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Marijuana Stock Report: Not With A Bang, But A Whimper

The North American Marijuana Index sank on Wednesday, with confidence in pot stocks continuing to dwindle even as analysts hype up the newly-dubbed post-Boehner era of the cannabis sector. MedReleaf Corp. (TSE:LEAF) (OTCMKTS:MEDFF) sent shockwaves throughout the sector on Wednesday when it was reported by The Globe And Mail (paywall enabled) that the company had contacted several competitors to inquire about a possible sale. According to reports, Aurora Cannabis Inc. (TSX:ACB) appears to be the frontrunner in negotiations to acquire Canada’s third-largest cannabis firm, with Canopy Growth Corp. (TSX:WEED) and Aphria Inc. (TSX:APH) also showing some interest.

The acquisition of MedReleaf would add to Aurora’s portfolio what some analysts consider to be one of Canada’s most significant pure-play medical cannabis operations. Included in the company’s portfolio is 140,000 kilograms per year of production capacity as well top-of-the-line extract operations, which to many is where the better margins are in the cannabis sector.

However, while mainstream analysts salivate at the thought of Aurora’s potential market domination, others rightfully question the value of such a deal, and what it has to say about pot stocks in general. As Scott Willis of Grizzle notes, MedReleaf’s indoor cultivation operation gives the company some of the highest production costs in the industry, something that any potential buyer should be loathe to add on to their books. Moreover, with MedReleaf’s $2.2 billion market cap, any investor should be concerned about further dilution of their shares, especially following the recent acquisition of CanniMed Therapeutics (TSX:CMED).

While most investors hope for the next market catalyst to push pot stocks back up to their all-time highs, insiders seem keenly aware that the market has flattened out for good. “Investors should be very wary of an industry where the third largest company is cashing out before the massive market opportunity (their words) has even opened,” wrote Willis in a recent piece for Grizzle on the MedReleaf move. “What do they see coming that public investors don’t?”

(c) The Marijuana Index www.marijuanaindex.com

The Index fell 2.45 points, or 0.99 percent, to close out the day at 243.93, with the United States Marijuana Index falling 0.79 percent and the Canadian Marijuana Index falling 0.97 percent.

Meanwhile Wall Street fell again on Wednesday as renewed worries over the worsening trade conflict with China were sparked by potential U.S. restrictions on Chinese telecom companies. Early trading saw gains on the major indexes as investors saw positive news in the Federal Reserve’s decision to leave interest rates unchanged, but prices quickly fell on news of the continued trade war with China.

"It's hard to see investors willing to take increasing risk ahead of a couple more weeks of trade discussions and negotiations to come," said Matthew Miskin, market strategist at John Hancock Investments in an interview with Reuters.

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The Dow Jones Industrial Average fell 174.07 points, a loss of 0.72 percent, to end the day at 23,924.98, and the S&P 500 fell 19.13 points, a loss of 0.72 percent, to close out the day at 2,635.67. Meanwhile, the Nasdaq Composite fell 29.81 points, or 0.42 percent, to finish Wednesday at 7,100.90.

The Horizons Marijuana Life Sciences ETF (HMMJ.TO) fell CAD$0.15 per share, or 0.92 percent to close out the day at CAD$16.15 and the Evolve Marijuana ETF (SEED.TO) fell CAD$0.07 per share, or 0.42 percent to close out the day at CAD$16.43.

Is Trudeau Hinting At A Possible Delay In Legalization?

Prime Minister Justin Trudeau may be hinting at a delay in Canadian cannabis legalization, a move that the Senate supports in regards to issues involving indigenous peoples of the country. According to The Post Millennial, the Senate aboriginal peoples committee recommended a delay of no more than one year of Bill C-45 so that Indigenous communities could be brought into the fray.

A report issued by the Senate committee calls the government’s interactions with the First Nations of Canada on the matter “atrocious.” When asked about delaying the bill Trudeau, in typical politician fashion gave a non-answer that has some legalization advocates worried about the future of the bill.

“We’ll continue to consult a broad range of Canadians,” Trudeau said on Tuesday. “And as our parliamentary secretary Bill Blair says regularly, legalization is not an event, it’s a process.”

“And that process will continue.”

Quick Hits

CannaRoyalty Corp. (CSE:CRZ) (OTCQX:CNNRF) received renewed licenses for Kaya Management Inc., Alta Supply Inc., Vista Distribution Inc., and Zenco Manufacturing Inc… Namaste Technologies Inc. (TSX-V:N) (OTCMKTS:NXTTF) acquired Swedish corporation Findify AB, for a purchase price of $12 million… Future Farm Technologies Inc. (CSE:FFT) (OTCQX:FFRMF) entered into a memorandum of understanding with KOM-Agro Management Services, LLC to cultivate marijuana in Puerto Rico.

Vic Neufeld Gives A Tour of Aphria

In the latest Pinnacle Digest Podcast, Alexander Smith visited Leamington, Ontario to see Aphria's grow operations. President and CEO, Vic Neufeld, gave a tour of the facility, which can be seen in the video below:

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