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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.

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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.

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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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4.5 stars on average, based on 453 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Marijuana Stocks Trade at Four-Month Highs as Canadian Senate Approves Cannabis Act

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North America’s marijuana index is riding high once again after one of the world’s biggest cannabis markets moved one step closer to full legalization.

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Canada’s Senate Passes Cannabis Act

Canada’s cannabis bill passed third reading in the Senate last week and in doing so overcame one of the last critical hurdles to full legalization of recreational marijuana. Bill C-45, the so-called cannabis bill, was approved by a vote of 56-30 with one abstention.

The amended bill goes back to the House of Commons, where Liberal Members of Parliament will determine which amendments to keep and which to omit before sending it back to the Senate. Once the bill is passed, provincial governments will have up to three months to prepare for full implementation of the law. At that point, recreational cannabis will be available for sale. According to various studies, the sale of recreational weed will open up a multi-billion-dollar industry.

However, it’s not entirely clear how long the Liberals will need to review the amended bill before sending it back to the Senate. There are currently three ministers looking over the amendments. Although most Senate amendments are minor, about a dozen stick out as significant impediments to implementation.

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For cannabis companies, this could mean many more months of uncertainty. However, in the grand scheme of things, the passing of Bill C-45 is a major breakthrough for businesses that have gambled heavily on the legalization of recreational pot.

Marijuana Stocks Rise

After initial trepidation, marijuana stocks have risen sharply since Canada passed Bill C-45. However, the bulk of the gains have been concentrated south of the border, a sign that investors were becoming more optimistic that the Trump administration would continue to back off states seeking to legalize recreational cannabis.

The North American Marijuana Index, which tracks 41 companies in Canada and the United States, rose 1.8% on Monday to $277.70. That was its highest settlement since Feb. 15.

Shares of marijuana companies have gained 10.6% over the past month but are still well below peak levels from early January.

All of the gains Monday came from U.S. companies, with the likes of MariMed Inc. (MRMD), CV Sciences Inc. (CVSI) and WeedMD Inc. (WMD) putting up large gains. The U.S. Marijuana Index jumped 5.3% to $110.04, its highest since late January.

Canadian cannabis stocks fell 1.5% on Monday, their third consecutive down session. The Canadian version of the marijuana index, which contains 24 companies collectively valued at $26.2 billion, rose to more than two-month highs ahead of the Senate vote on Bill C-45.

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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4.5 stars on average, based on 453 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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The Biggest Marijuana Merger Ever Lifts Cannabis Stocks

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An expected merger between Canada’s Aurora Cannabis and MedReleaf propelled marijuana stocks higher on Monday, sending a strong signal that consolidation is afoot ahead of planned legalization this year.

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Biggest Merger Ever

Aurora Cannabis, one of Canada’s biggest marijuana companies, is set to purchase MedReleaf in an all-stock merger worth $2.2 billion. According to an official statement, the deal will enable the newly merged company to produce 570,000 kilos (1.26 million pounds) a year of cannabis across nine facilities in Canada and two in Denmark.

The deal is expected to be finalized in August, just a few months before the Canadian government legalizes recreational pot. Canada was set to legalize the drug on July 1 but a series of bottlenecks pushed back the date until the fall.

Under the deal, Aurora will offer MedReleaf shareholders 3.575 shares in Aurora in exchange for every unit in MedReleaf they hand over.

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“It gives us a footprint in Ontario, it prepares us properly for the adult usage market, the strains that MedReleaf has managed to grow are the leading strains in this country, arguably in the world,” said Terry Booth, Aurora’s CEO.

Ontario is Canada’s most populous province, accounting for roughly 40% of the nation’s gross domestic product.

Aurora Cannabis and MedReleaf are the second and fourth largest Canadian marijuana companies by market capitalization. Combined, they have the potential to outgrow industry leader Canopy Growth Corporation, which is currently worth $6.45 billion. Taking today’s prices into account, the newly merged company is capitalized at more than $7 billion.

