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Cannabis Stock Report: Tanking Cryptocurrencies Create Volatility As Marijuana Markets Remain Mixed For Second Straight Day

By Brandon A. Dorfman
Jan 18, 2018

Cannabis stocks wavered for a second day on Wednesday as the marijuana market correction appeared to come head-on against panicked cryptocurrency investors unsure of their financial futures. As The Motley Fool pointed out earlier this week, with Bitcoin and other cryptocurrencies tanking in recent weeks not-so-savvy investors looking for the next hot speculative instrument to cash in on are tossing their money in and out of cannabis stocks. These undisciplined investors afraid of missing out on the next-big-thing may be somewhat responsible for the recent volatility in the marijuana markets, an issue compounded by a predictable market correction following the run-up in prices preceding the opening of California’s adult-use recreational market.

Major marijuana indicators were mixed on Wednesday, with MJIC’s North American Marijuana Market falling and Solactive’s North American Medical Marijuana Index posting substantial gains. Broader markets climbed higher on Wednesday as a clear picture of future earnings based off of last months new tax bill began to unfold. The Dow closed above 26,000 for the first time after briefly hitting the mark on Tuesday, with the Nasdaq and the S&P 500 both making gains as well. Canada’s main stock index edged higher on Wednesday with the S&P/TSX rising 27.82 points.

Cannabis stocks continued their shake-out on Wednesday, with market indicators fluctuating but major funds posting significant gains. MJIC’s North American Marijuana Index fell 2.13 points, or 0.64 percent to close the day at 328.90. In a reversal from Tuesday, the U.S Index fell 2.14 points for a 2.03 percent loss, closing out the day at 103.40, while the Canadian Index gained slightly. Up north the Index rose 2.23 or 0.25 percent, closing out the day at 893.97.

Other market indicators showed similar flux, with The Cannabis Stock Index falling 1.55 points or .94 percent. The Index closed at 163.06. Conversely, Solactive’s North American Medical Marijuana Index climbed 30.19 points or 1.68 percent to close the day at 1824.92.

It was a brilliant day for marijuana’s two ETF’s, with each showing gains on an otherwise rocky day for cannabis stocks. Horizon’s Marijuana Life Sciences Index ETF was up slightly at $0.42 per share, a 1.94 percent gain. The fund closed out the trading day at $22.06, per share. In the same vein, ETFMG’s Alternative Harvest ETF (MJX) was up $0.60 per share, a gain of 1.70 percent to close the day at $35.83 per share.

The fundamentals of the marijuana markets are slightly under attack, as cryptocurrency castaways nervously throw their money at the sector hoping for a quick win, with panic setting in quickly and causing instant sell-offs. Ignore cries of a bubble forming, as a recent spate of bought deals show that capital is flowing throughout the sector. Cannabis is not the housing market, nor is it the turn-of-the-century dot-com craze. The crypto-crowd will disperse, and the market will settle.

Bitcoin, on the other hand…

Meanwhile, Around The Industry...

I think pot should be legal. I don’t smoke it, but I like the smell of it… Topping their war chest is Canopy Growth Corporation (TSX:WEED) who announced on Wednesday a massive $175 million bought deal financing, through a contingency of underwriters led by GMP Securities L.P. According to the terms of the deal, GMP agreed to the purchase of 5.06 million shares of Canopy stock at a price of $34.60 per unit. Looking to expand the company ahead of this summer’s Canadian legalization efforts, Canopy plans to use the proceeds from the deal for working capital, general corporate purposes, and other expenditures.

The deal comes one day following Canopy’s announcement of a memorandum of understanding outlining a supply agreement with the Province of Prince Edward Island. Canopy will supply the province with 1000 kg of cannabis over a two-year period, with an option to extend for an additional year. The agreement echoes a similar deal between Prince Edward Island and Organigram Holdings Inc. (TSX-V:OGI) (OTCQB:OGRMF) also announced on Tuesday.

"The Province of PEI and its management team have made impressive progress in their preparations for the legalization of cannabis,” remarked Mark Zekulin, President, Canopy Growth. “Along with Organigram and our existing PEI-based CraftGrow partner, Canada's Island Garden, we are proud to be among the first suppliers in the province,"

Ray Gracewood, Chief Commercial Officer, Organigram said in an additional statement, "We are proud to work with PEI and share their vision of a thriving, responsibility-first recreational market."

