Tokers & Jokers | Cannabis Stocks Decline Thursday

Thursday was a mixed day for US and Canadian cannabis stocks with most companies largely on the decline.

According to the CBC, shareholders have implicated Aphria in two class-action lawsuits due to inadequate disclosures regarding the acquisition of its Colombian, Argentinian, and Jamaican assets. Allegations of fraud and insider dealing were first launched against Aphria in December 2018 by Quintessential and Hindenburg Research.

Tuesday, Liberty Health Sciences, a company implicated in one of Aphria’s lawsuits, issued a statement that the company hired an independent investigator. The investigation concluded that the allegations were inaccurate. Strangely, however, none of the allegations were refuted with the exception of an erroneous filing made by Liberty Health itself. The two month investigation has not officially been released, nor has Aphria issued a rebuttal to the claims. Brett D. Marchand was appointed Aphria’s Senior Vice President of Supply Chain Monday.

Today Green Growth Brands announced the launch of its Seventh Sense e-commerce site. The company’s new web presence will give consumers access to hemp-derived CBD-infused personal care products. Wednesday Green Growth announced the opening of its first Seventh Sense CBD shop in Fayette Mall in Lexington, Kentucky. Monday the company announced that it has entered into an agreement with the Simon Property Group. The agreement will give Green Growth a national footprint with 108 US mall locations, where the company plans to distribute its CBD product lines. Green Growth recently announced the execution of a licensing agreement with Authentic Brands Group and the Greg Norman Brand for the manufacturing of CBD personal care products. The deal includes a CBD supply agreement with Tilray.

Cronos seems to be chronically overpriced, with a 74% gain since the first of the year. The company has been on the rise despite a lack of news from the company. According to Cornerstone Investments, Cronos has been one of the best performing stocks in the cannabis sector in recent weeks. Cronos is driven by a $1.8B investment from tobacco giant Altria Group. Though the company has been surging on the sentiment of institutional investment, the company only reported $3.8M in revenue in Q3 2018. In the coming months investors will be looking for signs that Cronos has increased its production and manufacturing capacity. After skyrocketing more than 110% year to date, GMP Securities’ Martin Landry downgraded the company from a “hold” rating to a “buy” rating and reiterated a price target of $18. Recently short seller Andrew Left of Citron Research announced that he is now taking profits in Cronos.

Wells Fargo analyst Bonnie Herzog issued a bullish update on Constellation Brands’ investment in Canopy Growth Tuesday. Herzog projects upward momentum for Canopy in broader global markets. The company is scheduled to release its quarterly earnings report today, with expected revenues to exceed $63M according to The Street. Yahoo Finance reported Canopy’s financials should reflect gains from an expanding patient base and the launch of its new soft gel capsules with continuous and discrete dosing. Recently the company announced it is investing an additional $500M in the US market by adding hemp production in Rhode Island and two other states.

Organigram issued its Q1 2019 earnings report Monday. The company announced $12.4M in net sales, a 287% upside from the previous quarter. Organigram shares have soared over 45% in 2019. Last week Organigram announced the expansion of its production facility, which will more than triple the company’s annual production capacity to 113K kilograms once completed.

Valens GroWorks announced that it has boosted its extraction capacity to 240,000 kilograms annually. The company recently received a bullish write up from The Street, noting AltaCorp’s “outperform” rating on the stock. AltaCorp told Midas Letter that it views Valens as “one of the premier businesses in the entire sector.” According to AltaCorp, Valens also has a noteworthy partnership with Thermo Fisher Scientific. Last week Haywood Capital Markets initiated coverage on Valens, giving the company a “buy” rating and a target price of CA$5.25. The company has secured extraction supply agreements with both Canopy Growth and Organigram Holdings. Currently the company is expanding its production capacity to 150K kilograms annually.

According to Zacks, who issued a “buy” rating on the company, analysts have given Zynerba Pharmaceuticals an average 12-month price target of $16.40, representing a 219.0% upside.  Zynerba is on track to report results from its clinical study of CBD used in the treatment children and adolescents with Fragile X Syndrome, CEO Armando Anido told Proactive Investors at the 2019 BIO CEO and Investor Conference. The company also completed enrollment in its Phase 2 clinical trial for epileptic encephalopathy and expects to report results in the third quarter of 2019. Zynerba has an average “hold” rating from analysts, and a consensus price target of $15.88.

Tilray was expected to release its quarterly financial report on Tuesday after the close of trading. The company has not issued an update as to when the report will be officially released. According to Yahoo Finance in Tilray’s last quarterly report the company exceeded earnings expectations by nearly 43%. Last week Tilray teamed up with Green Growth Brands and Authentic Brands to bring cannabis infused products to US markets. Recently Tilray announced the expansion of its global senior leadership team with the appointment of Sascha Mielcarek as Managing Director of European Operations. Zacks currently has a “hold” rating on the stock.

