Cannabis Weekly Round-Up: Canadian Feds Outline Cannabis Tax Plan

- November 10th, 2017

The Investing News rounds some of the biggest news in the cannabis market for the past trading week

This past trading week (November 6- 10) saw major announcements from provinces in Canada outlining their framework plans when it comes to the legalization of cannabis. The federal government also provided an update to the taxation plan of cannabis and its distribution. Market news completes this week’s cannabis weekly round-up.
The federal government of Canada announced Cannabis will be taxed up to $1 per gram or “10 percent of the producer’s sale price of that product.” Set to be divided equally between the province or the territory and the federal level. Following this announcement, the voice of another level of government was raised demanding a piece of the earnings – cities.
“In a letter from the Federation of Canadian Municipalities [FCM] to Finance Minister Bill Morneau, Canada’s cities say they also want the federal government to cover start-up costs of transitioning to a new regime,” the CBC reported.
The letter argued municipalities represent nearly 60 percent of the country’s policing costs. “Preparing the bulk of Canada’s police forces to enforce new cannabis rules — with appropriate training, systems, and resources — is a massive and costly undertaking,” the letter sent on Nov. 2 from FCM president Jenny Gerbasi.
The report added the federal level is meeting with the FCM and wants to make sure their approach can also fulfill the needs of Canadian municipalities.

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Provincial updates

As provinces in Canada begin to outline their plans for the time when cannabis becomes fully legal, Manitoba introduced a version that sees the government overseeing distribution, while private stores will sell the product.
CBC wrote the Manitoba Liquor and Lotteries will be in charge of handling supplies and orders from retailers. These new stores will be open starting July 2, 2018, and the province will be evaluating applications for retailers to “open one or more stores to sell pot.”
In a joint statement Canopy Growth (TSX: WEED) and Delta 9 Cannabis (TSXV:NINE) were contempt with the announcement from Manitoba.
Manitoba has signaled an openness to private retail operations, and… we believe our track record positions us well to satisfy the government’s objectives while meeting the needs of Manitoba consumers,” Mark Zekulin, president of Canopy Growth said.
Alberta, on the other hand, announced its plan will encompass the sale of cannabis through bricks-and-mortar stores, while the government will be in charge of online sales. Postmedia reports this system was chosen in favor of opening the doors to publicly owned marijuana stores. “The proposed hybrid system means private stores will bear the brunt of the financial risk, rather than taxpayers,” Postmedia wrote.

LPs present recommendations on marketing standards

This past week INN reported on the announcement from the Coalition for Responsible Cannabis Branding. This grouping of major licensed producers (LPs) in Canada wants to establish strict guidelines when it comes to the promotion of cannabis products.
“If adopted by the federal government, we believe these guidelines will help ensure that the legal industry can effectively compete against the illicit market,” Cameron Bishop, co-chair of the Coalition for Responsible Cannabis Branding said in the statement.
As it stands these are just recommendations shared to government officials and made public in an attempt to gain recognition. The union of the leaders in the industry indicates a similar mentality on the rules these producers want to be applied to all cannabis players.

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Market news

Argentinian business journal El Cronista reported Vic Neufeld, CEO of Aphria (TSX: APH) made a proposition to the Argentinian Ministry of Health for an import 2-year plan of cannabis oils while later, the report indicates, there could be a bigger investment in the region.
El Cronista also writes Aphria proposed to take care of the training for medical staff in order to teach them the benefits of medical cannabis.
The Canadian marijuana ETF enjoyed a substantial growth to its value this past trading week. Over the five-day trading period, the Marijuana Life Sciences Index ETF (TSX:HMMJ) saw a 12.24 percent increase. As of 12:00 p.m. EST on Friday, the ETF traded at $11.83. Since its inception earlier this year, the index has gone up 15.41 percent.
Don’t forget to follow us @INN_LifeScience and @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.

