Cannabis stocks fizzled Monday as marijuana markets rode a wave of disappointment following a rise in the 10-year treasury yield that sent investors into a panic over the prospect of higher interest rates. The broader markets plunged following Friday’s record high closings, with Wall Street and the Canadian exchanges both notching losses. Experiencing its most significant loss of the year the S&P 500 fell .7 percent on Monday to close the day at 2,853.53. Both the Dow Jones Industrial Average and the Nasdaq showed similar dips. In Canada, the S&P/TSX composite index fell 144.50 points to close out at 16,094.72 as Wall Street’s decline saw rippling effects across the border.
Cannabis stocks fell victim to the broader markets as well, with MJIC’s North American Marijuana Index dropping 13.48 points for a 3.83 percent loss. The Index closed Monday at 338.86. Both sides of the Index experienced lows for the day, with The United States Marijuana Index falling .82 percent and the Canadian Index falling 5.09 percent.
Other indices fared just as poorly on Monday as market futures dampened every sector across the board. The Cannabis Stock Index dropped 8.41 points to close the day at 165.61. Meanwhile, Solactive’s North American Medical Marijuana Index was down to 1796.66.
It was a similar story for marijuana’s most significant funds, with the Horizon’s Marijuana Life Sciences Index ETF dropping $0.93 per share for a 4.10 percent loss to end the day at $21.76 per share. ETFMG’s Alternative Harvest ETF dropped over a dollar, losing $1.01 per share for a 2.68 percent fall. The fund closed the day at $36.64 per share.
Continued volatility in the cannabis sector is sending mixed signals to increasingly worried investors who have to begin to wonder if there will be an end in sight. The market correction is inevitable, but stockholders are left asking themselves some daunting questions. More importantly, as volatility becomes the new normal is it time to start questioning long-term assumptions about the cannabis market?
Interest rates are going up; is legalization going down?
Meanwhile, Around The Industry
You and I come by road or rail, but economists travel on infrastructure… Doing it right is Aphria Inc. (TSX:APH) who announced on Monday their acquisition of 100 percent of all issued and outstanding shares of global cannabis company Nuuvera Inc. (TSXV:NUU). The cannabis giant hopes to use the transaction to take advantage of Nuuvera’s well established international pipeline and preeminent manufacturing capabilities. Unlike the recent hostilities between Aurora Cannabis (TSX:ACB) and CanniMed Therapeutics (TSX:CMED), the deal was agreed to willingly by both parties, with each respective company’s board voting unanimously on the contract which values at $826 million.
Earlier this month the two companies undertook a definitive offtake agreement that saw Aphria supply Nuuvera with upwards of 77,000 kilos of cannabis. That deal, which was separated into two separate purchases of 60,000 and 17,000 kilos respectively, was slated for completion in January of 2019. According to a statement, Nuuvera’s management team will play a significant role in Aphria’s corporate structure moving forward.
"The combination of Aphria and Nuuvera creates a true global leader in medical cannabis with excellent potential for growth and value creation," said Aphria CEO Vic Neufeld. "This transaction, which builds on a long-standing relationship between the two companies, brings together our top tier ability to grow high-quality cannabis at a low-cost with Nuuvera's expansive international network, expertise in processing, and access to industry-leading technology."
Organigram’s Record High
If all the economists were laid end to end, they'd never reach a conclusion… Congratulating themselves is Organigram Holdings Inc. (TSX VENTURE:OGI) (OGRMF) who announced on Monday financial results for the first fiscal quarter of 2018. The company recorded $2.7 million in sales for the quarter, which it claims are its highest quarterly returns to date. According to a statement, they also saw record sales of dried flower and cannabis oil for the quarter as well.
“What is clear is that through a dogged commitment to product quality and innovation, we have built and are sustaining tremendous momentum,” commented company CEO Greg Engel. “We have been patient but determined in building a world-class facility imagined and supported by a world-class team. We are proud that our customers are recognizing and enjoying the results of that vision.”
mCig’s Dog Days
There can be no rise in the value of labour without a fall of profits… Going to the dogs is mCig, Inc. (OTCQB:MCIG), who announced on Monday their plans for a new hemp-based CBD line of products for pets. According to a statement the decision to move in this direction was reached after extensive research into “customer and supplier inquiries.” The company plans to offer their product via a transdermal patch, which it claims is safer for smaller animals and allows for better regulation and dosage of CBD.
“This innovative, optimal and gentle formula from Dr. [Arkady] Uryash combined with a highly-skilled new sales team on top of the rate of growth in demand makes us highly confident in our approach,” says mCig CEO, Paul Rosenberg. “We experimented with the sale of other CBD based products from third-party companies before. Now that we have this unmatched formula, it’s time to share it with the world.
Other News and Notes
Derivatives are financial weapons of mass destruction… Stocking up is ABcann Global Corporation (TSXV:ABCN) who announced on Monday a $70 million bought deal financing agreement with Canaccord Genuity Corp. and Eight Capital. The underwriters will purchase 11.5 million units of the company at $3.50 per share and another 30,000 unsecured convertible debentures at a price of $1,000 per Convertible Debenture. Proceeds from the deal will be used to further progress at the company’s Vanluven facility and planned Kimmett facility, as well as for other general purposes.
I made my money by selling too soon… Flying high is Aurora Cannabis Inc. (TSX:ACB) (OTCQB:ACBFF) who announced on Monday their Aurora Sky facility received a cultivation license from Health Canada. The facility and 800,000 square foot behemoth located near the Edmonton Airport will be the largest capacity greenhouse in the world according to the company and packed with the latest technological advances. It should have a capacity of 100,000 kg of cannabis per year.
We cannot both preach and administer financial matters… GW Pharmaceuticals plc (NASDAQ:GWPH) plans to release their Q1 financials on February 5… Digipath, Inc. (OTCQB: DIGP) recently hired Dr. Kimberly Ross, Ph.D. as Director of Quality Systems for Digipath Labs