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Billions in Financing Flowing Into Canadian Cannabis Companies

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Canadian marijuana companies attracted nearly $1 billion in financing in 2017, setting the stage for a budding cannabis industry once legalization is finalized later this year.

Financing Grows

Equity offerings by Canadian marijuana businesses reached a new high of nearly $1 billion in 2017, according to data from Thomson Reuters. That was triple the amount of 2016, sending a clear signal that investors are financiers are betting big on the marijuana industry once recreational usage is legalized on July 1.

One of the most prominent examples of financing help comes from BMO Capital Markets, which in January pumped more than $200 million CAD into Canopy Growth Corp (WEED.T0), the nation’s largest marijuana producer.

Canadian marijuana companies have been attracting hundreds of millions of dollars in financing each quarter since 2016, according to data from Canaccord Genuity, an independent investment broker. Financing accelerated in 2017 as investors looked ahead to legalization.

Marijuana Stocks

Canadian marijuana stocks were mostly lower on Wednesday after trending mostly sideways for two weeks. The Canadian Marijuana Index shed 2.6% to close at $723.77.

The biggest losers on Wednesday included InMed Pharmaceuticals Inc. (CNX), which fell 11.4%, and Newstrike Resources Ltd. (HIP), which closed down 8.7%. Cannabix Technologies Inc. (CNX) and Emerald Health Therapeutics Inc. (EMH) fell 8.6% and 7.4%, respectively. 

South of the border, the U.S. Marijuana Index closed down 1.3% at $86.19.

The North American Marijuana Index finished off 2.4% at $265.69.

Economic Impact

Few industries compare with cannabis in terms of expected growth. According to Deloitte, the legalization of recreational weed could generate nearly $23 billion in economic activity annually. In terms of “base market” impact, the marijuana industry could be worth $4.9 billion to $8.7 billion annually.

The base market consists of population of adult consumers, annual consumption in volume and price per gram.

That being said, not all Canadians support legalization. Research from Deloitte found that only 40% of adults were in favor of legalization, compared with a 36% who opposed and a quarter who were undecided.

Despite some social unrest, the Canadian government is expected to reap huge benefits from legalization in the form of tax revenue. Colorado, a state one-seventh the size of Canada, generated more than $500 million in taxes and fees between January 2014 and July 2017.

Canada’s marijuana industry is regarded as one of the biggest investment opportunities of a generation. This is clearly reflected in the performance of marijuana stocks over the past year-and-a-half. However, the euphoria surrounding legalization has left out one crucial detail: very little of the actual trading that has gone on over the past year has been based on earnings or revenue. This is especially true for recreational companies that are still waiting on the green light from the feds.

That green light might not come anytime soon, according to Bill Blair, Canada’s parliamentary secretary to the Minister of Justice. Blair told Bloomberg News earlier this month that the government will take as much time as it needs to “do it right” when it comes to legalization. So while legalization is coming, the timeline remains vague. Investors should plan accordingly.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 699 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Marijuana

Top Five Cannabis ETFs for Long Term Growth

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The global legal cannabis market size was estimated to be valued at $9.3 billion (USD) in 2016 and is expected to balloon to $146.4 billion (USD) by the end of 2025. The cannabis space is booming but it is volatile. Adding Cannabis focused companies to your portfolio has been a challenge to get right. Luckily for those who want to enter the sector but keep a safety net of diversification there are exchange traded funds that track cannabis companies. But which index to pick? Here are five cannabis-focused ETFs to consider for long term growth.

1) Horizons Marijuana Life Sciences Index ETF (TSE: HMMJ)

The Horizons Marijuana Life Sciences Index seeks to replicate the performance of The North American Marijuana Index (which tracks the leading cannabis stocks operating in the United States and Canada). Eligible companies are producers and suppliers of cannabis, biotechnology companies that are engaged in research and development of cannabinoids, companies that offer hydroponics supplies and equipment aimed at increasing efficiency of cannabis cultivation, and companies mainly engaged in leasing property to cannabis growers. HMMJ launched in April 2017, is equal-weighted and rebalanced quarterly with a 0.75% management fee.

2) Horizons Emerging Marijuana Growers Index ETF (NEO:HMJR)

The Horizons Emerging Marijuana Growers Index seeks to replicate the performance of the Solactive Junior Marijuana Growers Index (which tracks a basket of publicly-listed small-capitalization companies primarily involved in the cultivation, production and/or distribution of cannabis). With an emphasis on early stage small-cap companies this ETF has significant upside growth potential. HMJR launched in February 2018, rebalances quarterly and has a management fee of 0.85%.