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

Cannabis Weekly Round-Up: Alcohol Producer Invests $245 Million in Canopy

Nov. 3 – By Bryan Mc Govern
This past trading week (October 30 – November 3) saw the birth of a new type of deals between a cannabis company and an alcohol producer. The government of Ontario announced new details for its plan on cannabis legalization next year. Market news and performance complete this week’s cannabis weekly round-up.
On Thursday (November 2), the Investing News Network (INN) reported on Canopy Growth’s (TSX:WEED) announcement of an investment deal with  Constellation Brands (NYSE:STZ), an alcohol production company. The transaction will earn Canopy $245 million, in return Constellation gets 9.9 percent equity and aligns itself with a major cannabis licensed producer (LP).
Vivien Azer, an analyst with Cowen & Co. following both companies closely, told Business News Network she applauded Constellation for earning the status of the first mover as an alcohol company making a formal bet in cannabis.
Russell Stanley, a cannabis analyst with Echelon Wealth Partners, raised the target price for Canopy from $10.50 to $13 over a 12-month period.
“We view the news positively, as it is a strong validation of the Company’s outlook, as well as the industry as a whole,” Stanley wrote in his note to investors. “However, we view the stock as fully-valued at current levels and encourage investors to await a pull back before stepping in.”
On November 2, the Hydropothecary Corporation (TSXV:THCX) released their financial results for the third quarter of 2017. Since the release, Hydropothecary has seen a 2.61 percent increase in its stock value.
“Our goal for the next three years is to continue to innovate our product offerings and to become a national adult-use cannabis brand with the eventual legalization of that market,” Sebastien St-Louis, CEO of Hydropothecary said in their announcement.

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Update on legalization conditions in Ontario

Despite facing heavy criticism from consumers, the government of Ontario is continuing its plans for the legalization model of cannabis as announced. A new bill tabled by the Ontario government would see tougher punishments for dispensaries and establishes what entitles legal consumption in the province.
Next year the province plans to open 40 cannabis official retail stores intended to sell the legal product. A report indicated the initial 14 Ontario municipalities will get cannabis stores next year. The list includes Toronto, Ottawa, London, Hamilton and remote areas like Sault Ste. Marie and Thunder Bay.
“I think that there needs to be a regulation of cannabis… and I think that doing this in a safe, responsible way means that we put some parameters around the distribution of this substance,” Ontario Premier Kathleen Wynne told the Canadian Press.
According to Vice News, the new bill will make it illegal for recreational users to consume cannabis in “any public places, workplaces, inside a vehicle, or on a boat.”
Medical users will be restricted from consuming cannabis in enclosed workplaces and enclosed public spaces.

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News from around the cannabis market

INN also reported on the US Food and Drug Administration’s (FDA) warning against specific businesses and the industry as a whole from advertising cannabis-derived products as treatments or cures for cancer.

In its notice, the FDA shared examples of the types of claims it intends to prevent, including lines claiming CBD “combats tumor and cancer cells.” The agency also included a claim saying “non-psychoactive cannabinoids like CBD (cannabidiol) may be effective in treating tumors from cancer – including breast cancer.”

The government of Canada announced its regulatory agency in charge of licenses for cannabis producers, Health Canada, would be receiving additional funding for the bulk of cannabis businesses. This funding will be delivered over a five-year period and is set to fund a public campaign on cannabis and its effects.
According to a report by the Financial Post, Health Canada will be using a bulk of these new funds for “a new regulatory approach, including licensing and inspection, compliance and enforcement, monitoring and research, as well as a national public education and awareness campaign, tracking systems and program support.”
On Thursday (November 2) DOJA Cannabis (CSE:DOJA) announced it had completed an initial harvest of cannabis in their facility. They are now requesting an inspection from Health Canada, as the company seeks to acquire a sales license for their product as part of the ACMPR. Trent Kitsch CEO of the company said the yield of this harvest had exceeded their expectations.
The Canadian marijuana ETF enjoyed a substantial growth to its value this past trading week. Over the five-day trading period, the Marijuana Life Sciences Index ETF (TSX:HMMJ) saw an 8.45percent increase. As of 1:02 p.m. EST on Friday, the ETF traded at $10.52. Since its inception earlier this year, the index has gone up 2.63 percent.
Don’t forget to follow us @INN_LifeScience and @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: DOJA Cannabis is a client of the Investing News Network. This article is not paid-for content.

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