The Morning Blunt

Volume 2| Issue 26

October 26, 2018

“Conquer but don’t triumph.“ –Marie Von Ebner-Eschenbach

Stock Market

Out of the $2.87B in short interest made in the cannabis sector $2.58B has been generated by Canopy Growth Corp., Aurora Cannabis Inc, GW Pharma PLC, Tilray Inc, Cronos Group Inc, and Aphria Inc representing 90% of the total short interest in the sector.

Pot stocks took a positive turn on Thursday across both US and Canadian markets. Check out what Katie Lewis of Proactive Investors has to say about her ‘buds’ and ‘duds’ picks. Namaste skyrocketed at 20.7% after it announced the close of its oversubscribed bought financing deal of CA$51.7M. Of the few stocks down MedMen fell 1.1% to $5.02.

According to The Growth Op’s Kristine Owram short sellers have raked in over $450M on the cannabis industry in just two of the seven-day pot-stock slide. Short sellers have been paying huge fees to short canna stocks, making up nearly a third of their year to date losses in the first two days of the week according to financial analytics firm S3 Partners.

Cannabis stocks broadly bounced back Thursday after a seven-day slump setting the sector back on track. Horizons Marijuana Life Sciences ETF rallied 2.5%, ETFMG Alternative Harvest ETF was up 1.5%, Aurora dropped another 2.8% in its fifth straight loss, and Canopy Growth climbed 3.1%. Take a look at how other pot stocks did Thursday.

Seeking Alpha’s Easterly Winds reports Aurora Cannabis currently derives most of its revenues from cultivation which may be problematic in the long run as value added products might be a better option for the company considering cannabis will be a tight margin commodity.

National Access Cannabis Corp. announced a CA$75M capital raise to fund expansion of 200 retail locations throughout Canada.

Green Growth Brands, a lifestyle company focusing on cannabis products in Ohio has recently raised $65M from investors and will soon be listed on the Canadian Securities Exchange.

Snoop Dogg’s Casa Verde and global investment giant Tiger Global Management just raised $50M for Florida based cannabis tracking firm Metrc. The company plans to use the money to hire and perform facility upgrades.

To boost margins and counter widening losses US cannabis retailer MedMen outlined a plan Thursday that resembled many other cannabis retailer business models. MedMen reported net losses of $78.7M for Q4 up from $7.35M last year.

4Front Holdings LLC a cannabis branding and retail company received a private placement of $31M of securities to fund its ongoing investment in buildout, talent recruitment, and M&A opportunities.

Global News

Aurora Cannabis announced Thursday it received its first cannabis import permit from the Polish Ministry of Health and approval to fulfill its first shipment of medical cannabis to a pain treatment center in Warsaw.

Check out last week’s capital raises and merger and acquisitions in a data report provided by Viridian Capital Advisors. Among top capital raises were Green Thumb Industries with CA$101.7M, Supreme Cannabis Company close a CA$100M debt financing deal, and The Green Organic Dutchman closing a CA$75M equity financing deal.

According to Debra Borchardt of Real Money, Barclays European Consumer Staples analyst missed the bus a bit when equating tobacco users and cannabis users when examining why no market disruption has occurred for big tobacco despite cannabis’ market boom. Borchardt notes that the industries are made up of different customer segments.

US News

Congressmen Earl Blumenauer from the third district of Oregon wrote a blueprint to legalize cannabis in the 116th congress. The memo states that congress is out of sync with the American people and outlines steps to be taken to reform cannabis laws by a democratic majority if one were to take the house.

Only 180 out of California’s 540 municipalities have approved commercial cannabis, 67% of local governments have banned retail locations. The upcoming election stands to change this discrepancy with new tax measures that some are calling more important than Prop 64.

Salinas County by unanimous vote approved a measure to increase the annual cannabis tax program by $1.67M. The funds will primarily go toward investigating and prosecuting illicit cannabis facilities and ensure legal businesses are compliant.

Tuesday the Board of Supervisors approved the permitting of cannabis cultivation and sales in unincorporated areas of Riverside County California on a 3 to 2 vote. Estimates on county receipts from granting cannabis licenses range from $10M-$17M annually.

The Cannabis Control Commission in Massachusetts approved two retail cannabis locations in Northampton and Leicester that should open in a matter of weeks. Take a look at some of the items the CCC is looking into for the future of cannabis in MA.

Before his constituents vote, Utah lawmaker Jim Dabakis drove to Las Vegas Nevada to try cannabis for the first time on camera. Before consuming half of a cannabis infused candy, Dabakis discussed the tax revenues Nevada has benefitted from.

San Francisco’s equity program for the disenfranchised people negatively affected by the war on drugs is under review after some individuals have taken advantage of the system. Changes are pending approval while over 100 applications wait in limbo.

Only a small percentage of Los Angeles Pot Shops are legal with over 1,700 illicit cannabis stores in the city. Take a look at the history behind cannabis and zoning laws in California for a better perspective as to why some cannabis companies are legal and others still struggle.

Canada News

While cannabis entrepreneurs from all over the world are gearing up for the MJ Biz Con in Las Vegas NV, Canadian industry players are unsure about travelling south of the border. US officials have announced they intend to deny access to anyone who may be traveling for cannabis related business, such as the conference.

Quebec reported 140K cannabis transactions in the first week of legalization between the 12 retail locations and online platform SQDC. Only a week into the transition and the province is already having supply shortages. Having processed 53K transactions online as of Tuesday 48 out of 68 products were sold out on SQDC website.

Science

Researchers have pinpointed the dosage of CBD needed to relieve pain in animal models without getting the subject high. The findings have been published in the journal PAIN, the Journal of the International Association for the Study of Pain.

Take a look at some of the advancements cannabis science has made this fall including Epidiolex, the entourage effect, cannabis’ anti-nausea effects, a shift in theory regarding cannabis and schizophrenia, the benefits of CBD has on autism symptoms, and the target low dose for CBD.

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