Innovative Industrial Properties announced that its subsidiary IIP Operating Partnership LP has commenced a $100M private placement. The company recently announced the acquisition of its first California property in Sacramento this week. The 43,000 square-foot facility spreads IIPRs footprint across ten states. Last week the company also announced the acquisition of a 75K square-foot facility on a ten-acre property in Barry Illinois.

Wednesday Aurora Cannabis provided a positive corporate update on its investment in High Tide. Tuesday the company announced the buildout of its 300,000 square foot facility called Aurora Polaris is progressing well. The company issued its Q2 2019 earnings report late Monday, with quarterly revenue skyrocketing to CA$54.2M. Aurora’s surging revenue hardly kept up with their gigantic losses however. The canadian producer posted a quarterly loss of CA$237.8M. Monday the company announced it has exported its first shipment of cannabis oil to the UK. .

Neptune Wellness announced its Q3 earnings report for the period that ended December 31, 2018. The company reported quarterly revenues of $6.5M and a net loss of $3.7M. Roth Capital rated NEPT as a “buy” with a $5 price target last week. The company was also recently given a “strong buy” rating from Zacks, with a 12-month consensus price target of $6.06. Bidask Club downgraded Neptune from a “hold” rating to a “sell” rating Saturday morning.  .

Acreage Holdings is facing difficulties opening its Sterling Massachusetts dispensary, with town officials reluctant to change zoning laws which would allow the company to produce recreational marijuana products. Acreage Holdings’ John Boehner has formed a new cannabis lobbying effort called the National Cannabis Roundtable. The aim of the Roundtable is to reform marijuana taxation and legalization. The company is working to open the Fargo Compassion Center in North Dakota. Recently Acreage announced it intends to amass 78 medical and recreational dispensaries in 19 states over the next year. .

GW Pharmaceuticals is scheduled to release its earnings report for the period that ended Dec. 31, 2018 on February 26, 2019. Monday the stock saw its Relative Strength Rating rise from 63 to 85. According to Investors Business Daily GWPH is building a cup without a handle with a buy point at $179.75. Last week Zacks reiterated its “hold” rating for the company.

Hexo Corp. and its partner Molson Coors have announced the launch of their new cannabis-infused beverages is scheduled for the fall. According to La Presse, Hexo’s Vincent Chiara is pursuing legal action against Stockhouse users for defamation. Users on the platform made several comments, some regarding Chiara allegedly having ties to a mafia crime family. The comments were removed by Stockhouse per Chiara’s request. Chiara is now asking the courts to compel the ISPs to reveal the user identities so Chiara can pursue legal action. Through a joint venture with Molson Coors, Hexo is expected to launch a line of cannabis infused beverages this fall. .

MedMen has been met with a lot of adversity recently, with the New York Medical Cannabis Industry Association distancing itself from MedMen Enterprises after insiders of the company were accused of making of sexist and racist remarks. The association is also highly concerned about financial corruption among MedMen’s top executives. Former company CFO James Parker filed a lawsuit against the company recently, alleging top executives in the company forced him to “choose between complying with his fiduciary duty to the company and its shareholders or turning a blind eye and a deaf ear to improper and unlawful behavior”. This is the second lawsuit to accuse MedMen of fiduciary abuses launched in the last month. According to Marijuana Business Daily, MedMen may also lose its flagship store in West Hollywood. Despite serious allegations and concerns from shareholders and investors, MedMen seems to be going full steam ahead. Just today the company announced it is launching a clothing line. Wednesday MedMen announced the closing of the acquisition of two vertically integrated operations in Arizona collectively known as “Level Up”. .

KushCo announced Monday that the company is restructuring its executive leadership team. Effective March 1, 2019 Jim McCormick will be stepping down from his position as the company’s COO and will be replaced by Rodrigo de Oliveira. Oliveira is being promoted from Vice President of Operations and will serve as interim COO. The company’s president Jason Vegotsky is being promoted to Chief Revenue Officer, and Carmen Lam, who is the company’s Regional Sales Director is being promoted to Senior Vice President. .

Trulieve announced Monday that it has signed an agreement with Love’s Oven LLC to bring their cannabis infused confections and other products to Florida’s patient base of 180K people. The decision is somewhat premature considering edibles are still illegal in Florida. Last week Beacon Securities’ Russell Stanley reported Trulieve has 24 dispensaries in Florida and 60% of the state’s sales volume. Stanley projects a 2019 EBITDA of $90.7M for Trulieve, with revenue of $208.7M. The analyst set a price target of CA$28.00 for the company and reiterated his “buy” rating. .

MariMed announced Monday that it has converted its initial $30M purchase of debentures into GenCanna Global common stock. Recently the company established a subsidiary, MariMed Hemp Inc., which will be focused solely on hemp derived CBD products.

