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Capitalize On Cannabis Report - 01/28/17

|Includes: Aurora Cannabis Inc. (ACB), AMMJ, CGC, IIPR, INQD, KSHB, MQTRF, MSRT, OGRMF

Cannabis stocks were weak early on but ended the week almost unchanged. The biggest news of the week didn't get a lot of coverage, but The Canadian Bioceutical Company (BCC on the CSE) raised over $35mm, with the majority coming from UK and United Arab Emirates investors (and very little from Canada), at $0.20 in a private placement and announced the acquisition of the operations associated with a large Arizona dispensary with two stores and an extracts business and an option to acquire control of a Nevada cultivation facility. The stock, which had been halted for a year and recently delisted from the TSXV, soared on CSE trading Friday, ending at .84, up from .105, after trading as high as 1.03

Here are some of this week's highlights for Focus List names:

  • ACBFF received permission to sell oils almost a year after receiving permission from Health Canada to produce them. The company announced a $50mm bought deal that was upsized to $60mm. The offering was private placement units at $2.25 with 1/2 warrants at $3.00
  • AMMJ announced another dispensary client in Maryland
  • IIPR eliminated its Class A and Class B shares, creating a single class of common stock
  • INQD provided an update to the pending merger with Alamo CBD (posted to the Forum)
  • KSHB co-founder Dallas Imbimbo sold 250K restricted shares at $2
  • MQTRF shareholders overwhelmingly approved the sale to Canopy Growth, which is set to close on or about 1/31
  • MSRT announced a website advance expected to be implemented by 4/20. It also closed its acquisition of Whaxy.
  • OGRMF released FY17-Q1 financials, with sales strong but a big inventory writedown. CEO Arsenault bought 129.2K shares between 2.70 and 2.80 after the report.
  • TWMJF shareholders overwhelmingly approved the Mettrum acquisition, which is set to close on or about 1/31

The 420 Investor Cannabis Stock Index fell 0.1% this week to 80.37 and is up 8.5% YTD after gaining 18.8% in December and 88.8% in 2016. The index, which currently includes 44 stocks, ended 2016 at 74.10.

420 Opportunity ended the week valued at $46,232, up 1.9% and is up 2.9% YTD. In 2016, the model portfolio increased 293.4% compared to the 88.8% increase in the index.

Valuations have increased and remain cautionary, and fundamentals are questionable for most of the >400 companies in the sector. The market rallied on the cannabis legalization efforts as well as the legalization path in Canada. It would be the wrong conclusion, in my view, to believe that the rally in the vast majority of OTC cannabis stocks is sustainable, so we could be in for a period of consolidation. The retention of the Republican Senate majority was a negative for the cannabis industry.

The big themes ahead are likely to be insight into the new President's plans regarding the federal view on state-legal cannabis (especially in light of his nomination of Senator Jeff Sessions as Attorney General), hopeful extension of the Rohrabacher-Farr Amendment (which is set to sunset in April) to insulate state-legal cannabis businesses from DOJ intervention, better clarity from the federal government for banks and cannabis research (both part of the proposed CARERS Act and other proposed legislation), DEA pushback towards the CBD from industrial hemp industry, the inclusion of a broader range of extracts in Health Canada's ACMPR program and its continued growth in patient enrollment, potential legalization in Canada (Spring 2017 introduction of legislation at Parliament), the rollout of MMJ in Germany as well as continued advances in South America, progress with respect to the new legal cannabis implementations in CA, MA, ME, and NV and the new MMJ implementations in Arkansas, Florida, Hawaii, Illinois, Maryland, Minnesota, Montana, Nevada, North Dakota, Ohio, New York, Nevada, Massachusetts, Pennsylvania and Texas, the implementation of the new medical program in California and the possible legalizations via the legislatures in NM and RI.

The slide, which began in March of 2014, reversed out the entire gains from early 2014, with the market currently near the summer 2013 lows after the rally since mid-February. Most valuations remain high. Positively, we are seeing some new entrants into the publicly-traded sector of higher quality, and hopefully we see more in 2017, especially with the number of legal states doubling. Please remember that it remains the case that most of the penny stocks will not succeed. I expect that there will be just a few winners among the 400+ companies that are currently on our Broad List.

Here are some of the most interesting stories we published on New Cannabis Ventures this week:

Apple Vaporizer Patent Spurs Speculation of Cannabis Industry Entry​

www.newcannabisventures.com/apple-vapori.../

Aurora Cannabis to Raise $50.625mm

www.newcannabisventures.com/aurora-canna.../

Canopy Growth Acquisition of Mettrum to Close January 31st

www.newcannabisventures.com/canopy-growt.../

Former U.S. Senator Scores $555,467 Gain in Penny Stock Cannabis Sativa

www.newcannabisventures.com/former-u-s-s.../

Infused Cannabis Products Entrepreneur Partners with Established Companies to Create Appealing Products

www.newcannabisventures.com/infused-cann.../

OrganiGram Q1 Sales Increase 117%

www.newcannabisventures.com/organigram-q.../

Three Key Founder Attributes this Cannabis Investor Likes to See

www.newcannabisventures.com/three-key-fo.../

Wall Street Veteran Sells Cannabis Operations Stake in $25mm Deal

www.newcannabisventures.com/wall-street-.../

Why Medical Marijuana is Critical to the Evolution of the Cannabis Industry

www.newcannabisventures.com/why-medical-.../

Why You Should Continue to Watch this U.S. Based Cannabis Stock

www.newcannabisventures.com/why-you-shou.../

Resources:

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: At New Cannabis Ventures, we work with several publicly-traded companies, including Aurora Cannabis, Canopy Growth, Emblem, Emerald Health, GrowGeneration, and OrganiGram, providing each of them with Investor Dashboards. For more information: www.newcannabisventures.com/...