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Marijuana Stock Report: MedMen and the Terrible, Horrible, No Good, Very Bad IPO

The North American Marijuana Index fell flat on Tuesday as pot stocks closed mixed following U.S. marijuana producer MedMen’s debut on the Canadian Securities Exchange (CSE). Trading under the ticker MMEN, the so-called “Apple Store of Weed” took an unconventional route towards going public through a reverse takeover deal with Ladera Ventures. As Investor’s Business Daily reports reverse takeovers or RTO’s have become the preferred method of going public for marijuana companies, a move which involves a private company taking over a shell of a public company, so much so that there is a shortage of liability-free public companies available on the market.

"We are marching steadily toward a future where buying and using cannabis products will be just as normal as buying wine or beer," MedMen co-founder Andrew Modlin said in a statement on Tuesday.

The Index fell 1.50 points, or 0.59 percent to close out the day at 250.64, with The United States Marijuana Index losing .64 percent and The Canadian Marijuana Index gaining .09 percent.

Despite the initial celebratory nature of the news, MedMen’s IPO was cause for concern among the rank and file of the cannabis stock community, beginning with questions about the company’s $1.6 billion valuation without ever having posted a profit. Moreover, as reported in Equity.Guru, of the $100 million in new shares being sold by the company, a whopping $53 million are going to both the CEO and the Chairman in salary and other executive compensation.

In fact, Equity.Guru throws out a slew of serious charges at the company, including the fact that management holds what are called “Super-Voting Shares” —worth 1,000 votes per share held —making it nearly impossible to vote them out of their positions of power. Moreover, as the LA Times noted, Adam Bierman, MedMen’s co-founder and Chief Executive sees going public as a way to fleece investors. As per the LA Times, in discussing why MedMen chose the CSE as opposed to a more prestigious exchange like the Nasdaq:

Instead, they’ll be on the Canadian Securities Exchange, a second-tier stock market in Toronto that’s become a haven for cannabis companies. Adam Bierman, MedMen’s co-founder and chief executive, said going public this way makes sense in the cannabis industry, where companies face a tangle of conflicting regulations but see immense opportunity requiring fast money.

“And how do I get that today, with the way the world is set up?” he said. “I get it by being public on the CSE in Canada.”

Meanwhile, Wall Street saw some of its most significant losses in a month on Tuesday as investors worried about the political upheaval occurring in Italy. Since elections in March, the country has been unable to put together a coalition government, with the most recent nominee for Prime Minister failing to secure enough backing. Italy has been swept up with the rise of anti-establishment types pushing for the country to leave the euro.

"The direct connection between the Italian government and the S&P 500 is tenuous, but it indirectly reminds people of geopolitical uncertainty," said Ed Keon, chief investment strategist at QMA in an interview with Reuters.

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The Dow Jones Industrial Average fell 391.64 points, or 1.58 percent, to close out the day at 24,361.45, while the S&P 500 fell 31.47 points, or 1.16 percent, to end the day at 2,689.86. Finally, the Nasdaq Composite fell 37.26 points, or 0.5 percent, to finish Tuesday at 7,396.59.

The Horizons Marijuana Life Sciences Index ETF fell CAD$0.13 per share, or 0.73 percent to close out the day at CAD$17.76, while The Evolve Marijuana ETF (SEED.TO) fell CAD$0.09 per share, or 0.53 percent to end the day at CAD$16.92.

Aphria To Provide Medical Cannabis To Employer-Based Health Plans

Offering medical is Aphria Inc. (TSX:APH) of whom it was announced would become Canada’s leading, independent drug plan management company Reformulary Group second Licensed Producer to offer medical marijuana on employer health plans. Subscribers of the Reformulary Cannabis Standard will be offered preferred pricing options for greenhouse-grown cannabis from Aphria. Furthermore, the partnership will develop a database that captures patient-reported data.

“Aphria has built a reputation as a leading low-cost producer of high-quality medical cannabis to Canadians, including Canadian Veterans,” said Helen Stevenson, Reformulary Group founder and CEO in a statement released Tuesday. “This partnership will ensure employers that choose to cover cannabis have expert guidance on how to include cannabis in their benefit plans, and have access to specific Aphria products.”

Reformulary Group was founded in Toronto in 2011 and offers subscription-based healthcare plans to Canadian employers.

Quick Hits

Sunniva Inc. (CSE:SNN) (OTCQX:SNNVF) subsidiary Sunniva Medical Inc. received a receipt from Health Canada of the Confirmation of Readiness granting them a License under the Access to Cannabis for Medical Purposes Regulations… MedReleaf Corp. (TSX:LEAF) and BioPharma Services Inc. will conduct clinical research on cannabis together… CannaRoyalty Corp. (CSE:CRZ) (OTCQX:CNNRF) announced financial results for the first quarter 2018.

Colorado Flower Sales Continue To Flourish  

According to New Frontier Data, the Colorado Marijuana Enforcement Division reported huge growth in the volume of flower sold over the past few years. According to the data received the state has seen an increase from 25.2 thousand pounds in the first quarter of 2014 to 100.4 thousand pounds in the fourth quarter of 2017. The full dataset and more can be found in this week’s Cannabit below:

Courtesy New Frontier Data www.newfrontierdata.com
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