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Cannabis inventories were mainly down on Wednesday with Green Organic Dutchman's 15% decline after Aurora Cannabis sold its remaining stake of about 10% in the company at a discount.
Dawn
CBA -1.41%
CBA -2.25%,
which is the most widely held of the Canadian licensed producers, liquidated its participation in a bulk transaction carried out at CDN $ 3 per share on Tuesday evening, which is about 15% less than its closing price. Aurora first invested in the company
TGODF, -15.59%
tgod, -16.52%
in January 2018, when it purchased 33.3 million shares at $ 1.65. The company then purchased an additional 6.3 million shares in the company's $ 3.65 initial public offering, raising its stake to approximately 18%.
"Actions since then, however, have shown that this is not a long-term relationship; The director of Aurora Operations resigned from TGOD's board of directors in September 2018. Aurora began selling shares in October 2018 (priced between $ 5-6) which continued until January 2019. Ryan Tomkins wrote in a note to customers.
Aurora's decision to acquire Whistler under a C $ 175-million contract reflects a change in strategic direction. Whistler is a direct competitor of Green Organic Dutchman as one of the few organic cannabis growers. "In conversations we have had with the company since then, it has made it clear that the acquisition of Whistler was replacing that of TGOD and that a possible sale of shares was therefore inevitable," said Tomkins.
For Aurora, the news is positive since the 86.5 million Canadian dollars provide a financial boost to a company that has still not found major financial support, while its peers, as the market leader, Canopy Growth Corp.
GSC -1.21%
CANNABIS, -2.08%
and Cronos Corp.
CRON, -2.30%
CRON, -2.79%
earned investments from Constellation Brands Inc.
STZ, + 0.88%
and Altria Group
MO + 0.59%.
"This has not been helped in the past by a number of large equity-financed transactions, resulting in a dilution of the shareholder," said Tomkins. Aurora has taken steps to address this problem, including increasing the size of its credit facility.
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Regarding Green Organic Dutchman, Jefferies continues to view it as a potential target for a larger album that seeks exposure to the organic segment, which remains under-serviced.
"Given that Whistler's product prices are very strong in the market, as well as TGOD's comments in the last quarter, claiming that prices are very high, it could be interesting as a defense against general price suppression as The supply continues to increase, "he said. I said.
Aurora was down 0.7%.
Curaleaf
CURLF, + 1.26%
CURA + 0.00%,
Cresco Labs
CRLBF, + 5.26%
and reap the health
HHL, + 0.40%
HRVSF, + 8.98%
Shares held up against the negative trend on Wednesday, after Canaccord named them one of the top picks for multi-state traders, as the US sector continues to grow and expand.
In a large-scale report, analysts at Matt Bottomley said the sector deserves a fresh look for investors, as sector valuations have dropped 40% to 50% from the peaks reached in 2019. The sale has due to a delay in the approval process for some of the mergers and acquisitions announced this year as the US Department of Justice took a closer look at potential antitrust issues. Bottomley said that this process is more educational than that of justice officials, given the novelty of the legal sector, and that he expects the agreements to begin to wrap up. here october.
Cannabis Watch: For All Cannabis Business Coverage by MarketWatch
"Valuations remain attractive relative to Canadian peers," he said. US MSOs trade at an average multiple of 7.9 times the estimated 2020 enterprise value / EBITDA, compared to Canadian players trading on average 20 times.
"Given that MSOs have average access to a larger population than in Canada, they are able to conduct vertically integrated operations that are more favorable in many states and are closer to (or have achieved) cost-effectiveness. the profitability that most Canadian limited partnerships, we believe this valuation gap will eventually close, "says the report.
See: International activity of cannabis company Tilray soon to be a key growth factor, analyst says
Curaleaf's shares rose and then lost their gains after Canaccord named it Top Pick in the industry. Bottomley has praised its geographic exposure and operating assets, which make it the largest vertically integrated cannabis company in the country, meaning that a premium is warranted.
See now: Cannabis stocks increase after Curaleaf missed revenue estimates but offers optimistic outlook
Cresco Labs shares rose 3.7% and Harvest's health increased 1%.
Aleafia Health Actions
LEAF, + 0.00%
ALEF, -2.86%
rose 2.3% after the Toronto company announced the expansion of its 60-acre open-air cannabis site through the acquisition of adjacent farmland. The transaction closed on Tuesday for C $ 1.2 million in cash.
Elsewhere in the sector, market leader Canopy Growth lost 2.5%, Cronos
CRON, -2.30%
CRON, -2.79%
down 3.5%, the shares of OrganiGram Holdings
OGI + 0.23%
was up 0.7%. and Aphria
APHA + 4.01%
APHA + 3.11%
was up 0.4%. Tilray
TLRY, -0.33%
was down 7%.
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Hexo
hexo, + 2.64%
was up 0.3 %%.
Horizons Marijuana Life Sciences ETF
HMMJ, -1.78%
down 2.4%, with 35 of its 54 members. The ETFMG Alternative Harvest ETF
MJ -1.50%
was down 2.7%, with 24 of its 36 members down.
The Dow Jones Industrial Average
DJIA, + 0.91%
was up 0.8% and the S & P 500
SPX, + 1.08%
was up 0.8%.
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