Pot Stocks -. Bulls and Bears Week 9

This week saw many movers and shakers in the market. After a small pullback last week, shares continue their 2019 rally. Not many shares were down this week.

Althea made a big move up after they announced their partnership with Cannvalate. CannTrust saw big movement on the news that they will list on the NYSE on Monday. This is big news for the stock given they did not have a US ticker until recently.

 

 

The big news of the week was the fact that Barrons put out a negative report on the US Multi-State Operators (MSO's) but it had little impact on the market. MedMen had a good week but is still the worst performing MSO in 2019.

Liberty Health Sciences ended the week strong after Aphira announced they were liquidating any options they had to repurchase their initial investment. Green Thumb Industries continues to show strength, and we have been bullish on them for some time now.

 

 

Newsworthy Updates from the wide world of Cannabis

 

This week Trulieve and Slang Worldwide announced a partnership to bring Slang's product range to the Florida medicinal market. Brands including O.pen Vape, Bakked, and Magic Buzz will now be available in all of Trulieve's, 24 stores across the state. Truelieve will have the exclusive license

As part of the agreement signed by the two groups, will collaborate with Trulieve with regard to the production and distribution of the SLANG portfolio of products, offering in-house training to staff in preparation for production and distribution exclusively through Trulieve.

Sense was brought to the table this week when Namaste announced that they had settled with Sean Dollinger, the former CEO they fired the previous week. In doing so, they have hopefully avoided a very messy and public fight and one that could only have been detrimental to shareholders. We still sit very much on the sidelines when it comes to Namaste, as believe the problems run deeper than just the former CEO.

CannTrust announced this week that they will commence trading on the NYSE on the 25th February. This is a big deal for them. In recent times we have seen a number of the Canadian LP's move to the US exchanges. Cronos was the first to do so in 2018, followed by Canopy Growth, Aurora and Aphria.

Although initially, Cronos and Canopy Growth saw significant increases in share prices upon their arrival, the same could not be said for Aurora and Aphria. The reasons for this could well be that the "shiny new toy syndrome' was in play for Cronos and Canopy, but by the time Aurora and Aphria arrived, US investors were already in play.

 

 

However, CannTrust is different. CannTrust has not had a US ticker until very recently and hence has been very difficult for any US investors to invest in the company. As one of the most undervalued LP's, in our opinion, we see the move to the NYSE as being very beneficial to CannTrust as should open them up to US institutional and retail investors. Watch this space.

iAnthus, fresh off the back of their transformational merger with MPX Bioceuticals announced this week the opening of their 20th store – this time in New York, under their Citiva brand. The 2,600 sq. ft. dispensary is located in Wappingers Falls, and will offer more than 30 locally-sourced, lab-tested products, including vape cartridges, tinctures, capsules, and powders, dispensed by highly-knowledgeable patient care representatives.

Aphria announced the early termination of their interests in Liberty Health Sciences. To fully understand the implications of this, we need to wind back the clock. In April 2017, Aphria bought 37.6% of Liberty for CAD$25 million. However, in order to uplist from the TSX to the NYSE, they had to divest their holdings in Liberty. They did so in September 2018 for CAD$60 million.

 

 

They left the door open to re-enter Liberty over the next 5 years depending on how legalisation panned out in the US. Aphria held this right with the Surruya Family who bought the entire stake from Aphria. However, now Aphria has liquidated this right entirely for an additional CAD$47 million as a result of changes that have taken place at the company post the Hindenburg Short-Sell report that decimated the stock price in January this year.

This is a really good thing for Liberty. As a result of their relationship and ties to Aphria, they also suffered heavily post the short sell report. They removed Aphria directors from their Board and have not completely de-shackled themselves form Aphria.

Tilray jumped on the hemp bandwagon this week when they announced their acquisition of Manitoba Harvest – the world's largest hemp food company – for CAD$419 million.  Under the terms of the Agreement, Tilray will acquire Manitoba Harvest on a cash and debt-free basis, for an aggregate purchase price, including cash and class 2 Common Stock in the capital of Tilray, of up to C$419 million pending the achievement of certain milestones after the closing of the Transaction.

Founded in 1998, Manitoba Harvest is the world's largest hemp food manufacturer and a leader in the natural foods industry. It produces, manufactures, markets and distributes a broad-based portfolio of hemp-based consumer products, which are sold in over 16,000 stores at major retailers across the U.S. and Canada.

The deal did not explicitly specify how much was paid in cash and how much in stock. It is also unclear just how profitable Manitoba is, but what is clear, is that this issuing to add significant revenue to Tilray. This will allow for the production of wellness-based CBD products that they can then push down the Authentic Brands channel (whom they did a deal with last month).

 

 

Medicinal cannabis company, Althea Group this week signed a product supply and distribution agreement with Cannvalate, a company with one of Australia's largest network of medicinal cannabis prescribing clinics spanning all states of Australia.

The agreement appoints Cannvalate as a non-exclusive distributor of Althea's medicinal cannabis products in Australia with the aim of rapidly increasing Althea's network of existing prescribers, primarily specialist doctors and, ultimately, its patient base.

Cannvalate currently distributes medicinal cannabis products through their network of more than 1,000 doctors and 600 pharmacies. Cannvalate led prescriptions currently account for over 30% of the Australian market, which has seen the number of total monthly prescriptions increase by over 800% in the last twelve months.

 

"This agreement is expected to further accelerate our sales growth and is evidence of the rapidly growing market and validity of what we are doing in Australia."

 – Joshua Fegan, Althea CEO

 

Althea continues to increase its prominence in Australia's medicinal cannabis market with 354 patients being prescribed Althea's medicinal cannabis products through 109 prescribing doctors and an increasing network of pharmacies dispensing Althea medicinal cannabis products.

MediPharm Labs announced it had entered into its first definitive international sales agreement for the export of pharmaceutical grade wholesale concentrates. The two-year agreement with AusCann Group establishes MediPharm as the first extraction-only LP in Canada to export to Australia.

AusCann will use the concentrates to manufacture hard-shell capsules, which it believes will meet local demand for precise and consistent doses. Initially MediPharm expects demand to be serviced from its wholly-owned facility in Canada; however, once its Australian laboratory (which is under construction) is fully licensed and operating, MediPharm believes Australia and Asia-Pacific demand can be addressed regionally.

Another massive moment for MediPharm Labs on the back of the announcement of four wholesale agreements valued at over $85 million. The stock has been a superb performer year to date and is currently up over 30% in the past couple of weeks.

In another blow to retail in Canada, this Ontario announced that legal cannabis shops in the province will be prohibited from offering online retail options to consumers. This means that the initial 25 cannabis stores in Ontario and the multitude of stores that could open once the province lifts its temporary cap on retail licenses won't be able to offer consumers online ordering for store pickup (click and collect). Nor will they be able to offer any same-day delivery services.

The move to mandate that the province have a monopoly on cannabis e-commerce benefits the government, and the black market, at the expense of consumers. The Canadian recreational landscape is still in its earliest days and this highlights the problems consumers are facing. There is also still healthy debate on what edibles and extracts may or may not be allowed come October this year. We shall have to wait and see…

 

 

Mark Bernberg
Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.

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