The Morning Blunt

Volume 2| Issue 23

October 23, 2018

“ You will get all you want in life if you help enough other people get what they want.”

–Zig Ziglar

Stock Market

Cannabis stocks suffered across the board Monday as the sector faced its worst five-day slide in eight months. ETFMG Alternative Harvest ETF fell 20% amid the five-day session, its biggest loss since inception. Also sharing its biggest historical loss, Horizons Marijuana Life Sciences Index ETF fell 11.6%.

BNN Bloomberg and Andrew Kessner equity research analyst for William O’Neil & Co. discuss the latest declines in the cannabis sector, his outlook on Canopy Growth, and the changing direction of money flow in the industry.

Before investing heavily in Aurora on the NYSE take a look at why Aurora is an overvalued, under producing, diluted buy that analysts are warning about. Regardless of skyrocketing overvaluation, Aurora only produced 5,631 kilos of cannabis last year, which isn’t even ten percent of their expected 570K kilo throughput. This lofty target goal, if met, would saturate the Canadian market and drive prices of cannabis to rock bottom.

The Motley Fool’s Sean Williams says if given free money he would still avoid these five cannabis stocks, Aurora Cannabis, Cronos Group, MedMen Enterprises, The Green Organic Dutchman, and Tilray. Check out why Williams won’t touch these popular pot stocks.

While excitement around pot stocks surges, Seeking Alpha’s Julian Lin is bearish on Canopy Growth Corp. with a 46% slide. Though Canopy is operating at all cylinders, shares remain a strong sell and Lin reiterates his price target of $25.

Motley Fool’s Keith Speights discusses the key differences between Cronos Group and Supreme Cannabis and why Cronos is the better buy for institutional or long-term investors, though neither are great picks for cannabis choices.

Innovative Industrial Properties has embraced the cannabis industry in a unique way which puts them in the position to offer a dividend to their shareholders. Check out Innovative Industrial’s business model as a real estate investment trust who seeks investment for real estate assets in order to provide leasing agreements to medical cannabis firms.

Global News

After a global outcry against the death sentence handed down to Muhammad Lukman, a provider of medicinal cannabis oil, Malaysia announced that it will move to abolish the death penalty. The announcement comes as breakthrough for conservative Southeast Asia. Lukman’s sentence has been placed on hold while legislation is pending.

Cannabis producers are building their brands in the US based on consumer experience and lifestyle design. Genevieve Roch-Decter CEO of Grit Capital joins BNN’s Catherine Murray to discuss companies such as MedMen and their approach to branding in New York City.

What happens after the buzz wares off and cannabis firms no longer get the free publicity from media coverage? Mark Stov of Satov Consultants explains how companies competing with the black market will first need to fix supply issues and then market to consumers accordingly.

CannaRoyalty has rebranded and is now operating as Origin House. Marc Lustig CEO of Origin House joins BNN to discuss the decision behind rebranding, what the California market is like, and how it’s making its way into the Canadian market.

With all the hype around pot stocks it’s easy to forget that cannabis is just a commodity market. While there is an immense amount of opportunity around the cannabis industry, most of the revenue streams are spoken for in terms of production. It may be easier for companies to establish strong convictions and compete head on as challenger brands.

Cannabis could be a huge threat to the alcohol industry. In states that have legalized cannabis alcohol sales dropped by an average of 15% and counties with cannabis had 20% less alcohol sales than neighboring jurisdictions where cannabis is still prohibited. HEXO and Molson Coors teamed up to create a cannabis infused non-alcoholic drink, however legally cannabis infused edibles and concentrates are illegal in Canada until July 2019.

Former British Metropolitan police chief Bernard Hogan-Howe announced he would “hold an urgent commission of experts to look at the evidence about what’s happening about cannabis in North America.” Hogan-Howe did not call for a law change but did state he believed there was clear evidence to warrant a review of cannabis laws.

