Cannabis stocks continued to slide on Friday as the marijuana markets hit full-blown panic-mode despite the industry’s best efforts to assuage investor fears over a U.S. policy shift that declared open-season on states that legalized the plant. Canadian stocks once thought to be a benefactor of tightening U.S. rules also took another substantial hit on Friday as uncertainty in the U.S. market infected the broader industry. Another record day on Wall Street and Canada’s top stock exchange exposed the panic ensuing in the marijuana markets, as cannabis stocks drifted farther away from the gains of the general markets for the third day in a row.
Lawmakers on Friday signed onto a spending bill proposal that would protect states where marijuana is legal, but it was too late to affect the markets in any real sense. Meanwhile Wall Street posted another day of record gains, with the start of the fourth-quarter earning season bringing in strong results leading to investor optimism about economic growth. The Dow Jones Industrial Average jumped .89 percent to close the day at 25,803.19, with the Nasdaq and the S&P 500 posting similar gains. In Canada, the S&P/TSX Index rose .13 percent, with considerable increases in the gold and materials sectors.
Friday’s losses made it harder for investors to explain away the crumbling cannabis economy as due to outside factors such as recent rumors about NAFTA. The “Sessions Panic” is in full effect, with MJIC’s North American Marijuana Index the benchmark for the industry’s issues. The Index fell 21.55 points on Friday, a 6.58 percent drop, to close at 306.03. News on both sides of the U.S.-Canadian border was atrocious for investors, with the former index falling 1.8 percent and the latter 9.5 percent.
Marijuana’s other two significant indices fared no better on Friday, as investors struggle to navigate through the minefields set up by the Justice Department. Solactive’s North American Medical Marijuana Index officially halted its two-month rise this week, falling 165.86 points for a 9.06 percent drop. The Index closed at 1663.96, after breaking the 2000 mark this month. The Cannabis Stock Index as overseen by 420 Investor also broke a two-month winning streak, dropping 10.09 points, or 6.20 percent to close Friday at 152.67.
It was an unfortunate day for marijuana’s two funds, the Horizon Marijuana Life Sciences Index ETF and ETFMG’s Alternative Harvest ETF, both of which were riding high up until this week. The Horizon’s fund lost another $2.15 per share for a 9.75 percent loss to close out the trading day at $19.90 per share. Similarly, the alternative harvest ETF - the former Latin American Real Estate Fund - fell $2.16 per share for a 6.05 percent loss.
Cannabis stocks fell into a full-fledged panic on Friday, as U.S. policy rippled across the border having an undeniable effect on the marijuana markets. The fundamentals of the marijuana markets appear stronger on paper than in reality at this point, with too much volatility in Washington as well as on the exchanges.
Meanwhile, Around The Industry…
People try to put us d-down (Talkin' 'bout my generation)... Finding investors is GrowGeneration Corp. (OTCQB:GRWG) who announced on Friday a $9 million offering in convertible notes from a group led by Merida Capital Partners. The company now predicts a healthy $30 million in sales for the fiscal year 2018. GrowGeneration owns 14 retail hydroponic and organic gardening stores throughout the United States.
The past years has been a successful one for the company both regarding their ability to raise capital and increase revenue. They continue to expand, bringing in $4.8 million in capital in the third quarter of 2017. Revenues increased to $4 million from $2.1 million for the same period the previous year. Gross profits for the third quarter came in at $1.1 million.
"Several acquisitions are planned to close in the 1st and 2nd quarters of 2018, said company CEO and Co-Founder Darren Lampert. “The Company's acquisition targets include hydroponic and cultivation supply operations in the New England and California markets and proprietary products for commercial growers. Merida Capital's continued support, along with our additional institutional investors, validates the Company's business model and its ability to attract high-quality strategic capital."
GrowGeneration was up 13.29 percent on higher than average trading volume on Friday, closing the day at $8.10 per share.
CanniMed Fights Back
The People’s Court… Going to court is CanniMed Therapeutics Inc. (TSX:CMED) who announced on Friday the filing of a lawsuit against Aurora Cannabis (TSX:ACB), several former shareholders, and a host of others involved in the hostile takeover bid that has dominated headlines for the past few months. CanniMed alleges “breach of confidentiality, intentional interference with economic relations, conversion, breach of contract and other allegations” about the issue at hand and is seeking $725 million in damages. Furthermore, CanniMed seeks additional damages against one current and one former board member, Doug Banzet and Robert Duguid, for acting out of self-interest, among other improprieties.
“Aurora knew, or should have known, that the information obtained and utilized to design and launch their hostile bid was obtained inappropriately,” said CanniMed CEO Brent Zettl in a statement. “As a result of Aurora’s use of this confidential information, CanniMed shareholders have been disadvantaged and deprived of seeing the full value of their shares. These bad actors, working in concert, have done the company and other shareholders a significant disservice and we can’t let them get away with this. I urge all shareholders NOT to tender to Aurora’s hostile bid and to vote YES (Green) for CanniMed’s acquisition of the Newstrike Resources Ltd.”
CanniMed was down 4.42 percent on Friday, closing out the day at $24.03 per share.
Isodiol Says “Namaste”
The Avengers. It's what we call ourselves. Sorta like a team. Earth's Mightiest Heroes type thing… Building a cannabis superteam is Isodiol International Inc. (CSE: ISOL) (OTC:ISOLF) who announced on Friday a partnership with Namaste Technologies Inc. (CNSX:N) (OTCQB:NXTTF). The agreement calls for Isodiol to provide Namaste with phytoceutical products, which the latter will go on to sell via their e-commerce platform. Both companies see the relationship as mutually beneficial, with Isodiol gaining new sales channels and Namaste a more varied product offering.
“This transaction further demonstrates our eagerness to attract industry leaders who see value and can benefit from our revolutionary e-commerce platform,” remarked Namaste CEO Dean Dollinger in a statement. ”We are very much looking forward to offering Isodiol's best-in-class quality range of products through our sales channels, as we look to broaden our product offerings to encompass some of the most innovative phytoceutical products in the market.”
Isodiol was down 0.72 percent on Friday to close the day at $1.37 per share. Namaste also took a hit, falling 13.25 percent to close the day at $2.62 per share.
Other New and Notes
Does not compute… Scoring big is cannabis regulatory compliance software builder Simplifya, who announced this week a $1 million capital infusion as part of a Series B funding round. As reported by Green Market Report, the company hopes to raise as much as $3 million by the time this round of funding ends. “Simplifya’s compliance tool has helped companies across Colorado navigate a constantly evolving regulatory landscape and set an example for the rest of the nation,” said company CEO Marion Mariathasan in a statement.
I’ll make him an offer he can’t refuse… Making deals is Emblem Corp. (TSX-V:EMC) who announced on Friday a $50 million bought deal with Eight Capital. According to the terms of the deal, Emblem will sell 12 million shares and 25,000 convertible unsecured debentures for $25 million each. Emblem, who is licensed to sell and cultivate medical marijuana under the Access to Cannabis for Medical Purposes Regulations (ACMPR) plans to use the proceeds for expansion and general corporate purposes.
My get up and go, musta got up and went… Lifestyle Delivery Systems Inc. (CSE:LDS) (OTCQB:LDSYF) completed a non-brokered private placement financing to the tune of CAD$2.75 million… Global Cannabis Applications Corp. (CSE:APP) (OTCQB:FUAPF) is now a premier member of the Medical Cannabis Counsel of Australia...Newstrike Resources Ltd. (TSX VENTURE:HIP) major shareholders and popular musicians The Tragically Hip announced their support for the CanniMed deal…
Stocks to Watch (And Watch Out For)