- Cronos became the first Canadian cannabis company to list to Nasdaq.
- Canopy disclosed plans to list on Nasdaq after Cronos move.
- We expanded Cannabis Index to include U.S. and Australian companies.
Welcome to our Weekly Cannabis Report, a reliable source for investors to receive the latest developments and critical analysis for the cannabis sector.
Weekly Note to Readers
The bright spot in the cannabis space last week was Cronos Group which became the first Canadian cannabis company to be listed on the Nasdaq. Cronos share price jumped 37% after the listing announcement, a clear demonstration of the benefits of having direct access to the U.S. stock market. Many readers have complained to us the onerous fees and limitations for trading OTC stocks, and we think Cronos' Nasdaq listing will create tangible benefits and attractiveness to U.S. investors. We think the success for Cronos will attract many other Canadian cannabis companies to seek Nasdaq listing.
Canopy Growth said at an event that it will also seek a Nasdaq listing. No timeline was given but Bruce Linton told a group of audience that his company has already started working on a Nasdaq listing, only to be superseded by Cronos. We think U.S. listing would benefit any company immensely by having direct access to the largest stock market in the world. U.S. investors have long been investing in Canadian cannabis companies, and we believe many are happy to hear that these companies are finally coming to Nasdaq. We think Canopy will likely announce its Nasdaq listing in the next few months and share price should benefit from such announcement.
We also highlighted the fallout from Maricann's $70 million after three directors and chief executive was investigated by OSC over suspicious personal trading and other matters. January and February saw a large number of cannabis companies issue equity to take advantage of the hot market. However, Maricann reminds us that management and board governance should become an important due diligence item for investors. Maricann will most likely be shut out of the capital markets in the short term, limiting its growth in this critical period before legalization later this year. Investors should evaluate board and management carefully before investing.
The Cannabis Index
This week we made significant additions to our cannabis index. We are excited to announce the addition of a number of U.S. pharmaceutical and Australian cannabis companies to our index. New additions include Zynerba, Cann Group, Auscann, Mgc Pharmaceuticals, Hydroponic. We will continue to add new names on a select basis in order to capture the burgeoning scene on the global cannabis market. We think U.S. and Australia are two of the most promising markets besides Canada and we welcome readers to suggest names to us.
- Top Gainer: Cronos gained 37% this week.
- Top Loser: Canadian Cannabis lost 31% this week.
- Large Caps (>$1.0B): Canopy gained 4%; MedReleaf gained 8%, Aurora and Aphria held relatively flat
- ETFs: Most ETFs are largely unchanged this week. Notably, Horizons Junior Growers Index ETF lost another 5% after a 4% loss last week. We have long preferred large-cap names and believe junior growers are subject to higher risks due to the controlled nature of cannabis distribution.
|Name||Ticker||Currency||Market Value||Return 1W|
|Liberty Health Sciences||(OTCQX:LHSIF)||C$||$356||(2%)|
|Maple Leaf Green World||(OTCQB:MGWFF)||C$||$120||(19%)|
|Lifestyle Delivery Systems||(OTCQX:LDSYF)||C$||$75||(8%)|
|Canada House Wellness||(SARSD)||C$||$44||(10%)|
|Gw Pharmaceuticals Plc||(GWPH)||US$||$3,150||(3%)|
|Scotts Miracle-Gro Co||(SMG)||US$||$5,165||(1%)|
|Insys Therapeutics Inc||(INSY)||US$||$570||(1%)|
|22Nd Century Group Inc||(XXII)||US$||$310||(6%)|
|Radient Technologies Inc||(OTCPK:RDDTF)||C$||$307||(1%)|
|Maricann Group Inc||(OTC:MRRCF)||C$||$236||(21%)|
|Zynerba Pharmaceuticals Inc||(ZYNE)||US$||$137||(3%)|
|Icc Labs Inc||(OTC:ICCLF)||C$||$200||(2%)|
|Delta 9 Cannabis Inc||(VRNDF)||C$||$134||(17%)|
|Harvest One Cannabis Inc||(HRVOF)||C$||$170||(2%)|
|Innovative Industrial Properties||(IIPR)||US$||$169||(4%)|
|Village Farms International Inc||(VFFIF)||C$||$325||5%|
|Cann Group Ltd||(OTCPK:CNGGF)||AU||$413||--|
|Auscann Group Holdings Ltd||(OTCPK:ACNNF)||AU||$428||9%|
|Benchmark Botanics Inc||(OTCPK:BHHKF)||CAD||$137||(26%)|
|Valens Groworks Corp||(MYMSF)||CAD||$162||(10%)|
|Mgc Pharmaceuticals Ltd||(OTCPK:MGCLF)||AU||$101||(11%)|
|Hydroponic Co Ltd||(OTCPK:HDRPF)||AU||$88||(6%)|
|Hempco Food And Fiber Inc||(OTC:HMPPF)||CAD||$55||(4%)|
|Liberty Leaf Holdings||(LIBFF)||CAD||$50||(5%)|
|Horizons Marijuana ETF||(HMLSF)||C$||$720||2%|