Auxly Cannabis announced changes to its management team, with the appointment of Brian Schmitt as Chief Financial Officer, Jason Sonshine as Vice President, Strategy, and Carla Nawrocki as Vice President, Investor Relations of the Company. Auxly recently announced the termination of its JV with FSD Pharma due to contractual breaches and significant concerns over the building’s infrastructure. FSD failed to remedy the concerns and terminated its contract with Auxly. FSD issued a press release denying the allegations and accused Auxly of failing to fulfill its contract. Auxly was given an “outperform” rating from AltaCorp Capital recently. .

It is worth noting that FSD has also fired its recently hired CEO from GW Pharmaceuticals. Dr. Raza Bokhari has resumed the role of interim CEO once again. The company has issued a flurry of press releases recently, most of which have little substance. FSD Pharma is on our radar as a potential risk to investors. This week the company entered into a supply agreement with CannTab Therapeutics and World Class Extractions.  .

iAnthus announced the appointment of Pat Tiernan as Vice President of Operations, yesterday. The company has increased its footprint to eleven states after receiving its most recent license from New Jersey. Last week, in a $1.6B merger, iAnthus and MPX Bioceutical Corporation (CSE: MPX) (OTC: MPXEF) announced the closing of the agreement whereby iAnthus will acquire all of MPX’s issued and outstanding shares. According to Seeking Alpha’s James V. Baker, “the pro forma balance sheet of iAnthus, after the combination with MPX and the spinoff of MPX International, shows cash of $25.2 million, intangible assets of $50.8 million, goodwill of $140.6 million, and an accumulated deficit of $154.2 million. Goodwill and intangibles represent 62.9% of total assets and 98.7% of shareholders’ equity.”  Beacon Securities analyst Russel Stanley reiterated his “buy” rating and gave the company a price target of a whopping $16.00, implying a 129% return. .

Namaste has been shrouded in drama recently. The company announced that it has terminated CEO Sean Dollinger due to evidence of self-dealing. Canada News Wire issued a correction stating that Namaste has not brought legal action against Dollinger. According to the Globe and Mail Dollinger is disputing the company’s dismissal and is seeking an injunction to retain his role as CEO. The company issued a press release last Tuesday that Dollinger is counter-suing the company. .

New Age Beverages delivered revenues of $15.3M for the three months that ended Sept. 30, 2018. The company delivered a quarterly EBITDA of -$2.5M due to an inventory shortfall due to working capital constraints. Over 6 million previously locked up shares of NBEV poured into the market last week. According to White Diamond Research, NBEV has burned through most of its cash raise from a non-core acquisition and expects the company to initiate more rounds of equity financing in the near future. BidaskClub downgraded NBEV from a “buy” to a “hold” rating on Saturday. The company gained a whopping 36.7% in January according to S&P Global Market Intelligence. According to Zacks the company is expected to announce $14.06M in sales for the current fiscal quarter. Average analyst expectations project New Age Beverage to post full-year sales of $52.23M for the current financial year. .

GMP Securities analyst Robert Fagan lowered Supreme Cannabis’ price target from CA$3.50 to CA$3.25 Wednesday. Supreme issued its Q2 2019 financial results Tuesday, reflecting a 359% increase from Q2 2018. The company reported quarterly revenue of $7.72M with a net loss of $1.55M. Last Monday Supreme Cannabis began listing on the Toronto Stock Exchange. The company’s subsidiary 7Acres announced last Thursday that it has entered into a supply agreement with the New Brunswick Liquor Corporation to supply cannabis to its retail stores. The agreement will expand Supreme’s footprint into New Brunswick and Saskatchewan, upping the company’s provincial count from 6 to 8. .

Amyris and the Infectious Disease Research Institute announced the receipt of a $4.4M grant from the National Institute of Allergy and Infectious Diseases. Amyris was selected as a partner because of its record of success in engineering molecules that are pure, sustainable, and achieved at a low cost. Monday Amyris announced the appointment of Oreste Fieschi as President of Sweeteners & Ingredients. According to Zacks, analysts expect the company to post $100.76M in sales for the current fiscal quarter. Amyris announced a $255M binding term sheet for a planned cannabinoid facility, licensing, and commercialization partnership last week. The confidential partner will receive payments linked to milestones that are expected over the next 12-36 months. .

Level Brands is scheduled to release its quarterly earnings report tomorrow at 9am Eastern Time. Chairman Emeritus and Chief Brand Strategist at Level Brands was recently appointed to the board of the NFL Players Inc — the licensing and marketing arm of the NFL Players Association. In December the company acquired North Carolina-based cbdMD. cbdMD was recently featured in Elle Magazine as the first national CBD oil advertiser. .

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