Weekly Round-Up: New Deal Splits Hiku-WeedMD Merger

This past trading week (July 9 – 13) the industry faced a stunning reversal when a widely known merger between Hiku Brands and WeedMD was dismantled in favour of a new acquisition deal by Canopy Growth.

A look into the 31 supply agreements B.C. signed with cannabis licensed producers (LPs) and market updates completes this Cannabis Weekly Round-Up.

The Investing News Network (INN) published its Q2 2018 report on the cannabis sector for investors to catch up and hear from some experts in the public markets. With legalization close to reality in Canada, embracement of branding as a key metric for public ventures and a newfound bullish sentiment for US focused cannabis stocks, investors in the space have a lot to go through in order to be as prepared as possible to take advantage of the market.

Canopy swoops in for Hiku, WeedMD gets termination fee but stock dips

In April WeedMD (TSXV:WMD) and Hiku Brands (CSE:HIKU) agreed to a mutually beneficial merger that experts had called an example of what the industry would be striving for with these deals. WeedMD had not created a significant presence in the retail or recreational cannabis space, while Hiku had raised a lot of the appeal to this area of the cannabis sector. The proposed arrangement would see existing Hiku and WeedMD shareholders owning approximately 51.75 percent and 48.25 percent of the combined company.

Then on Tuesday (July 10) the merger between the two was dropped after Hiku obtained an acquisition offer from industry giant Canopy Growth (TSX:WEED,NYSE:CGC). Hiku elected to go with the “superior” proposal in Canopy’s all-share deal.

Since Tuesday’s trading session WeedMD’s share price has dropped 21.46 percent, while Hiku’s rose 14.86 percent. As part of Hiku cancelling its proposal with WeedMD the medically focused producer was awarded a C$10 million termination fee.

B.C. inks supply agreements with 31 cannabis LPs for adult-use product sales

This week the Liquor Distribution Branch (LDB) for B.C. provided more information on its approach to the legalization of recreational cannabis arriving on October 17, including listing all the LP’s that will initially provide the province with legal adult-use product. Several of these producers are related to the public markets, here’s a list of the ones cannabis investors can get exposure to:

• Acreage Pharms – Invictus MD (TSXV:GENE)
• Aphria (TSX:APH)
• Aurora Cannabis (TSX:ACB)
• Bloomera – Ravenquest BioMed (CSE:RQB)
• Broken Coast Cannabis – Owned by Aphria
• CannTrust (TSX:TRST)
• Canopy Growth
• Cronos Group (TSX:CRON; NASDAQ:CRON)
• DOJA Cannabis – Hiku Brands
• Experion Biotechnologies – Viridium Pacific Group (TSXV:VIR)
• Hydropothecary (TSXV:HEXO)
• Maricann (CSE:MARI)
• MedReleaf (TSX:LEAF)
• Natural Med Company – Eve & Co Incorporated (TSXV:EVE)
• Beleave Kannabis – Beleave (CSE:BE)
• Solace Health (TerrAscend Corp. CSE:TER)
• THC BioMed (CSE:THC)
• 7ACRES – The Supreme Cannabis Company (TSXV:FIRE)
• United Greeneries – Harvest One (TSXV:HVT)
• Up Cannabis – Newstrike Cannabis (TSXV:HIP)
• WeedMD
• Whistler Medical Marijuana – Active stake owned by Cronos Group

Health Canada offers updated look at medical cannabis consumption

The government agency tasked with regulating the use of cannabis, Health Canada, provided an update to its quarterly statistics on legal medical cannabis consumption. Health Canada indicated during the most recent fiscal quarter, January to March, an increase for cannabis and oil product consumption.

Patient registration also continued to increase, with a total of 296,702 licensed medical patients at the end of March, 2018. Health Canada also provided a breakdown of the amount of cannabis and oils sold during the most recent fiscal quarter, with dried flower selling 6,610 kilograms and Oils increasing 11 percent from the previous quarter to 10,326 kilograms sold.

During this week CTV News reported noted venture capitalist Sam Znaimer was banned from entering the US due to investments in the American cannabis market. “[W]hen Znaimer tried to cross in May, questions about his investments, not his personal consumption, landed him a lifetime ban from Canada’s neighbour to the south,” CTV News wrote.

Len Saunders a US immigration lawyer said this wasn’t an isolated case and it could become more prevalent for investors into the US sector. “Either stop travelling to the U.S. or get out of the business,” she said.

TGOD faces opposition from local city council vote

The Green Organic Dutchman (TSX:TGOD) took a hit on Friday’s trading session after the city council for Hamilton, Ontario voted down a motion for the company seeking to obtain an amendment to grow medical cannabis in its proposed expansion.

Hamilton mayor Fred Eisenberger was not present for the vote as he has a stake in the Canadian licensed producer.

As part of a letter to shareholders issued on Monday (July 9) TGOD announced it planned to open its Hamilton facility during the first quarter of 2019 and projected it would produce 14,000 kilograms.

Shares for TGOD took an initial dip of over 4 percent following the ruling by the city council. As of 1:47 p.m. EST TGOD had decreased in value 6.39 percent in value and traded at a price of C$5.70.