|Horizons Junior Growers ETF||(HMJR.TO)||C$||$13||(5%)|
|ETFMG Alternative Harvest ETF||(MJ)||US$||$404||2%|
|Evolve Marijuana ETF||(SEED.TO)||C$||$2||3%|
|Redwoods Marijuana Opportunities Fund||(MJJ.TO)||C$||$6||2%|
Cannabis Sector Update
Cronos, First to be Listed on Nasdaq
Cronos Group (PRMCF) (CRON) became the first Canadian cannabis company to be listed on the Nasdaq. Cronos saw its share price rising 37% by the end of the week, outperforming all other major LPs which saw mixed results. The clear outperformance can be mostly attributed to the higher profile from listing news and greater access to the largest stock market in the world. Given the lack of news otherwise, a mere listing has resulted in Cronos gaining $500 million in market capitalization. We think the impressive results would incentivize other Canadian cannabis companies to repeat what Cronos did here by seeking U.S. listing before legalization later this year.
We plan to publish our initiating report on Cronos this week, stay tuned!
(Globe and Mail, Mike Gorenstein, Cronos CEO)
Underwriters Canceled Maricann' Bought Deal
Maricann announced a $70 million bought deal equity financing back in January and the deal was supposed to close on Feb 23. The underwriters include Eight Capital and Canaccord Genuity, each with 40% economics. The underwriters were able to get out of the deal due to the OSC investigation of three directors at Maricann over personal trading activities. Maricann's chief executive, Ben Ward, is also under investigation by OSC for his tenure at another firm, Canadian Cannabis Corp. Maricann's share price has fallen harder than most peers, losing almost 50% of its value since its peak in January. We think the investigation and resignation of directors and CEO will create an overhang on the stock price in the near-term, as investors avoid the stock. The cancellation of the bought deal could hamper Maricann's M&A and corporate strategy. The capital markets will likely remain closed for Maricann in the near term and liquidity concerns will emerge amid heavy investments and a delayed legalization timeline.
Hiku Expands to Jamaica
Hiku Brands (OTCPK:DJACF) announced a strategic alliance with Kaya, the first licensed medical cannabis producer and dispensary operator in Jamaica. The strategic partnership will focus on pursuing medical and adult-use cannabis branding, genetics, and retail opportunities in Jamaica and Canada. Hiku will acquire 10% stake in Kaya and enter into mutual licensing agreements to develop cannabis brands and retail and lifestyle locations in both countries. We think the deal is interesting in that Hiku has emerged as a leading vertically integrated cannabis brand including production and retail operations. Hiku's portfolio includes craft beer and craft cannabis in addition to licensed production. We think Jamaica market is a small one but nevertheless represents a positive step towards Canadian companies establishing leadership position on the global cannabis scene.
U.S. Federal Judge Rejects Marijuana Lawsuit
U.S. District Judge Alvin Hellerstein dismissed a lawsuit where plaintiffs seek to overturn the illegal status of marijuana on the federal level. The judge said that his decision "should not be understood as a factual finding that marijuana lacks any medical use in the United States", but rather that the court does not have the authority to make that decision. According to Reuters, the plaintiffs include parents of two children who use marijuana to treat illness, and former National Football League player Marvin Washington, who works with a company that develops marijuana-based products. The lawsuit came after U.S. Attorney General Jeff Sessions announced his decision to abolish an Obama-era policy that had left regulation of the drug largely up to states, ending an era of benign policy from the federal government. We think the news is immaterial to the overall cannabis industry.
(CNN, Jeff Sessions)
Our widely read Weekly Cannabis Report is the go-to source for many investors. Follow us to stay informed of the latest development and best ideas in the cannabis sector. We also encourage you to check out our recent publications in the cannabis industry:
- Which Marijuana ETF Is Best For You?
- Canopy And Sunniva: A Win-Win Deal For Both
- Did Aphria Just Rob Nuuvera Shareholders Of $32 Million
- Canopy And Aurora: Who Just Had The Better Quarter?
- What Could Trigger A Sell-Off?
- Best Way to Play the Cannabis Industry
- 5 Predictions For the Cannabis Industry
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
This article was written by
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.