That said, Aurora Cannabis has emerged as the largest pure play cannabis company in the world, earning that distinction through a series of key acquisitions. By purchasing MedReleaf, the company has given itself a strong foothold in the medical marijuana sector.

Marijuana Stocks Outperform

North America’s marijuana industry gained on Monday, as news of the Aurora-MedReleaf deal made its way to investors.

The North American Marijuana Index rose 2.2% to close at $256.64, its highest settlement in a month.

MariMed Inc. (MRMD) and OrganiGram Holdings Inc. (OGI) were the top performers, gaining 14.4% and 11.1%, respectively.

Cronos Group (CRON) jumped 7.2% and Canopy Growth Corp (WEED) added 6.9%.

Merger news failed to lift Aurora Cannabis (ACB), as share prices fell 2.1% on Monday.

The Canadian Marijuana Index, which is capitalized at $24.41 billion, rose 2.9% to $660.35. Meanwhile, the $6.82 billion U.S. Marijuana Index added 1.2% to finish at $90.20.

Cannabis stocks outperformed Wall Street by a wide margin on Monday. The S&P 500 Index gained just 0.1% during the session.

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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4.5 stars on average, based on 453 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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The Case for Marijuana Stocks Is Growing

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The marijuana industry is abuzz with optimism again. Looming legalization in Canada, cutting edge research and development and a pivotal shift in favor of state rights in the Trump White House have all raised the stakes for cannabis stocks. These developments could generate an industry worth $47 billion annually in about ten years, according to ArcView.

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Trump’s Decisive Move

President Donald Trump made a bold move earlier this month by reversing a Justice Department proposal to crack down on the marijuana industry. In doing so, he may have ended a looming legal battle between states that have legalized recreational marijuana and federal prosecutors who want to enforce national laws against them.

Perhaps more interesting is the fact that Trump made the decision without consulting Jeff Session, the Attorney General who decided back in January that Obama-era guidance was not needed. This meant that federal prosecutors could pursue legal action against marijuana growers even in states where the substance is legal.

Colorado Republican Senator Cory Gardner was instrumental in convincing the Trump administration to abandon the Justice Department’s proposal. Legal weed sales have generate $1.5 billion for the state since prohibition ended in 2014.

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Cannabis and Pharmaceuticals

Pharmaceuticals account for the largest share of established marijuana companies when measured by market cap. The sub-sector is primarily involved in cannabinoid research to treat ailments like cancer, epilepsy, multiple sclerosis and other chronic pains. Now, a prominent researcher is on the verge of getting FDA approval for a cannabinoid-based drug.

The company is GW Pharmaceuticals (GWPH) and the drug is Epidiolex, which is designed to treat childhood-onset epilepsy. The FDA is expected to reach a decision on the drug by the PDUFA deadline of June 27. PDUFA dates usually give federal regulators ten months to review new drugs. Priority drugs are given a six-month review window. FDA approval of the drug would not only boost GW share prices, but catalyze the entire industry.

Other prominent cannabis drug researchers include Insys Therapeutics (INSY) and Axim Biotechnologies (AXIM).

Canada Leads the Charge

Marijuana legalization has been high on the government’s agenda since Justin Trudeau took office in 2015. Although the timeline for legalization has been pushed back, Canadians will still be able to buy weed legally this year.

A final Senate vote on the mater is scheduled for June 7, with full legalization to commence shortly eight-to-12 weeks later. Although the Conservative party is opposed to legalization, the Senate is expected to pass the measure easily.

Legalization will open the door to a $5 billion industry, leading to direct and indirect spending that could add billions more.

Canada’s Marijuana Index is currently valued at $24 billion, much higher than the still-underdeveloped U.S. equivalent. Some of the most active companies on the Canadian cannabis scene include Aurora Cannabis (ACB), Canopy Growth Corporation and Aphira (APH).

The North American Marijuana Index rose 1.3% on Thursday to settle at $256.32. The Canadian Index advanced 1.4% to $652.46. By comparison, the U.S. S&P 500 Index fell 0.6% and the TSX Composite Index closed down 0.5%.

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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4.5 stars on average, based on 453 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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