The Week In Cannabis: Canopy's Earnings, JPMorgan's Restrictions, A Slew Of Earnings, Big Policy Moves

The Week In Cannabis: Canopy's Earnings, JPMorgan's Restrictions, A Slew Of Earnings, Big Policy Moves

Below is a recap of the main news related to the cannabis industry and markets for the week of November 1st, 2021.

Canopy’s Earnings

Canopy Growth Corporation CGC, announced its financial results Friday for the second quarter fiscal 2022 ended September 30, revealing a 3% year-over-year decline in net revenue to CA$131 million ($105.4 million).

Total net cannabis revenue increased by 1% over the same period reaching CA$95 million in the second quarter of 2022.

The company also reported an adjusted EBITDA loss of CA$163 million for the same period, representing a CA$77 million wider loss versus the same period of last year, which can be attributed to lower sales, a decline in gross margins, partially offset by the reduction in total selling, general and administrative expenses.

Following the announcement, Cantor Fitzgerald’s Pablo Zuanic reiterated a ‘Neutral’ rating and the same price target of $CA18.50 on Canopy’s stock, concerned by the revenue and adjusted EBITDA misses, the double-digit decline in domestic business-to-business cannabis sales and ongoing share loss.

Benzinga Cannabis’ content is now available in Spanish on El Planteo.

“We rate the stock Neutral, but we realize it is a bellwether stock, in a momentum sector, more sensitive than most to news flow about federal changes in US regulation. We believe CEO David Klein has the backing of Constellation Brands STZ (he was a well-regarded CFO there) and the Canopy Growth Board of Directors, so we do not expect disruption to the strategic plan he is implementing,” Zuanic concluded.

Big Banks Vs. Cannabis

Banking giant JPMorgan Chase & Co. JPM may restrict the trading of certain U.S. cannabis-related stocks starting November 8.

According to Reuters, the company sent a letter to prime brokerage clients, citing compliance reasons: “J.P. Morgan (JPMS) has introduced a framework that is designed to comply with U.S. money laundering laws and regulations by restricting certain activities in the securities of U.S. Marijuana Related Businesses," the letter read.

It seems, however, the restriction will only apply to Over-The-Counter (OTC) traded stocks and limit new acquisitions and shorting of these equities. JPMorgan clients with pre-existing positions will be allowed to sell their shares at will.

Other than these exceptions, JP Morgan noted, cannabis-related businesses that are fully compliant with federal U.S. law, and can thus be listed on the Nasdaq, the New York Stock Exchange or the Toronto Stock Exchange will continue to be permitted to trade. These are non-plant-touching businesses operating in the U.S. and elsewhere, as well as companies working with the cannabis plant in federally legal settings, such as Canada.

Support For Legalization

The number of Americans who think that marijuana should be legally obtainable hit a record high for the second year in a row, according to a new Gallup survey released Thursday, which showed that as many as 68% of U.S. residents support cannabis legalization. The figure is the same as last year, which is the highest percentage of support ever revealed in a national Gallup poll.

Marijuana Research Bill For Veterans

With Veteran's Day just around the corner, a House committee passed legislation that would require the U.S. Department of Veterans Affairs to conduct clinical trials into the therapeutic potential of marijuana for military veterans.

The bill, sponsored by Rep. Lou Correa (D-Cal), was approved by the House Veterans Affairs Committee on Thursday in an 18-11 vote, with all Democrats in support and all but one Republican opposed

The earlier versions of the proposed legislation did not make it into law. Now, the VA Medicinal Cannabis Research Act mandates that the department introduce a series of studies focusing on the use of medical marijuana in the treatment of PTSD and chronic pain.

New York’s Ban Of Delta-8 THC Products, Allowance Of Hemp Flower Sales

The New York Cannabis Control Board (CCB) made it clear on Wednesday – controversial delta-8 THC products cannot be sold, though hemp flower is allowed. The clarification comes some eight months after former Gov. Andrew Cuomo signed the legalization bill into law.

Empire State regulators also approved the sale of hemp-infused food and beverages.

Pakistan’s Commitment

In the context of a meeting of the Standing Committee on Science and Technology of the National Assembly of Pakistan, Shibli Faraz, Minister of Science and Technology, pledged to file a bill for the national regulation of cannabis, before the end of 2021.