Matthew Van Dongen, a city hall reporter with The Hamilton Spectator, tweeted TGOD would appeal the decision with the Local Planning Appeal Tribunal (LPAT) of Ontario. The director for TGOD said the company is confident in a tribunal victory eventually, according to Van Dongen.

I think this decision will go against marijuana greenhouse expansion, based on public statements so far. Not sure what that would do to The Green Organic Dutchman timelines for construction. Tribunal appeals are rarely resolved quickly. #HamOnt
— Matthew Van Dongen (@Mattatthespec) July 13, 2018

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 Supreme Cannabis Company, Hiku Brands, Maricann, Beleave and Harvest One are clients of the Investing News Network. This article is not paid-for content.

** This article is updated each week. Please scroll to the top for the most recent information**

Cannabis Weekly Round-Up: TD Updates Cannabis Recommendations

By Bryan Mc Govern – July 6

This past trading week (July 2 – 6) a new report indicated Toronto-Dominion (TD) Bank had reversed its stance on recommending cannabis stocks.

A closer look at the cannabis companies that were awarded a supply agreement with Alberta and market updates completes this Cannabis Weekly Round-Up.

This past week the Investing News Network (INN) shared a report showing TD decided to add 13 cannabis stocks to its list of allowed stocks to recommend by its advisors. In April The Globe and Mail reported the Canadian bank had actually backed away from recommending cannabis stocks.

According to the report the stocks TD will be recommending must trade on the Toronto Stock Exchange (TSX) or TSX Venture Exchange (TSXV) and have absolutely no exposure into the US cannabis market, due to its illegal status federally. These restrictions explain the reason this list does not include Aphria (TSX:APH) and Aurora Cannabis (TSX:ACB), two leading cannabis companies with a combined market cap of nearly C$8 billion.

“Our most recent update reflects our ongoing evaluation of this emerging market,” a TD spokesman told The Globe and Mail. “We expect our views will continue to evolve and develop with the industry.”

Market updates

In June INN reported on a ruling from the Arizona Court of Appeals in a case involving the status of hashish (cannabis resin extracts) under the Arizona Medical Marijuana Act (AMMA) and its effect on the public companies operating in the state. The ruling denied recognition and protection for the extracts under the legalizing act. On Friday (July 6) MPX Bioceuticals (CSE:MPX), one of the operators with a large presence in the state issued a statement on the ruling.

The company cited a response from the Arizona Department of Health Services regarding the decision from the appeals court and said it expects the ruling to be met with either an appeal or direct legal action.

“The intent of the AMMA, was to protect from prosecution patients utilizing marijuana or cannabis for their medicinal needs. This most recent court ruling is in direct conflict of this protection afforded by the AMMA,” MPX said.

INN also reported on the first analyst note on Sunniva (CSE:SNN), a cannabis company with interests in California and Canada, from Canaccord Genuity. Analyst Matt Bottomley gave the company a “Speculative Buy” rating on its stock and a one year price target of C$7.80. As of 12:21 p.m. EST, during Friday’s trading session, Sunniva is valued at a price of C$8.01 per share, as of 12:21 p.m. EST.

“Although we believe our individual valuations are built on relatively conservative assumptions, the core value driver of our model rests in the assumed market penetration Sunniva will ultimately be able to secure in California and Canada,” Bottomley wrote.

Alberta confirms which cannabis producers earn supply agreements

Similar to how Manitoba unveiled the winners of supply agreements for legal cannabis, Alberta has revealed which companies will be providing the province with its adult-use cannabis during the first year of sales. The list included a variety of cannabis producers across the TSX, TSXV and Canadian Securities Exchange (CSE).

Here’s the list of the public companies obtaining a supply deal:

• Aurora Cannabis
• Aphria
• Canopy Growth (TSX:WEED,NYSE:CGC)
• CannTrust (TSX:TRST)
• MedReleaf (TSX:LEAF)
• The Supreme Cannabis Company (TSXV:FIRE)
• ABcann Global Corporation(TSXV:ABCN)
• Emblem (TSXV:EMC)
• Organigram (TSXV:OGI)
• Newstrike Resources (TSXV:HIP)
• WeedMD (TSXV: WMD)
• Maricann (CSE:MARI)

The nature of some of these deals is set to evolve as transactions between companies are expected to be completed. Hiku Brands (CSE:HIKU) is in the process of merging with WeedMD and Aurora will acquire MedReleaf. Aurora, a company with operations in Alberta, earned the biggest supply agreement with the province, the company will provide 25,000 kilograms of legal product during the first six months of sales.

“Alberta offers a unique opportunity for quality-driven brands as it is one of the most sophisticated private retail markets in the country and its approach to retailing cannabis recognizes that ensuring quality and offering a selection of products are critical steps towards impacting the illicit market,” John Fowler, CEO of Supreme Cannabis, said in a statement.

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 Supreme Cannabis Company, Emblem, Hiku Brands and Maricann are clients of the Investing News Network. This article is not paid-for content.