3) ETFMG Alternative Harvest ETF (NYSE: MJ)

This ETF started life as a Latin American real-estate fund before pivoting to cannabis companies last December when it benchmarked to the Prime Alternative Harvest Index. It is currently the only Cannabis focused ETF trading on a US exchange (as Cannabis is still illegal under US federal law banks are hesitant to touch the sector). This ETF allows an investor to be exposed to global cannabis stocks and major tobacco companies, with an expectation that tobacco companies will eventually enter the cannabis sector. MJ entered the cannabis space in December 2017, includes roughly 30 stocks rebalanced quarterly and has an expense ratio of 0.75%.

4) Purpose Marijuana Opportunities Fund (NEO:MJJ)

The Purpose Marijuana Opportunities Fund was the world’s first actively managed cannabis focused ETF. The fund is run by Greg Taylor. Its strategy allows for active buying, selling and shorting of pot stocks with a focus on growth and relative valuation. The ETF invests primarily in Canadian-focused companies with the potential to expand globally as regulatory clarity improves. That being said, roughly 13% of the fund’s current holdings are in U.S.-based companies. The fund holds a cash position which could be deployed in the event of a pullback in the sector. MJJ was founded in January 2018, holds 40 companies and pays a management fee of 0.75%.

5) Evolve Marijuana ETF (TSE: SEED)

The Evolve Marijuana ETF is another actively managed ETF on the list. The fund invests both in Canada and globally in the recreational and medical cannabis sector. For a taste of the private market this ETF has the option to invest up to 10% of the fund in private companies. SEED was founded in February 2018, holds 25 companies and pays a management fee of 0.75%.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Five Cannabis Stocks to Consider for Long-Term Growth

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In the most recent Midterm elections Michiganders voted to pass Proposition 1 which legalized marijuana for recreational use. Cannabis culture is rapidly going mainstream (although it is still illegal at a federal level in the United States). Marijuana is now legal recreationally in 10 states and legal for medical purposes in 33 states. In addition to these state level legalizations Uruguay and Canada have passed legislature legalizing recreational cannabis country-wide. But no matter where you live the best “high” you can get from Cannabis is in potential sky-high returns in your cannabis portfolio. To help you out here are five publicly traded marijuana stocks to consider:

Aurora Cannabis (NYSE: ACB)

This Vancouver based Cannabis producer has the munchies – for growth. In addition to buying up cannabis producers (such as H2 Biopharma, CanniMed and MedReleaf) they have smartly snatched up a number of ancillary companies to support their operations. Aurora purchased BC Northern Lights, a manufacturer of indoor growing supplies, and Aurora-Larssen Projects, a greenhouse engineering and design consultancy firm. Most notable for its growth potential is Aurora’s purchase of German based Pedanios GmbH in 2007. Pedanios is Germany’s largest cannabis distributor to pharmacies (medical cannabis is legal in Germany while recreational is not). Pedanios has EU GMP certification (the highest certification attainable by pharmaceutical companies to distribute their product in the European Union) and Aurora is laying the groundwork to supply medical cannabis to the EU, with a recent shipment to by Aurora to Italy being the first ever by a private company.

The Green Organic Dutchman (OTCQX: TGODF)

This Mississauga based company is a cannabis producer focused on research and development. They are looking to refine the genetics of medical grade cannabis strains. They are building facilities that grow organically. Organic cannabis fetches a higher price per gram and is expected to rise in demand as consumers look to buy pesticide-free products. In addition, they have operations in 17 countries revolving around growing hemp and the production of CBD oil (rules for growing hemp are less stringent than Cannabis). But don’t think that they’re only focused on the medical market- the company has recently announced a partnership with Velvet Management Inc to fast-track supplying Canada’s provinces with Cannabis (Velvet Management Inc. is a new company created by and with connections to Canada’s largest wine distributor Philippe Dandurand Wines). With this partnership The Green Organic Dutchman has a red velvet carpet laid out as it builds relationships with provincial distributors.

Aleafia Health (TSXV: ALEF)

Aleafia Health is a vertically integrated medical cannabis company. They help patients find the right prescription and have the facilities to grow it too. They boast the largest network of cannabis clinics with 22 across Canada and a patient list of over 50,000 members. Their Aleafa Labs division partners with leading institutions including universities, clinical researches and other cannabis companies to improve the science behind medical cannabis. They’re currently undertaking a project to tackle replacing addictive sleep medication with a cannabis based alternative. If you’re looking for a company with friends in high places look no further: company co-founder and chairman Julian Fantino was a politician before getting into the cannabis sector and was the head of Toronto’s police division before that.

