The North American Marijuana Index skirted upwards on Monday as pot stocks gained on the news of that Aurora Cannabis Inc. (TSX:ACB) acquired MedReleaf Corp. (TSX:LEAF), bringing together two of Canada’s most prominent Licensed Producers. As management celebrated the deal, however, analysts debated the effects of shareholder dilution that the merger would create in the short term. As cannabis stocks near their apex, mere months away from Canadian legalization, the most massive deal in the history of the industry appears to have left more questions than answers hanging over the marijuana markets.
According to reports, Aurora spent CAD$3.2 billion ($2.51 billion) to acquire the rival cannabis company, creating a mega-corporation that has the capacity to produce 570,000 kg of cannabis per year. Aurora will now have 11 growing facilities and 4.5 million square feet of production capacity.
“The combination strengthens our capacity to service the rapidly expanding global medical cannabis markets, and amplifies our early-mover advantage,” Aurora Chief Executive Officer Terry Booth said in a statement.
However, as noted on Midas Letter Live, Aurora has an outstanding share balance of 561,006,914, and MedReleaf shareholders are about to receive 3.575 common shares of Aurora for each MedReleaf common share held, leading to a lot of dilution about to take place. “With 101 million MedReleaf shares outstanding, the end result will be a float somewhere north of 900 million shares o/s, not including any ancillary warrants and purchased options attached,” the article noted.
Some argue that Aurora is taking a short-term hit in an effort to prepare for long-term dominance, while others see red flags galore. With the company line being that dilution will help them grow faster, it would serve well to remember that last year at this time they promised Aurora Sky would be fully operational with 200,000 kg production capacity by legalization, and yet they are nowhere near that capability. The goalposts keep moving and shareholders are the only ones who seem to be paying the price.
Meanwhile Wall Street showed that conspiracy and collusion matter none as President Trump’s conciliatory remarks toward China's ZTE Corp appeared to calm tensions of U.S.-China trade relations, sending stocks higher. Buried under the lede, however, was what fueled Trump’s remarks —a Trump Organization project in Indonesia partially financed by the Chinese government that most experts agree is in clear violation of the emoluments clause. To be clear, that is the same clause that saw former President Jimmy Carter give up his stake in a peanut farm so many years ago but has yet to see President Trump divest from his multi-million dollar company, leaving the Presidency open to bribery and corruption on a scale heretofore unseen.
“The Trump Organization is involved in a project in Indonesia building hotels, golf courses, residences — it is getting up to $500 million in backing from the Chinese government,” Noah Bierman of The Los Angeles Times asked during Monday’s press briefing at the White House. “Can you explain the administration’s position on A, how this doesn’t violate the emoluments clause; and B, how this wouldn’t violate the president’s own promise that his private organization would not be getting involved in new foreign deals while he was president?”
Deputy Press Secretary Raj Shah dodged the question. “I’ll have to refer you to the Trump Organization,” he said.
The Dow Jones Industrial Average rose 68.24 points, an increase of 0.27 percent, to close out the day at 24,899.41, while the S&P 500 gained 2.41 points, an increase of 0.09 percent, to end the day at 2,730.13. Meanwhile, the Nasdaq Composite jumped 8.43 points, or 0.11 percent, to end Monday at 7,411.32.
The Horizons Marijuana Life Sciences ETF (HMMJ.TO) rose CAD$0.48 per share, or 2.80 percent to end the day at CAD$17.63, while the Evolve Marijuana ETF (SEED.TO) gained CAD$0.57 per share, or 3.39 percent to end the day at CAD$17.39.
Canopy Growth To Uplist To NYSE
Earning their wings is Canopy Growth Corporation (TSX:WEED) who announced on Monday their application to list its common shares on the New York Stock Exchange (NYSE). Hopeful, the company expects that should all approvals go through they will begin trading on the exchange by the end of the month. Canopy’s new ticker symbol expects to be CGC when the move is approved.
"Since becoming the first regulated cannabis producer to list their shares in North America in 2014 our team has focused on building credibility through consistent execution,” said Bruce Linton, company CEO in a statement. “Once finalized, listing our shares on the NYSE will represent a continuation of our upward trajectory as we build the global cannabis industry."
iAnthus Capital Holdings, Inc. (CSE:IAN) (OTCQB:ITHUF) received a $50 million investment from Gotham Green Partners, one of the largest investments to date by a single investor in a publicly traded U.S. cannabis company… Invictus MD Strategies Corp. (TSX-V:GENE) announced a new retail strategy that includes dispensary ownership and partnering with retail outlets… Cannabis Wheaton Income Corp. (TSX-V:CBW) entered into a definitive licensing agreement with Dixie Brands, Inc.
Top Cannabis Investment Sectors
According to New Frontier Data, there are seven primary market sectors in the legal cannabis industry, which includes Cultivation and Retail; Biotech/Pharma; Investment/M&A; Software and Media; Consumption Devices; Infused Products & Extracts; and Real Estate. The organization notes that investments are up in six out of seven of those sectors in the past few years. For an overview of the data, check out their latest Cannbit below: