Weekly Hashish Report: Cover Taking Benefit Of Acreage

Cannabis, Marijuana, Hemp, Cornerstone InvestmentsWelcome to our Weekly Hashish Report, a dependable supply for buyers to obtain the most recent developments and evaluation within the hashish sector.

Buying and selling Abstract

Hashish shares continued to wrestle final week. Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) dropped three.1% and ETFMG Various Harvest ETF (MJ) lowered by three.four%. Horizons launched a brand new ETF referred to as U.S. Marijuana Index ETF which has all main U.S. gamers.

(Supply: Bloomberg)

Canadian Massive-Cap: Aphria (APHA) was the large mover final week after its inventory tanked 24% resulting from disappointing quarterly outcomes. Cover led the group with its 5.four% achieve after it introduced a deal to amass Acreage Holdings. Aurora (ACB) was up 1.four% after Financial institution of America initiated protection with a purchase score. Tilray (TLRY) and Cronos (CRON) continued their latest slides as buyers wrestle with their elevated valuations.

Canadian Mid-Cap: The mid-cap house was combined. HEXO (HEXO) gained 7.four% after Financial institution of America initiated protection and referred to as it a Prime Choose. OrganiGram (OTCQX:OGRMF) dropped 6.7% regardless of asserting a robust quarter. CannTrust (CTST) slid 1.three% because the inventory struggles to recuperate from a deeply disappointing poor This autumn outcomes. Inexperienced Natural Dutchman (OTCQX:TGODF) misplaced 6.9% with out information.

Canadian Small-Cap: Village Farms (VFF) dropped 9.9% after Citron launched a brief assault on the corporate. Emerald (OTCQX:EMHTF) additionally dropped 13.three% as Citron talked about it in its brief report. Namaste (OTCQB:NXTTF) misplaced 17% final week as the corporate continues to undergo from a scarcity of strategic course after its CEO was fired. Nationwide Entry Hashish (OTCPK:NACNF) dropped 13.2% after asserting its quarterly consequence. Extraction gamers had a robust week as Valens Groworks (OTCQB:VGWCF) and Neptune (NEPT) each superior >10%.

(Supply: Writer, primarily based on public information)

U.S. Hashish Operators: The U.S. MSOs had a robust week boosted by Cover’s entry into the U.S. market. Cover agreed to purchase Acreage (otcqb:ACRGF) contingent on U.S. federal legalization. Cresco Labs (OTCQX:CRLBF) gained 6.2% and Harvest Well being (OTCQX:HRVSF) gained 6.zero% as buyers count on extra offers to observe. Curaleaf (otcqx:CURLF) led the group by hovering 18% whereas recovering a lot of the latest losses.

Inexperienced Progress (otcqb:GGBXF) rose 14.5% after it terminated its hostile bid for Aphria and acquired again 27 million shares from the billionaire Schottenstein household. Physique and Thoughts (otcpk:BMMJ) continued to soar with a 13.eight% achieve and the inventory has rallied near 200% in a span of 1 month.

Ancillary and Worldwide: Charlotte’s Net (OTCQX:CWBHF) gained four.5% with out information. Latin American participant Khiron Life Sciences (OTCQB:KHRNF) was flat whereas stabilizing its latest slide. KushCo (OTCQB:KSHB) dropped four.1% within the aftermath of a combined quarter. Progressive Industrial Properties REIT (IIPR) dropped four.7% however stays 78% up for the yr.

(Supply: Writer, primarily based on public information)

Business Information

Trying Forward

Final week was dominated by chatters round Cover’s deal to amass Acreage which is contingent on the U.S. legalization. The deal was the primary time a Canadian hashish firm acquired a significant U.S. multi-state operator. The transaction was structured as an modern resolution that gives a set buy worth for Cover to amass 100% of Acreage throughout the subsequent 7.5 years as quickly because the U.S. legalizes hashish federally.

Nonetheless, the deal seems to be like a really one-sided consequence to us. We expect Cover took benefit of the state of affairs and negotiated a terrific deal whereby it secured entry to a longtime platform at a worth that appears very engaging. Cover’s provide comprised of $2.55 in money and zero.5818 Cover shares per Acreage share which have been value $27.45 on the finish of Thursday. Contemplating that Acreage raised at $25 per share throughout its RTO in November final yr, lower than six months in the past, we expect the worth is extremely engaging to Cover. On the opposite aspect, Acreage’s public shareholders are clearly pissed off with the shortage of premium and Acreage shares closed at $22.51 final week, a reduction of 18% to the headline provide worth. The low cost is smart given the unsure timeline of the deal and a suggestion worth that has a small money part and relies on Cover’s share worth on the time of closing.

For buyers, we expect expectations are operating excessive that different offers may observe for different U.S. MSOs. Nonetheless, we expect there are only a few gamers that might do what Cover did right here. Cover paid $300 million of money to safe the Acreage deal and solely Cronos and Tilray presently have comparable quantities of money. Apart from these two gamers, most different Canadian gamers would wrestle to amass any of the highest U.S. MSOs. Many of those American hashish firms have gotten greater than their Canadian friends. Consequently, we expect buyers shouldn’t get too enthusiastic about different comparable offers, particularly after Acreage offered itself for a small premium.

Disclosure: I/we have now no positions in any shares talked about, and no plans to provoke any positions throughout the subsequent 72 hours. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (apart from from In search of Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.

Editor’s Notice: This text covers a number of microcap shares. Please concentrate on the dangers related to these shares.

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