Vancouver edition of the Arcview Investor Forum.

Cannabis investors were able to discover some of the new trends in the space and learn where the industry may be headed in 2019 during the Arcview Investor Forum in Vancouver.

The three day event, which ran from April 23 to 25, gave investors the chance to hear from thought leaders in the public sector, including analysts from financial institutions who are researching the space.

As has been the trend at other recent investor focused marijuana events, multi-state operators (MSOs) in the US market dominated conversation. Read below to find out about highlights from the event.

Analysts offer their take on the status of the market

Hosted by Gerald Pascarelli, an associate with the beverages and restaurants division at Cowen (NASDAQ:COWN), the event’s analyst panel reviewed how investors have gravitated towards the US market thanks to the emergence of MSOs.

Graeme Kreindler, equity analyst with Eight Capital, said the recent acquisition agreement between Canopy Growth (NYSE:CGC,TSX:WEED) and Acreage Holdings (CSE:ACGR.U,OTCQX:ACRGF) offers validation for the entire MSO play.

Analyst Matt Bottomley from Canaccord Genuity (TSX:CF,OTC Pink:CCORF) said his coverage has mostly shifted to the MSO space given the growth in the sector.

John Zamparo, equity analyst for the Canadian Imperial Bank of Commerce (CIBC) (NYSE:CM,TSX:CM), told the audience that, while investors have matured along with the sector, in his view some still see cannabis as a resource.

The Canadian bank is a recent entrant to the marijuana space, initiating coverage of Canopy Growth, Cronos Group (NASDAQ:CRON,TSX:CRON) and Aphria (NYSE:APHA,TSX:APHA) in January.

According to Zamparo, investors need to realize that the market will be dominated by differentiated products rather than growth production numbers.

Pascarelli agreed with his fellow analysts and added that he views the space as a consumer packaged goods industry.

While Bottomley agreed that the metrics need to change for these stocks, he said that when evaluating companies the funded capacity and lowest cost of production metrics are a “necessary evil.”

Canaccord was one of the first financial institutions in Canada to jump on coverage and deal making in the marijuana market.

The panelists were also asked about the issue of value in the sector and the disconnect between some of the valuations in the market compared to results seen so far.

Zamparo said the cannabis market demands that investors project into the future to evaluate a company. “That’s what you have to do in today’s industry,” he said.

The analyst for CIBC added that investors can get too bogged down by focusing on profits from these companies.

“That does bother some people, not looking at profitability,” said Zamparo, as he explained that his firm looks at elements such as disruption and top line enterprise value to sales. “I think if you’re actually interested in profitability in Q1 of 2019 or Q2 of 2019, I think you’re missing the bigger picture about what these companies are trying to become.”

Kreindler added that his clients are similar in their hunger for profits from marijuana firms.

He explained that there is still a constant evolution of the metrics for these companies and the standards are currently being established.

In addition, the panelists discussed the potential for the current gap between Canadian firms and MSOs in terms of valuations.

Kreindler projected that policy changes in the US will lead to some reevaluation on the monetary worth of MSOs.

Zamparo explained that, while the MSOs could catch up to Canadian valuations, this convergence of multiples could signify a decrease in valuations for the Canadian cannabis firms.

Other experts offer predictions and views on the market

Talking about the evolution of the investment market for cannabis, Urban Smedeby, president of ManifestSeven (formerly MJIC), said investors have quickly shifted away from their initial reservations in the risk associated with marijuana investing.

The executive explained that he is seeing more aggressive investors who are not backing away from the risk in this space.

Smedeby spoke during the “Raising Capital While Avoiding the Regulatory and Compliance Landmines” panel, and his firm is a business solution company focused on the cannabis space.

Sander Zagzebski, a partner with the corporate and business practice group at law firm Greenspoon Marder, told the audience that he expects to see merger and acquisition activity grow in terms of deal size and sophistication.

The lawyer said he can foresee the entry of antitrust reviews given the increase from deals in the US.

Zagzebski spoke during a panel titled “Crystal Balling the Future of Cannabis.”

“We have a group of folks that are aggressively trying to become the leading players so that when legalization happens they are going to be juicy acquisition targets for a US-based, consumer-branded company or something like that,” he said.

As part of a panel discussing the various options to raise capital in the public markets, titled “Capital Market Funding Options: IPO, RTO, ETFs and SPACs,” one executive told the audience a new model of investing is about to begin trading in Canada.

Jonathan Sandelman, CEO of Cannabis Strategies Acquisition (NEO:CSA.A), said special purpose acquisition corporations (SPACs) are poised to capture the attention of marijuana investors due to the transparency and increased level of regulation.

“Its mission is to be very much like a private equity firm, but with daily liquidity, with the optionality not given to a private equity manager but to the investor,” he said.

According to Sandelman, his firm has already acquired five US cannabis companies in order to establish a presence in the market.

These purchases were approved by shareholders of the company in March.

“With a SPAC, you’re investing in a management team who’s going to go out and acquire assets … in the future,” said Anna Serin, director of listings development with the Canadian Securities Exchange (CSE).

Serin told the audience that the CSE will be offering SPACs at some point.

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: Acreage Holdings is a client of the Investing News Network. This article is not paid-for content.

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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 ...

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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.

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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.

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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.

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