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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. 

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4.5 stars on average, based on 410 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

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 410 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

President Trump Ditches Clampdown on Legal Marijuana

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U.S. President Donald Trump has abandoned the Justice Department’s proposed crackdown on recreational marijuana, giving states that legalized the drug complete discretion to administer its use. The decision ends months of uncertainty over whether federal drug laws would impede on states that have already voted in favor of legalization.

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Reversing the U-Turn

White House sources confirmed on Friday that the president would not be taking the advice of Attorney Jeff Sessions, who in January reversed Obama-era guidance on cannabis laws. In a one-page letter, Sessions said he would allow U.S. attorneys to enforce marijuana prohibition to the fullest extent of the law. This effectively meant that marijuana businesses in states where the substance is legal could still face federal raids and prosecution.

The decision to end the crackdown emanated from Trump himself after meeting with Republican Senator Cory Gardner, who hails from the pro-cannabis state of Colorado.  Gardner was a staunch critic of the Justice Department’s policy u-turn, calling it “a trampling of Colorado’s rights.” He retaliated by blocking Justice Department nominees.

The state of Colorado has generated hundreds of millions of dollars in revenue from recreational marijuana sales. Interstate traffic, especially from New Mexico and Texas, helped to generate $1.5 billion in sales last year.

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Gardner says he was assured that federal laws would not interfere with Colorado’s booming marijuana industry and that President Trump would promote a new law that gives states the authority to formulate their own policies on the matter.

Several U.S. states backed legalization during the 2016 election cycle, including California, Nevada, North Dakota, Main and Massachusetts. Recreational weed is also legal in Washington, Oregon, Alaska and Colorado.

Marijuana Industry

President Trump’s decision to back state-level cannabis regulation sent marijuana stocks soaring in Friday’s session, which was characterized by widespread losses on Wall Street.

North America’s Marijuana Index, which tracks 42 leading cannabis stocks, surged 10.1% to $257.87. That was its highest settlement since Mar. 20.

The smaller U.S. index rose 14.9% to $91.76, with 16 of 19 companies reporting gains.

Meanwhile, Canada’s version of the index climbed 6.5% to $646.86.

Analysts say Trump’s renewed commitment to state rights is a game-changer for the industry, especially in California, a state with a bigger population than Canada. Greater certainty around state administration of cannabis laws could boost investment and business growth in state-legal markets.

Cannabis stocks surged to record highs in the new year before legal concerns and signs of overvaluation triggered a broad retreat in the market. However, as of Friday’s close, marijuana stocks had advanced in four straight sessions.

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 410 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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Canada’s Marijuana Sector is Becoming More Attractive

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Canada’s dynamic cannabis sector is getting more attention from investors, even as concerns of overvaluation and strained supply continue to weigh on stock prices. Beyond the ticker symbols, marijuana investors are envisioning an industry that could eventually rival alcoholic beverages, especially among younger cohorts.

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The Marijuana Index

Marijuana investments steadied on Wednesday, bringing cautious optimism that the month-long downtrend could be coming to an end. Canada’s Marijuana Index, which is comprised of 25 companies worth a collective $21 billion in market cap, closed at $609.56, where it was virtually unchanged compared with the previous close.

The index experienced dramatic fluctuations throughout the day, reflecting a highly volatile North American stock market on Wednesday. The index touched a low of 546.46 after the open before rebounding more than 8% by the close.

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In terms of individual stocks, WeedMD Inc (WMD) gained more than 18%. The penny stock is officially certified by Health Canada to produce medical marijuana, an industry that first achieved legalization almost two decades ago. Axim Biotechnologies Inc (AXIM) gained nearly 15.8% while CV Sciences (CVSI) added more than 7%.

More established marijuana stocks like Aphira Inc (APH), Aurora Cannabis Inc (ACB) and Canopy Growth Corporation (WEED) closed in negative territory.

The much smaller U.S. version of the index, which contains 17 constituents collectively valued at $5.3 billion, rose 0.6% to $73.33.

Canada’s Budding Pot Market

While favorable legislation has made Canada a top contender to become the Silicon Valley of marijuana, some say the sector is relying too much on hype and speculation. When the marijuana index was valued at more than $30 billion, it was worth half the market capitalization of the nation’s more established gold mining industry.

That said, other nations are watching Canada’s experiment with recreational cannabis very closely because they know it could mean big business. According to Daniel Pearlsteinof Eight Capital, Canada’s retail marijuana sector could hit $9 billion annually in just a few years.

Recently, Constellation Brands (STZ), a U.S. alcohol giant, predicted that global cannabis sales could reach $200 billion in 15 years. That’s a huge source of revenue for governments.

Constellation also estimates that U.S. cannabis sales already generate $50 billion every year, which is about $10 billion lower than wine and a$ 25 billion shy of tobacco. It therefore comes as no surprise that the company recently invested $191 million in Canopy Growth Corp.

As marijuana edges closer to full legalization, stocks that are involved in the sector will likely gain more legitimacy. Cronos Group made history earlier this year when it became the first Canadian weed grower to list shares on the U.S. Nasdaq exchange. The company also trades in Canada and Germany.

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 410 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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