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Cannabis stock report: Big tobacco saves Cronos; Aphria plummets as short-seller shenanigans continue

By Brandon A. Dorfman
Dec 05, 2018

Still reeling from the Aphria debacle the North American Marijuana Index fell nearly 15 points on Tuesday, with Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON) being the one bright spot, as news emerged that Marlboro-maker Altria Group may acquire the pot company to diversify. According to CNBC, a potential deal is still in its early stages, with nothing as of yet agreed upon and no certainty that it will be.

Altria is also in talks to assume a minority stake in e-cigarette producer Juul, a deal which could have a significant impact on any potential acquisition of Cronos. Juul has quickly become one of the most popular e-cigarette brands on the market today, worth over $15 billion.

While Altria did not respond to reporter’s requests for comment, Cronos did put out a brief statement addressing the matter.

[Aphria shares plummet as short-sellers have investors doubting Vic Neufeld]

“Cronos Group Inc. today confirmed that it is engaged in discussions concerning a potential investment by Altria Group Inc. in Cronos Group,” read the statement. “No agreement has been reached with respect to any such transaction and there can be no assurance such discussions will lead to an investment or other transaction involving the companies.”

[Marijuana stocks weekend investor roundup: Analysis of the week's most important events in the cannabis industry (November 30)]

Once a dominant force in the cultural landscape, tobacco companies are now looking for new ways to stay relevant in the face of a successful public campaign against smoking. Meanwhile, according to Marijuana Business Daily overall cannabis demand is at $52.5 billion, making it an obvious next step for big tobacco. Whether or not the two business models can work together remains to be seen.

The Index fell 6.2 percent on Tuesday, closing out the day at 230.58, with the United States Marijuana Index losing 6.46 percent and the Canadian Index falling 5.41 percent. Horizon’s Marijuana Life Sciences ETF (HMMJ.TO) fell CA$0.74 ($0.56), or 4.36 percent to end the day at CA$16.25 ($12.23), while the ETFMG Alternative Harvest ETF (MJ) fell $1.00, or 3.44 percent, closing out Tuesday at $28.10.

Meanwhile on Wall Street…

Cannabis investors weren’t the only traders fretting on Tuesday as the Dow Jones Industrial Average fell almost 800 points, with trade tensions and an inversion in part of the U.S. yield curve sending investors into a slight panic.

On Monday the Street was ready to take some risks following President Donald Trump and Chinese President Xi Jinping’s announcement of a 90-day halt to new tariffs stemming from their meeting at the G20 summit. By Tuesday, however, conflicting reports of what went on at the meeting, including specifics of the deal, had investors acting more risk-averse.

[US Tax Court rules against use of standard deductions for legal cannabis industry]

“Markets don’t believe that the deal (Trump) struck with China is as solid as what he suggested it was after the meeting concluded,” Jamie Cox, managing partner for Harris Financial Group, said in an interview with Yahoo Finance. “Until which time China confirms it, markets are not going to react positively.”

Along with the Dow, the S&P 500 fell 3.24 percent or 90.31 points on Tuesday and the Nasdaq fell 3.8 percent or 283.08 points.

Planet 13 calms worried investors

Planet 13 Holdings Inc. (CSE:PLTH) (OTCQB:PLNHF) put out a statement on Tuesday hoping to calm worried investors after stock prices fell over the past two trading sessions. Having just opened their superstore in Las Vegas last month, Planet 13 reports traffic averaging 1400 customers per day, exceeding expectations and trending towards their run-rate goal. They’re also awaiting word on whether or not they will be awarded any of the six dispensary licenses they recently applied for in Nevada.

"I am going to keep this short and sweet,” said Bob Groesbeck, co-CEO of Planet 13 in a statement. “There is absolutely no fundamental reason that we are aware of, for [Planet 13] shares to be trading as they have over the past two days. We opened the Superstore on November 1 as promised, and we have barely scratched the surface of what is possible here.”

[Cannabis news briefs: New Jersey makes headway with cannabis legislation, hemp comes closer to legalization, and Lindsey Graham takes powerful new post]

He continued: “Daily sales and average ticket are already above our internal expectations and trending in the right direction with only four weeks of data in the books and ancillary space still under development. Furthermore, we are optimistic on receiving word about significant value-enhancing catalysts for this company both this week and in early 2019.”

No one is passing the STATES Act

Yahoo Finance has a report that CEO of cannabis edibles distributor Dixie Brands, Chuck Smith believes cannabis will be federally legal in some form in the United States within the next 18 months. He’s the latest in a long line of cannabis company CEOs who believe that in the absence of Jeff Sessions, the long national nightmare will finally end.

Like most of those CEOs, however, he seems to forget that the Republican-controlled Senate, led by Mitch McConnell will never pass a cannabis legalization bill. “I do not have any plans to endorse the legalization of marijuana,” said McConnell in May.

“I’m going to predict that there will be a form of federal legalization in this country in the next 18 months,” said Smith, on Yahoo Finance’s Morning Meeting live show last week. “Let’s make it a states issue, but if you’re operating legally in a state that has legalized cannabis, you’re not going to be subjected to prosecution at the federal level. You’ll have access to banking, and you’ll have a more fair tax code.”

[WATCH: Grego shorts Aphria at the Kase Learning Shorting Conference]

The Colorado-based Dixie Brands offers a wide selection of THC and CBD infused products, including Leafs By Snoop and herbal supplements made by Aceso.

Who’s up and who’s down

Cronos Group Inc. (CRON) gained $0.57 per share, an increase of 5.60 percent to end the day at $10.74… GW Pharmaceuticals Plc (GWPH) finished the day at $127.05, a gain of $0.80 per share, or 0.63 percent… MariMed Inc. (MRMD) jumped $0.0225 per share, an increase of 0.56 percent to finish the day at $4.0725.

[Cannabis stock report: Congress agrees on new farm bill legislation, CBD industry readies to explode]

Liberty Health Sciences Inc. (LHS:CNX) fell $0.32 per share or 25.81 percent to end the day at $0.92… Aphria Inc. (APHA:CA) lost $1.61 per share, a decline of 21.18 percent, to end the day at $5.99… Sunniva Inc. (SNN:CNX) fell $0.68 per share or 17.89 percent to end the day at $3.12.

Vic Neufeld talks Latin America

From the vault comes an interview Aphria Inc. (NYSE:APHA) (TSX:APHA) CEO Vic Neufeld gave to Midas Letter earlier this year where he talked up the Latin American purchases now in question. Is he telling the truth? Watch and see for yourself.

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