Canadian licensed producers experienced their twelfth consecutive monthly decline during March, with the Canadian Cannabis LP Index falling 18.3% to 246.96, slightly worse than the S&P/TSX Composite, which fell 17.7%:
Over the past year, the index has declined 77.4%:
The index remains substantially below the all-time closing high of 1314.33 in September 2018, just ahead of Canadian legalization. During the month, it posted a new 52-week closing low of 196.10, a level not seen since late 2016, and is now down 37.3% from its close of 393.78 at the end of 2019:
The index, which included 35 publicly-traded licensed producers that traded in Canada at the end of February, with equal weighting, is rebalanced monthly. Each of the members is also included in a sub-index, with 8 in the Canadian Cannabis LP Tier 1 Index, 7 in the Canadian Cannabis LP Tier 2 Index and 20 in the Canadian Cannabis LP Tier 3 Index during the month. Please note that at the end of 2019 we began excluding companies with a price below C$0.20 unless they generate quarterly industry revenue in excess of C$1 million. There are currently 20 publicly traded LPs that fail to qualify.
Tier 1
Tier 1, which included the LPs that are generating cannabis-related sales of at least C$10 million per quarter (in 2018, we used C$4 million as the hurdle), declined less than the total market as they fell 17.3% to 394.22, which followed a 2019 decline of 38.5%, when it ended the year at 642.23. Tier 1 has declined 38.6% so far this year. This group included Aphria (TSX: APHA) (NYSE: APHA), Aurora Cannabis (TSX: ACB) (NYSE: ACB), Canopy Growth (TSX: WEED) (NYSE: CGC), Cronos Group (TSX: CRON) (NASDAQ: CRON), HEXO Corp (TSX: HEXO) (NYSE American: HEXO), MediPharm Labs (TSX: LABS) (OTC: MEDIF), Organigram (TSXV: OGI) (NASDAQ: OGI) and Valens Company (TSXV: VGW) (CSE: VGWCF). The performance was mixed within this group, with MediPharm Labs and Aurora Cannabis declining by more than 30%, while Cronos Group rose by almost 3% and Organigram lost less than 5%.
Tier 2
Tier 2, which included the LPs that generate cannabis-related quarterly sales between C$2.5 million and C$10 million, fell 9.6%, outperforming the other tiers as it closed at 405.02. In 2019, it lost 44.3% in 2019 after closing at 569.54 and is down 28.9% in 2020. This group included Delta 9 (TSXV: DN) (OTC: VNRDF), Emerald Health (TSXV: EMH) (OTC: EMHTF), Supreme Cannabis (TSX: FIRE) (OTC: SPRWF), TerrAscend (CSE: TER) (OTC: TRSSF), VIVO Cannabis (TSX: VIVO) (OTC: VVCIF), WeedMD (TSXV: WMD) (OTC: WDDMF) and Zenabis Global (TSX: ZENA) (OTC: ZBISF). Emerald Health posted the best performance of Tier 2 companies, increasing 17.1% after having fallen by more than 41% in February. Delta 9 and VIVO Cannabis both fell by more than 20%.
Tier 3
Tier 3, which included the 20 qualifying LPs that generate cannabis-related quarterly sales less than C$2.5 million, declined 21.7% as it closed at 58.36. It ended at 96.76 in 2019, declining 45.0%, and is down 39.7% in 2020. Two Tier 3 companies produced positive returns, while six dropped by more than 30%.
The returns for the overall sector varied greatly, with 4 names posting positive returns, while 8 declined by more than 30%, with the entire group posting a median return of -19.0%:
For April, the overall index will have 32 constituents, as we have removed Harvest One (TSXV: HVT) (OTC: HRVOF), MPX International (CSE: MPXI) (OTC: MPXOF) and Rapid Dose Therapeutics (CSE: DOSE) (OTC) (RDTCF because they no longer qualify for inclusion due to their price being below C$0.20 and the quarterly industry revenue not meeting the minimum requirement of C$1 million for stocks that don’t meet the price minimum. Additionally, Radient Technologies has moved from Tier 3 to Tier 1 following its recent report of quarterly revenue in excess of C$10 million. Aleafia Health (TSX: ALEF) (OTC: ALEAF) and Heritage Cannabis (CSE: CANN) (OTC: HERTF) have moved from Tier 3 to Tier 2.Note that the date for making changes to the index was 03/27. Next month, Cronos Group will move from Tier 1 to Tier 2 based on its December financials that were released subsequent to the cutoff date for March, while Zenabis will move to Tier 1 from Tier 2.
In the next monthly review, we will summarize the performance for April and discuss any additions or deletions. Be sure to bookmark the pages to stay current on LP stock price movements within the day or from day-to-day.
