48North Surprise Leadership Change Should Be a Red Flag for Investors

Bottom Line: 48North Cannabis Corp. (CVE:NRTH) has announced that Alison Gordon will be resigning her role as CEO effective immediately. Historically, sudden resignations of a key member of a company’s management team do not bode well for future financial and operational performance.

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Aurora Cannabis Accused of Collusion and Sales Inflation With Smaller Pot Firm 

Bottom Line: Aurora Cannabis has been accused of colluding with Radient Technologies after Radient reported in its Q3 2020 report an 800% surge in sales. Radient stated that all of its revenue in the three months ended Dec. 31, 2019 came from one customer, and that customer being Aurora.

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Marijuana firm TGOD books loss of C$145 million, has seven weeks of funds left

Bottom Line: The Green Organic Dutchman’s net loss ballooned to $145 million Canadian dollars ($105 million USD) for the final three months of 2019, compared to a C$20 million loss the previous quarter. It is clear that TGOD has expanded too much too fast and may face serious negative financial consequences in the near term.

marijuana bud mj

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Canopy Rivers Portfolio Company Secures C$80.5 Million Debt Financing Arrangement With Canopy Growth

Bottom Line: TerrAscend Canada has entered into an C$80.5 million loan financing arrangement with Canopy Growth Corporation pursuant to a secured debenture. In connection with the loan, TerrAscend has issued 17,808,975 common share purchase warrants to Canopy Growth. This deal provides TerrAscend with much needed cash for expansion and is a vote of confidence from Canopy Growth.

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Coronavirus Fears Cause More Cannabis Industry Event Cancellations 

Bottom Line: The National Cannabis Risk Management Association’s annual conference is the latest high-profile marijuana event to be scrapped due to coronavirus fears.

Cannabis / Marijuana products / Edibles - mj

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In wake of coronavirus, cannabis firms look for packaging outside of China

Bottom Line: With factories in China shut down to prevent the spread of the coronavirus, some cannabis companies are looking for alternative packaging companies in Mexico, India, and the United States.

mj - cannabis cbd oil

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CannTrust Remains in Default Status 

Bottom Line: CannTrust’s troubles continue as the company remains in default of its debt obligations, has no meaningful revenues, has terminated or laid-off a significant portion of its workforce and is also facing a variety of regulatory investigations.

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Planet 13 Branded Products Gaining Momentum

Bottom Line: Planet 13, a Nevada based cannabis producer, distributor, and retailer, announced their brands of cannabis products: HaHa GummiesDreamland ChocolatesTRENDILeaf & Vine, and Medizin, set a record of around $1 million in sales in February. The brands are now available in select dispensaries in Las Vegas. Over the course of Q1 and Q2 2020, Planet 13 intends to rollout the brands to dispensaries across Nevada.

mj - marijuana and oil

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Large cannabis operators positioned to dominate potential Arizona recreational cannabis market, shut out small businesses

Bottom Line: Some experts worry that the industry-backed recreational cannabis ballot proposal will favou0r existing medical MJ license holders and would shut out small businesses, which would enable large cannabis companies to dominate.

mj - marijuana oil

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Weekly Stock Performance

Overall, it’s been a very rough week for the cannabis sector. Globally, cannabis stocks were down 27.52%. The U.S. cannabis market was down 29.48% and the Canadian sector was down 21.10% since the end of last week.

We’ve been watching the performance of U.S. and Canadian stocks closely and U.S. stocks are still where you want to be invested.

Since the end of September 2019, U.S. cannabis stocks are down 63.5% while the Canadian LPs are down 61.5%. Investors should begin building a long-term position in a basket of the top five U.S. operators, but save some extra cash to buy on any weakness in 2020.

The highly anticipated UN meeting to potentially deschedule cannabis as a schedule 1 drug has unfortunately been delayed until December 2020. With this major catalyst gone in 2020, we don’t see state by state legalization on its own driving the cannabis stocks higher.

Cannabis stocks will have to begin generating profits to bring investors back into the sector and break the downward trend.

YTD in 2020 the Global cannabis sector is underperforming the S&P 500 by 33.7% and the TSX by 30.2%.


Market Outlook

There are now question marks on whether increased sales from cannabis 2.0 products will lift the stocks. Capital markets are largely shut to cannabis companies right now, which is a problem when the business models are built on rapid expansion and big deficits. Canadian cannabis investors should not be putting more money into the sector until retail prices find a bottom.

Price compression has arrived and will drive cannabis stocks lower over the next 6-12 months in our view without a new regulatory catalyst.

U.S. stocks will continue to outperform Canadian LPs from here in our view with more catalysts potentially on the horizon. At the first whiff of nationwide U.S. legalization, investors should pile into the largest MSOs and hold for the long term.

Canadian LPs are still stuck in a legal market growing slower than investors expected, making it hard to show the revenue growth embedded in their trading multiples. LPs are showing slow growth in 2019 and even with the 2020 rollout of edibles, vapes, and topicals growth is unlikely to exceed 150% in 2020. U.S. operators in comparison are growing revenue 150%-300% in 2019 and at similar rates or better in 2020. With analyst consensus wildly too high for Canada LPs in 2020, there may still be downside in the sector.

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