Backside Line: Aurora Hashish has to this point been constructing their enterprise on hype moderately than sound fundamentals. Now the chief architects of the hype, Sales space and Battley, are each out of the corporate. On the similar time, the corporate introduced it was reducing 500 jobs. However is that this too little too late, or can the brand new administration truly save the sinking ship?
Backside Line: That is an unsightly transaction for shareholders if we ever noticed one. Sure the corporate wants cash so that is higher than going bankrupt, however not by a lot. CEO Kevin Murphy is lending Acreage $20M however requires fee solely 4 months later or he takes $20M of belongings and sells them out from below shareholders. One other inventory to keep away from till they’re completed diluting shareholders to remain afloat.
Backside Line: Leisure gross sales hit $39.2M in Illinois in January which is an efficient begin however that pales compared to the primary month in Massachusetts when gross sales hit $11M with solely 2 dispensaries open in comparison with greater than 40 open in Illinois on day 1. Vacationers made up 20% of gross sales which exhibits Illinois has a superb geographic location to drive gross sales from non-legalized states.
Backside Line: In response to analysis from Arcview and BDS Analytics, the worldwide hashish market is value about $14.4B and can attain $42.7B by 2024. We estimate if the uslegalizes Hashish North America alone is value $100 billion in gross sales ($10Bn Canada, $90Bn U.S).
Backside Line: Some U.S. corporations try to make use of the Canadian chapter course of to reorganize shortly and save on prices, however can they. A Canadian inventory itemizing isn’t sufficient and solely firm’s with greater than 50% of operations in Canada can doubtless use this avenue. Nice particulars on this article.
Backside Line: Small marijuana companies sometimes face further challenges with gaining access to banking providers because of the nature and stigma round hashish. The governor of Colorado, Jared Polis, has unveiled a plan to assist marijuana companies get extra secure and secure entry to banking.
Backside Line: CBG is the precursor to all different cannabinoids, together with THC, CBD and CBC. Lately, research on CBG has proven medical properties that may very well be helpful in most cancers remedy. Based mostly on the preliminary analysis we’ve seen, hashish has big potential as a patented pharmaceutical.
Backside Line: Hemp farmers have had issues holding the THC content material of their vegetation under the mandated zero.three% restrict on account of dangerous genetics. Now lobbying teams try to alter the restrict to 1% to keep away from having to pay for brand spanking new seeds and cultivars with decrease THC ranges. The zero.three% restrict is creating all kinds of complications and growing working prices for farmers.
Aurora Hashish Receives EU GMP Certification For Bradford Web site, Gross sales Suspension Lifted In Germany
Backside Line: Final week we reported on Aphria receiving its EU GMP Certification. This week, information got here out that Aurora Hashish has additionally obtained the EU GMP in addition to having reached an settlement to raise the gross sales suspension in Germany for some particular merchandise. Not sufficient to maneuver the needle for Aurora who wants a whole lot of assist, however a constructive piece of reports nonetheless.
Backside Line: The race for the Democratic Nomination for President is heating up. Present front-runner Bernie Sanders, a senator from Vermont, has pledged that if elected, he’ll enact by means of an govt order, to legalize marijuana on day 1 of his presidency.
Total, it’s been a tough week for the hashish sector. Globally, hashish shares have been down 6.10%. The U.S. hashish market was down 9.05% and the Canadian sector was down 5.39% because the finish of final week.
We’ve been watching the efficiency of U.S. and Canadian shares carefully and U.S. shares are nonetheless the place you need to be invested.
For the reason that finish of September 2019, U.S. hashish shares are down 29.5% whereas the Canadian LPs are down 38.7%. Buyers ought to start constructing a long-term place in a basket of the highest 5 U.S. operators, however avoid wasting further money to purchase on any weak spot in 2020.
An upcoming catalyst to look at is a UN assembly in March 2020 to probably deschedule hashish as a schedule 1 drug. If this goes by means of with America’s blessing it may set the wheels in movement for federal legalization earlier than later. As soon as the latest vaping disaster is resolved we also needs to see a bounceback within the U.S. MSOs.
YTD in 2020 the World hashish sector is underperforming the S&P 500 by 14.zero% and the TSX by 14.5%.
There at the moment are query marks on whether or not elevated gross sales from hashish 2.zero merchandise will raise the shares. Capital markets are largely shut to hashish corporations proper now, which is an issue when the enterprise fashions are constructed on fast enlargement and massive deficits. Canadian hashish traders shouldn’t be placing extra money into the sector till retail costs discover a backside.
Value compression has arrived and can drive hashish shares decrease over the following 6-12 months in our view with no new regulatory catalyst.
U.S. shares will proceed to outperform Canadian LPs from right here in our view with extra catalysts probably on the horizon. On the first whiff of nationwide U.S. legalization, traders ought to pile into the biggest MSOs and maintain for the long run.