Toronto based cannabis acquisition firm Canadian Cannabis Strategies Acquisition Corp. bought Sira Naturals, the first cannabis business in Milford Massachusetts. Canadian Cannabis Strategies dished out $76M set on acquiring Sira and four other companies to create an anchor portfolio.

US News

Bartell Drugs has begun selling a line of cannabidiol products at select locations throughout the Pacific Northwest. The product line does not include THC and is locked in a cabinet and is only available for purchase by those 18 and older. It is unclear if there are CBD products for human consumption available at these locations.

Attorney General Mark Brnovich is asking the Arizona Supreme Court to declare possession of concentrates a crime as the product is not the flower of the plant but an extracted product which, according to Brnovich, is an entirely different and illegal product. Former state health director Will Humble who wrote the law argues that is a misrepresentation of the Arizona Medical Marijuana Act.

The Coastal Commission’s certification for land use ordinances in Santa Barbara County was approved which will clear the way for law enforcement actions to begin in the coastal communities.

In case you missed it, California Bureau of Cannabis Control recently released a new round of rules drafted for public comment until November 5th. Third-party cannabis delivery companies that do not have marijuana commercial licenses could be banned under the proposed regulations. Silent partnerships could also be banned. Check out what else the BCC has drafted.

Some Vermont bankers are providing banking services to CBD producers and industrial hemp cultivators. Though the paperwork alone is enough to deter banks from working with cannabis producers, Union Bank has made some exceptions. According to Matt Simon of Marijuana Policy Project, credit unions, such as Vermont State Employees Credit Union, are regulated in a way that may make it easier to work with those in the cannabis industry.

Canada News

Ryan Kessler reported supply shortages have caused cannabis prices to spike in parts of Canada. According to analysts who have studied Oregon’s market, Canada could take up to two years to stabilize market prices.

As cannabis shortages are announced across Canada, a new cultivation facility in Sackville N.S. opened Monday and may give the province’s First Nations an opportunity to enter the lucrative cannabis industry. AtlantiCann Medical Inc. and GrowForce announced their 48K square-foot facility is on the cusp of receiving a cultivation license from Health Canada after product samples are approved.

Conservative leader Andrew Scheer recently took an outspoken stance against cannabis legalization, calling Justin Trudeau’s decision a rush to legalization. However Public Safety Minister Ralph Goodale warned Scheer that reversing the decision would recriminalize people.

Nova Scotia cannabis users are concerned by the excessive packaging cannabis products come in. Canada’s regulations surrounding packaging are required to be tamper-resistant, prevent contamination, waterproof, and childproof.

Despite bylaws in Calgary outlawing public consumption of cannabis, Mayor Naheed Nenshi says he is open to changes when the community demands them. While smoking zones have not been permitted few complaints have been made by community members.

Science

At first researchers thought cannabis may relieve symptoms of Crohn’s disease due to its anti-inflammatory effects in the gut. However, a study conducted recently found a 65% remission rate after treating patients with a four to one ratio of CBD and THC, but the reason behind symptom relief was not from an anti-inflammatory response and alludes researchers.

According to a study conducted by the University of Massachusetts Intercampus Program in Bioengineering and Biotechnology, hepatitis C patients who were habitual cannabis users had a reduced cirrhosis risk by 38%, suffered fewer complications, had less unfavorable conditions at discharge, and had a lower cost of care.

Like craft beer makers, cannabis firms are using yeast to create cultures that can produce THC and CBD. Gingko Bioworks, in a $100M deal with Cronos Group, promised to produce a more pure product at a fraction of the time and resources than cannabis plants can reliably produce. Other companies are following Gingko’s lead and investing in R&D into yeast modifications for cannabinoid production.

Research will now be conducted in Canada on how long the effects of cannabis impair functioning of consumers. While some have proposed allowing 28 days to pass before police officers and others can return to work, research may suggest a timeline closer to three days.

CannaGx DNA test is designed to be a swab DNA test that can help determine which strain, titrate, and delivery system to use tailored to your genetic code.

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