Aurora Cannabis Founder Terry Booth Goes on a Selling Spree

Bottom Line: The fact that Terry Booth was willing to sell 80% of his shares at $1-$2 per share tells you all you need to know about what he thinks the true value of Aurora Cannabis is. Yes we understand he was likely pushed out, but if he thought the company had a decent chance of surviving he would not be selling his entire stake at all time lows. Be wary of this stock.

Aurora Cannabis Inc. (TSE:ACB) - debt facility with BMO

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Village Farms International Announces $10 Million Underwritten Public Offering of Common Shares

Bottom Line: Village Farms surprised some investors, but not us with this raise. JV Pure Sunfarms is still cashflow negative when spending on greenhouse construction is taken into account so a cash raise makes sense. In this market environment, liquidity is all that matters at any cost. VFF remains the lowest cost greenhouse producer in Canada.

cannabis / marijuana supply / greenhouses - mj

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First Medical Cannabis Sales in Colombia Imminent – A Year Later than Expected

Bottom Line: Colombia has continually overpromised and underdelivered. Investors should look for confirmation that exports are exploding before diving into any companies in this market. Local pricing is far too low to justify current valuations even after 12 months of a deep selloff.

Marijuana - Colombia - MJ

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Cronos Group, Inc. Investigated by SEC for Accounting Problems says Block & Leviton

Bottom Line: The SEC is asking Cronos to preserve accounting documents as the company’s Audit Committee has called into question some of its reported recognized revenue that was stated on its financial statements in 2019. This revenue relates to sales agreement with extraction provider MediPharm Labs. Investors didn’t seem worried with the stock largely brushing off this news.

cronos earnings

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Canopy Growth to Temporarily Close Corporate-Owned Retail Amid Response to COVID-19

Bottom Line: The fallout from the COVID-19 outbreak continues. Canopy Growth has made the decision to temporarily close all its retail locations amid the crisis. When this is all over it will be fascinating to see if online orders and home delivery made up for the revenue lost from store closures.

Canopy Growth - marijuana

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Full Suite of Farm Credit Canada’s Financial Lifelines Open to Cannabis Businesses

Bottom Line: Though positive for cash strapped producers, the article mentions lending amounts that are far too little to make a difference for all but the smallest licensed producers. There may be other lending products available, but the top 15 producers need millions not thousands of dollars to pay their bills.

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Harvest One Announces Leadership Changes

Bottom Line: Harvest One Cannabis Inc. has appointed Andy Bayfield, currently Chief Commercial Officer, to the position of Interim Chief Executive Officer, effective immediately. This comes after the resignation of Grant Froese from the position of Chief Executive Officer, and from the Board of Directors, effective immediately. Sudden leadership changes seem to be occurring more and more often in the cannabis space. This could be a red flag for incoming trouble for the company.

mj - marijuana stocks

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Planet 13 Offering Expanded Online Ordering and Delivery Services

Bottom Line: The recent crisis has forced Planet 13 to expand its online presence, a move that the company was most likely going to make anyways but probably pushed way ahead of schedule due to recent events.

Marijuana stocks / cannabis stocks - mj

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Medical Cannabis Businesses Increasingly Deemed ‘Essential’ During Coronavirus Pandemic

Bottom Line: More states and local officials are declaring medical marijuana dispensaries “essential” services akin to pharmacies during the Coronavirus epidemic. This is a very positive political indicator for cannabis and could be used as a strong argument for why cannabis legalization should be expanded.

marijuana / cannabis / weed / pot / dagga - mj

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Dutch Cannabis ‘coffee shops’ to Remain Open Amid Coronavirus Clampdown

Bottom Line: Dutch authorities ordered all cannabis coffee shops to close along with all restaurants and bars to prevent the spread of COVID-19. However, the Dutch authorities quickly reversed course on cannabis realizing they would be encouraging the illegal market to proliferate if legal stores were closed for too long.

marijuana bud mj

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Weekly Stock Performance

Overall, it’s been a very rough week for the cannabis sector. Globally, cannabis stocks were down 8.50%. The U.S. cannabis market was down 7.90% and the Canadian sector was down 7.78% 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 66.3% while the Canadian LPs are down 64.5%.

Investors should BEGIN, begin being the keyword, a long-term position in a basket of the top five U.S. operators, especially with the market weakness we are seeing because of the Coranavirus.

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 25.4% and the TSX by 23.5%.


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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