Monetary media ignore American publicly traded hashish shares in misguided rallies – New Hashish Ventures
You are reading an issue of this week’s issue of New Cannabis Ventures’ weekly newsletter, which we’ve been publishing since October 2015. The newsletter contains unique insights to keep our readers one step ahead, as well as links to the week’s most important news.
We can’t say we were surprised by what went on when we first explained in October why Canadian cannabis operators would benefit from the opportunities they saw in the US. These companies trade on higher stock exchanges and four months later continue to benefit from the media who fail to understand the major financial implications of legalizing more states.
News that Virginia was about to legalize, for example, prompted the media website Briefing and others last Monday to send misleading warnings to Canadian LPs: “The Virginia General Assembly has passed legislation to legalize recreational marijuana (MJ, TLRY, ACB , CGC, CRON), APHA). “Of course, none of these stocks got any benefit from this news. Publicly traded Columbia Care and Jushi actually do, but traders have been misinformed.
Since our October newsletter, it has been nothing short of remarkable how traders have moved Canada’s largest LPs well beyond the returns of leading American operators in that period that started two weeks before the elections:
Tilray, Aphria and Aurora are all above the GTI, while Cronos Group is slightly ahead of Cresco. The worst Canadian LP among the largest market cap companies, Canopy Growth, outperformed Trulieve and Curaleaf. The top five LPs by market cap have posted an average return of 196.9% since Oct. 23, while the top four top-selling American operators, all of which have more revenue and are all profitable, averaged 100.8%.
After the election, we said we believe investors betting that the US market will soon open to Canadian LPs are making a mistake. Since November 13th Returns were more balanced, with one major exception: Tilray and Aphria went parabolic by 279% and 199% respectively. Looking at the remaining three largest LPs, they returned an average of 71.4%, while the four MSOs returned an average of 73.1%.
Since the Georgia runoff election that flipped the Senate, we’ve heard from three top Canadian LP CEOs on quarterly conference calls. Aphria’s Irwin Simon spoke in January about how he believes it is possible that his company could export Canadian cannabis to the US. Aurora’s Miguel Martin pointed out that his experience in other federal markets provides an advantage in the U.S., suggesting the FDA is doing so to be involved in regulating federally legal cannabis. Canopy’s David Klein further suggests that it will hit the US THC market this year.
We continue to believe that things will be slower, but we understand why the leaders of these companies with seemingly bloated market caps need to give their investors something positive to think about in the short term. From our point of view, it’s very simple: the largest Canadian LPs will be able to enter the market as soon as NASDAQ and NYSE deem it possible without risking their listings. This would of course be the case with legalization, but it is likely to take a long time due to the complexities of issues involved, including taxes, interstate trade, and social justice. Passing laws would require 60 votes in the Senate, which could be a challenge.
However, on the eve of legalization, it is possible that Congress could provide a safe haven for the major exchanges for cannabis companies operating in the United States to be listed. While this may be seen as positive for the major Canadian LPs, we believe it will far exceed the impact they would have on leading MSOs.
Leading MSOs are already raising capital from institutional investors despite being disadvantaged in terms of listing status, and the floodgates will open as soon as they can switch to the NYSE or NASDAQ. In this case, the major Canadian LPs trading on higher US exchanges will lose one of the few advantages they currently have. Despite the recent irrational price moves in these companies, we continue to believe that the Canadian market is improving and we are already seeing signs that some of the smaller operators are benefiting.
In the environment we envision, which is the continued rapid adoption of state legalization and a slow transition to federal legalization, American operators are already benefiting from little to no media coverage.
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With best regards,
Alan & Joel
Alan is based in Houston and leverages his experience as the founder of the 420 Investor online community, the first and largest due diligence platform focused on publicly traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to seek new ways to connect the industry and fuel its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before focusing on the cannabis industry in early 2013, Alan worked as an independent research analyst in 1986 after having worked in research and portfolio management for over two decades. Alan is a prolific writer with over 650 articles published since 2007 on Seeking Alpha where he has 70,000 followers. He is a frequent speaker at industry conferences and a frequent source for media such as the NY Times, Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | E-mail
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In this article:
ACB, ACS Lab, Aurora Cannabis, Canopy Growth, CCHW, CCHWF, CGC Weed, Columbia Care, Elevated Signals, Fire, Green Thumb Industries, GTBIF, GTI, GTI, Jush, Jushf, Jushi, MedMen, Mmen, MMNFF, SPRWF, highest cannabis, ugro, urban-large