Canadian cannabis producers moved modestly higher on average in May, with the Canadian Cannabis LP Index increasing 0.6% to 867.30:
After rallying to begin the year, the index has now declined 13.7% thus far in 2018. Some of the most exciting developments in May for the sector included the Canopy Growth listing on the NYSE, the TSX IPO of Green Organic Dutchman and the Aurora Cannabis deal to buy MedReleaf. If there was a theme evident, it is that the Canadian LPs are increasingly focused on international opportunities. Health Canada issued just 1 new cultivation license during the month after issuing 13 new licenses in April, bringing the total to 105. We published 59 stories on the Canadian sector during the month.
The index, which included all 31 publicly-traded licensed producers at the beginning of May, is equal-weighted and rebalanced monthly. Each of the members is also included in a sub-index, with five in the Canadian Cannabis LP Tier 1 Index, fifteen in the Canadian Cannabis LP Tier 2 Index and eleven in the Canadian Cannabis LP Tier 3 Index during May.
Tier 1, which includes the LPs that are generating sales of at least C$4 million per quarter, surged 15.5% after three consecutive monthly declines and is now up 6.6% year-to-date. This group included Aphria (TSX: APH) (OTC: APHQF), Aurora Cannabis (TSX: ACB) (OTC: ACBFF), CannTrust (CSE: TRST) (OTC: CNTTF), Canopy Growth (TSX: WEED) (NYSE: CGC) and MedReleaf (TSX: LEAF) (OTC: MEDFF). Within the group, Aurora was roughly unchanged while the other four gained 15-22%.
Tier 2, which includes the remaining LPs that are generating sales, fell 1.1%, its fourth consecutive monthly decline, and is down 11.9% year-to-date. Organigram (TSXV: OGI) (OTC: OGRMF) was the clear winner with its 23.3% gain, but several other companies were able to post positive returns. Newstrike (TSXV: HIP) (OTC: NWKRF) plunged 35.9% following an equity offering that was substantially lower than its large capital raise earlier this year.
Tier 3, which includes the LPs that are licensed to cultivate but not yet approved to sell, fell 3.8% after a 20.2% decline in April and is down 18.7% year-to-date.
The returns for the overall sector varied greatly, with eight stocks rising more than 10% while six fell in excess of 10%:
For June, the overall index will have two additions, including Green Organic Dutchman (TSX: TGOD) (OTC: TGODF), which has been added to Tier 2, and FSD Pharma (CSE: HUGE), which has been added to Tier 3.
In the next monthly review, we will summarize the performance for June 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.