LGC Capital Ltd. (TSXV: LG)

This Canadian headquartered Cannabis investment company has global ambitions and portfolio to boot. They own stakes in cannabis projects in Canada, Jamaica, Italy, Australia, Switzerland and the United Kingdom. In addition to convertible debt and equity stakes they have also smartly negotiated royalty payments in four of their portfolio companies. By 2020 they expect to have 2.1 million square feet of planted Cannabis growing.

Ascent Industries Corp (CSE: ASNT)

This British Columbia based Cannabis company has operations in Canada, the United States and Europe. Ascent is one of the only Canadian licensed producers of Cannabis to have produced and sold cannabis related branded products in recreational and medical markets in the United States. This company is serious about R&D and since 2013 it has done research focused on developing products and intellectual property with Simon Fraser University. The research initiatives are targeting cultivation, extraction, hardware and medical applications.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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A Few Lessons From Last Week

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There is an adage on Wall Street.  It is quite old. It was passed down to me from my grandfather last Wednesday.  It goes something like this. When the cops raid the brothel, they take everybody including the piano player.  

No matter when the notion originated, it applies directly, and painfully, to last week’s experience with stocks, bonds and crypto assets. Between early Wednesday and Thursdays New York closing, most major US indices dropped a fast five percent.  Friday showed a tepid rebound with the tech heavy NASDAQ posting a 2.3% one day recovery followed by the S&P 500 with a meager 1.2% upward move. Otherwise there wasn’t much good happening.

The story in crypto land wasn’t any better.  In truth it was worse. Taking just the two big guys during the same Wednesday/Thursday time period, things were dismal.  Bitcoin lost 6% in price before staging a weak 1.1% recovery on Friday. Ether dropped 15.6% on Wednesday, then managed a 3.2% Friday bounce.

Nobody escaped untouched unless you were a short seller in which case, congrats! Having lots of company is hardly any consolation for having to deal with investment losses, even if there are only accounting losses.  Nevertheless, everyone who had the ability to read understood the stock market was on a record breaking binge and thus vulnerable.

The only binge connected to crypto prices was a 10 month long hangover from the record levels of late last year.  So should the Wall Street adage be applied here making crypto take on the role of piano player? Or to present the question in a different way, is the piano player merely an innocent victim of being in the wrong place at the wrong time?

The Stock Market Correction Is Not Over

Stock market corrections are never pleasant but many veteran strategist consider them to be a necessary and even healthy part of the investment process.  Last week’s 5% drop was not even pronounced enough to qualify as a bona fide correction. That requires something even more than the 8%+ drop that took place back in February.  

In the very short term, there is little in economic news that is likely to upset the market this coming week but that doesn’t change the fact that interest rates are putting pressure in bond prices and $80 oil prices aren’t helping the inflation picture either.  Finally, there is the uncertainty created by the midterm elections. Making short run market predictions is a fools game, but this one is an exception.

What Does This Say About Crypto Values?

After events of the last week where already depressed crypto values get beaten down even further than stocks and bonds, that is not a good sign.  One of the reasons for this had to be last weeks report from Diar Ltd. showing how Coinbase’s active customers have dropped 80% from record levels of $24 billion in the fourth quarter of last year to $3 billion in the third quarter of 2018.  News of this study was reported by Bloomberg on Wednesday. So this could well have been the fundamental culprit. If so, the timing could not have been better for the short sellers.

No Longer Trending?

The folks at Diar Ltd. are spot on in their analysis but does this mean the end for crypto? Don’t count on it.  In fact there is a positive side to their findings. The most important point is the crypto prices (except for Wednesday) have become increasingly stable.  This stability will serve long term investors well as it will calm the nerves of regulators and merchants inclined to use crypto as a medium of exchange.

The drop off in activity at Coinbase is not surprising.  Speculators have lost interest. Recently we wrote an article about the competition for investor attention between crypto and cannabis.  There is loads of anecdotal evidence suggesting that this is contributing to crypto interest declining.

Here is just two points to remember.  This week on October 17, cannabis becomes legal for the first time throughout Canada. Investors are acutely aware of this bonanza.  During one of the worst weeks in the stock market, US listed cannabis stocks like Medmen Enterprises (MMNFF: $5.84) gained 35% while APHRIA (APHQF: $14.65) added over 13%.  Both stocks experienced greatly accelerated volume. This is an example of just two of many cannabis opportunities that are challenging crypto for investment capital. So the piano player may not be so innocent: he could just be smoking a little ganja.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 115 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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