Philadelphia’s Decrim

Philadelphia voters approved a referendum on marijuana legalization. Preliminary results from Tuesday's elections showed the proposal leading by a 73 percent to 27 percent margin.

Markets

Stocks posted mixed results this week. Over the five trading days of this week:

  • The ETFMG Alternative Harvest ETF MJ: gained 2.2%.
  • The AdvisorShares Pure Cannabis ETF YOLO: rose 2.2%.
  • The AdvisorShares Pure US Cannabis ETF MSOS: advanced 3.7%.
  • The Cannabis ETF THCX: was down 0.2%.
  • The Amplify Seymour Cannabis ETF CNBS: advanced 1%.
  • The SPDR S&P 500 ETF Trust SPY closed the week up 1.8%.

M&A

Acquiring Company Acquired Company Price Conditions
Columbia Care Inc. CCHW CCHW CCHWF Medicine Man $42M Cash & stock
Flora Growth Corp. FLGC Vessel Brand $30M Cash & Stock
The Green Organic Dutchman Holdings Ltd. TGOD TGODF Galaxie Brands $17M Cash & Stock
Copperstate Farms Goodness Growth Holdings, Inc. GDNS GDNSF’s Phoenix dispensary assets $15M Cash
New Frontier Data Skylight Health Group Inc’s SLHG SLHG medical cannabis certification businesses - Canna Care Docs and Relaxed Clarity $8.63M Cash
       

Financings

Company Lead Financier Amount
XS Financial Inc. XSF Private Placement $43.5M
Hero Diversified Associates NewLake Capital Partners, Inc. NLCP $30M Loan
Kiaro Holdings Corp. KO KIARF Private Placement $3.75M
Sanity Group Casa Verde Capital $3.5M

Halloween Weekend Figures

Adult consumers were more interested in using the Halloween weekend for toking rather than trick-or-treating, according to new data from Akerna KERN.

Over the Oct. 29-31 Halloween weekend, Akerna determined that adult-use cannabis consumers spent an average of $77.17 per person on cannabis products. In comparison, the National Retail Federation reported the average American spent about $30.40 on Halloween candy and $33.59 on costumes this year, totaling $63.99.

Halloween weekend generated $182.7 million in total adult-use and medical cannabis sales, an 8.2% year-over-year growth, while Oct. 29 was the largest day in sales volume with $81.5 million. It was also the ninth-largest day for cannabis sales this year.

Microsoft Could Go Green

Microsoft MSFT wants to build data centers and other buildings with materials such as hemp and algae.

The proposal seeks to displace concrete (a material that contributes to 8% of global CO2 emissions) with materials that store carbon.

Beverages

Two Roots Beverage Co. will provide Truss Beverage Co., a joint venture between brewer Molson Coors Beverage Co. TAP and HEXO Corp. HEXO, with a non-alcoholic beer for its newly launched brand Bedfellows Liquid Arts.

As the first collaborative brand in the Truss portfolio, Bedfellows Liquid brings consumers of legal age carefully crafted cannabis beverages, including Bedfellows Haus Mates and Bedfellows Indie Pals, which will be available this month in cannabis stores and authorized online retailers across Canada.

Tilray, Inc. TLRY TLRY announced that two of its leading brands, SweetWater Brewing Company and RIFF Cannabis have collaborated for the exclusive U.S. launch of SweetWater RIFF - SweetWater's first ready-to-drink cocktail and its inaugural entry into the spirits category.

SweetWater RIFF drinks are crafted with vodka and real fruit juices and come in two offerings, including SweetWater RIFF Citrus and SweetWater RIFF Strawberry Mule.

