Why Tilray went to $300 but is only worth $50
Bottom Line: Not enough shares outstanding and white-hot US investor demand drove Tilray to spike to $300 this week. Looking at fundamentals the stock is not worth more than $50.
The Structure of a Coca-Cola Deal Will Define Cannabis M&A
Bottom Line: The eventual entrance of a global consumer giant like Coca-Cola into the cannabis market will add an air of legitimacy that even Constellation Brands can’t match. If the deal is done as a JV instead of an equity investment you should expect future deals to follow that model.
If you’re a cannabis investor you want a direct equity investment, not a JV.
Why We Need Cannabis to Combat the Opioid Epidemic
Bottom Line: Grizzle’s chief economist Chris Wood lays out how the opioid crisis will be an important catalyst to drive cannabis legalization in America.
Alberta Gives us First Look at Wholesale Prices
Bottom Line: Consumers are likely looking at retail prices of $11-$15 for legal cannabis. The ALGC will receive $6.40 which has the licensed producers revenue built in, but we still have no idea what portion of the $6.40 LPs will be getting. Licensed producers currently make $8 per gram on average selling medical cannabis so revenue per gram will fall until international exports take up a big enough share of the pie.
ALGC
The Final Look at Legal Cannabis Labeling
Bottom Line: Labeling is extremely restrictive and will make it hard for each brand to stand out when your logo is overshadowed by all kinds of warnings and product information. Brands will have to get creative making retail locations, where some form of advertising may be allowed, an interesting workaround to build brand awareness.
Source: BNN Bloomberg
Marijuana Stock Performance for the Week
Global marijuana stocks had a strong week up 7%. Large cap Canadian stocks continue their dominance up 14% for the week while mid caps were up 4% and small caps increased 14%. The cannabis group broke out to all time highs this week even surpassing peak stock prices in January of this year.
There is a significant M&A premium built into most of the large-cap stocks as investors expect large corporations to enter the market through licensed producer buyouts. If these deals don’t occur in the next few months stocks could retrace recent highs.
Market Outlook
Stocks have reached all time highs. The Canopy Constellation deal gave the market some new momentum which should carry stocks higher at least through the end of the year. Until we have 3 to 6 months of data from the legal market in Canada, investor enthusiasm should continue to push cannabis stocks higher.
Once the Canadian market opens we expect retail and wholesale price compression from a legal oversupply. Falling cannabis prices will pressure producer stocks in the second half of 2019.
New Cannabis Ventures
United States
Michigan’s Marijuana Legalization Moves Forward with Ballot Language
New York Likely to Be Added to States Legalizing Marijuana
Marijuana Tops E-Cigarettes in FDA Chief’s Concerns
New Jersey MJ Legalization Legislation Moving Forward with Delivery Options
Canada
Albertans in for a Wait Before Publicly Consuming Cannabis
Legalization to Bring Drastic Changes to Existing Dispensaries in Canada
US Congressman Calls For Clarification On Canadian Border Crossing After Legalization
International
South Africa Legalizes Marijuana for Personal Use
Australian Senate Kills Marijuana Legalization Bill
US Territory Northern Mariana Island Legalizes Marijuana
Denmark’s StenoCare Launches Europe’s First Marijuana IPO
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