Canopy Growth was up 2.98 percent on lower than average volume trading on Wednesday, closing out the day at $37.61 per share. Organigram fell 0.60 percent on lower than average trading volume, closing out the day at $4.94 per share.

Wheaton’s Aphria Deal

Kush rolled, glass full… I prefer the better things… Trying things out is Cannabis Wheaton Income Corp. (TSX-V:CBW) who announced on Wednesday the signing of an interim supply agreement with cannabis powerhouse Aphria Inc. (TSX:APH). Wheaton subsidiary Navisent Inc. will purchase upwards of 60,000 kg of cannabis flower and oil for international distribution. According to a statement, Wheaton’s plans for worldwide distribution will now proceed ahead of schedule due to the deal.

“We are thrilled to be partnering with an industry leader such as Aphria as we begin to execute our international strategy,” noted Wheaton President Hugo Alves. “This supply arrangement enables us to deploy product into international jurisdictions that are of interest to us and gain brand presence and market share in those markets on an accelerated timeline.”

Cannabis Wheaton was up 3.86 percent on Wednesday, closing the day at $2.42 per share. Aphria prices also rose, gaining 1.85 percent on average trading volume.

A Pennsylvania First

It’s a thousand times better than whiskey — it’s an assistant — a friend… Notching a first is Keystone Canna Remedies, Pennsylvania’s newly opened medical marijuana dispensary, located in Bethlehem. The dispensary opened to great fanfare, with many state and local officials in attendance to mark the occasion. Pennsylvania residents are limited to specific forms of the drug, which they can only obtain following a complicated registration process, including oils, topical agents, pills, vaporization, tinctures, and liquids.

"It's an exciting day for Pennsylvania," remarked former Philadelphia Flyers hockey player Riley Cote, making an appearance at the dispensary grand opening. "Today marks the beginning of compassionate healthcare for patients in the Keystone State. Cannabis is a holistic phenomenon. The healing compounds contained within this plant will help people from all walks of life increase quality of life while also finding the relief they need."

Other News and Notes

Hemp is of first necessity to the wealth & protection of the country… Attracting capital is Scythian Biosciences Corp. (TSX-V:SCYB)(OTCQB:SCCYF) who announced on Wednesday a series of financing deals with total proceeds topping CAD$20 million. The second of the two deals, a brokered private placement financing agreement done on a bought deal basis was struck with industry leader Aphria Inc. (TSX:APH) for approximately CAD$10 million. Scythian earmarked the funds for working capital as well as general corporate purposes.

It’s a peaceful gesture and they have to respect that and appreciate that… Moving on is Newstrike Resources Ltd. (TSX-V:HIP) who announced on Wednesday that shareholders agreed to the CanniMed Therapeutics Inc. (TSX:CMED) acquisition plan following months of unflattering headlines concerning the deal. It was a nearly unanimous vote, with 99.4 percent of all shareholders, representing approximately 217 million shares, voting in favor. The agreement goes to CanniMed for a final vote on January 23, as both companies still contend with Aurora Cannabis Inc.’s (TSX:ACB) hostile takeover attempt of CanniMed.

We all need something to help us unwind at the end of the day… Crawling back is MassRoots, Inc. (OTCQB:MSRT) who announced on Wednesday the retirement of all notes related to debt offerings from August 2017. In a statement, the company noted their pleasure at moving forward and continuing their efforts to increase shareholder value. In a related story, The Cannabist reported that MassRoots was evicted from its downtown Denver headquarters last week for failure to pay the rent.

Quick Bites

Some of my finest hours have been spent on my back veranda, smoking hemp and observing as far as my eye can see… mCig, Inc. (MCIG) blockchain subsidiary Obitx, Inc. launched a new website at  https://www.obitx.com/Liberty Health Sciences Inc. (CSE:LHS) (OTCQX:LHSIF) signed a licensing agreement to provide medical cannabis products with MC Brands LLC IncrediblesNamaste Technologies Inc. (CSE:N) announced their intentions only to operate where cannabis is legal…

Until tomorrow…

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