International News

  • Khiron Life Sciences Corp. KHRN KHRNF announced the opening of Zerenia Clinics UK in London as its first International Zerenia clinic in Europe.
  • Halo Collective Inc. HALO HCANF (Germany: A9KN) announced the completion of its previously-announced share purchase transaction with Akanda Corp. The transaction creates two stand-alone entities, Halo, which will continue to focus on the North American adult-use cannabis market, and Akanda, which will focus on medical cannabis for international markets, Kiran Sidhu, CEO of Halo, explained.
  • Avicanna Inc. AVCN AVCNF 0NN announced that its Colombian subsidiary, Santa Marta Golden Hemp S.A.S., has met global conformity standards of Good Agricultural and Collection Practices for its 360,000 square foot cultivation project in Santa Marta. The certification allows the expansion of the company’s raw materials supply business to include organic, and now GACP certified dried flower and biomass at a global level.
  • In a major regulatory win for the entire cannabis industry, the stringent Brazilian Health Regulatory Agency (Anvisa) has approved a cannabis-derived CBD 50 mg/ml product produced by Verdemed Pharmaceuticals, in partnership with Colombian-American operator Clever Leaves Holdings Inc CLVR. In addition to being able to commercialize the product, Verdemed will provide the medicine for a new clinical study on medicinal cannabis uses for long-haul COVID-19 sufferers, led by InCor, the Heart Institute of the São Paulo University Medical School (FMUSP).

B-Real Videogame

LEAF Mobile Inc. LEAF (OTCQB: LEMLF), a Canada-based free-to-play mobile game group, along with its subsidiary, LDRLY Games Inc., announced on Tuesday the worldwide launch of their next free-to-play mobile title, B-Real Monster Buds, released in collaboration with DGT Enterprise LLC.

The game is authentically represented by B-Real’s licensed music, style, voice and the 420 culture.

Cannabis Is America's 5th Most Valuable Crop

Cannabis marketplace Leafly Holdings, Inc. released its inaugural Cannabis Harvest Report on Wednesday revealing that cannabis is America’s 5th most valuable crop. The report takes the first look at cannabis data, insights and projections across the 11 states where Americans can currently purchase both adult-use and medical cannabis.

To conduct the analysis, Leafly’s investigative team collaborated with Whitney Economics and ended up discovering that cannabis has become a major agricultural commodity that supports thousands of American farmers and farm communities.

Based on the report, cannabis crops in adult-use states now support 13,042 licensed farms in the aggregate. On an annual basis, those farmers harvest 2,278 metric tons (5,022,990 pounds) of cannabis. To give you a better idea: that's enough weed to roll more than two billion joints or fill 57 Olympic-size swimming pools.

That amount makes cannabis the fifth most valuable crop in the United States. With a wholesale harvest value of $6.2 billion, America’s cannabis harvest ranks above cotton and below wheat, based on US Department of Agriculture data for 2020. Only corn, soybeans, hay and wheat bring in more money to American farmers.

Based on wholesale harvest value, this is how U.S. crops rate:

  • Corn $61 billion
  • Soybeans $46 billion
  • Hay $17.3 billion
  • Wheat $9.3 billion
  • Cannabis $6.2 billion
  • Cotton $4.7 billion
  • Rice $3.1 billion
  • Peanuts $1.3 billion

Earnings Reports

Find all the details on this week’s earnings reports on Benzinga Cannabis’ Earnings Center. This week, the following companies reported results:

  • Sproutly Canada, Inc. SPR (FRA: 38G) SRUTF
  • India Globalization Capital, Inc. (AMEX: IGC)
  • Ayurcann Holdings Corp. AYUR
  • Christina Lake Cannabis Corp. CLC CLCFF
  • ManifestSeven Holdings Corporation MSVN MNFSF
  • Delta 9 Cannabis Inc. DN DLTNF
  • Scotts Miracle-Gro SMG
  • Innovative Industrial Properties, Inc. IIPR
  • AFC Gamma Inc. AFCG
  • 22nd Century Group, Inc. XXII

California And Oklahoma

The Highway Cannabis Company has completed the acquisition of three California retail dispensaries and an indoor licensed Southern California cultivation facility, following a $20 million equity funding round.

The company aims to create a vertically integrated cannabis platform operating under the Highway Cannabis brand, which will encompass retail locations and branded products.

The Nirvana Group, a vertically integrated cannabis company in Oklahoma, has partnered with Toast, a multi-state cannabis brand, to distribute their pre-roll products in medical dispensaries across the state.

Top Stories Of The Week

Check out the top stories on Benzinga Cannabis this week:

Top Spanish Stories

Lead image by Ilona Szentivanyi. Copyright: Benzinga.

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