After retreating 26% in Q4, the Canadian Cannabis LP Index extended its losing streak to seven months in January, declining 9.5% to 176.42. In February, the pace of the decline slowed, but the index has now fallen eight straight months, losing 2.6% in February to 171.79:
The index, which fell 29.2% in 2021 to end at 194.95, is down 11.9% in 2022 and has declined 58.6% over the past year:
It remains substantially below the all-time closing high of 1314.33 in September 2018, just ahead of Canadian adult-use legalization. The index, which trades below its March 2020 closing low, has lost 86.9% since that all-time high:
The Canadian Cannabis LP Index, which is rebalanced monthly, included 24 qualifying publicly traded licensed producers that traded in Canada at the end of January, with equal weighting for each stock. Each of the members was also included in a sub-index, with 4 in the Canadian Cannabis LP Tier 1 Index, 8 in the Canadian Cannabis LP Tier 2 Index and 12 in the Canadian Cannabis LP Tier 3 Index during the month. At the end of November 2021, we raised the minimum for Tier 1 from C$25 million to C$30 million, for Tier 2 from C$5 million to C$7.5 million and for Tier 3 to C$2.5 million from zero. This was the first change since June 2020, when we required companies to have a price of at least C$0.20 unless they are generating at least C$2.5 million quarterly from their cannabis production operation. Previously, we required revenue in excess of C$1 million for stocks trading below C$0.20. There are currently more than two dozen publicly traded LPs that fail to qualify.
Tier 1, which included the LPs that are generating cannabis-related sales of at least C$30 million per quarter, fell 4.7% to 252.00 in February. Tier 1, which is now down 19.8% in 2022, dropped 17.7% in 2021 when it ended at 314.28. We have increased the minimum revenue required to be included over time. In November 2021, we raised it from C$25 million. At the beginning of 2021, we raised it from C$20 million. During 2019 and the first half of 2020, companies needed to generate revenue in excess of C$10 million for inclusion. In 2018, we used C$4 million as the hurdle.
This group included Aurora Cannabis (TSX: ACB) (NASDAQ: ACB), Canopy Growth (TSX: WEED) (NASDAQ: CGC), HEXO Corp (TSX: HEXO) (NASDAQ: HEXO), Organigram (TSX: OGI) (NASDAQ: OGI) and Tilray (TSX: TLRY) (NASDAQ: TLRY).
Among these largest LPs by revenue, Canopy Growth was the worst performer, falling 11.5%. The best performing company was Tilray, which rose 2.1%.
Tier 2, which included the LPs that generate cannabis-related quarterly sales between C$7.5 million and C$30 million, rose 1.6% to 2340.33. In 2021, it lost 17.1%, closing at 267.36, and it is down 10.1% thus far in 2022. Prior to December 2021, companies needed revenue in excess of C$5 million to qualify for inclusion. Prior to July 2020, companies needed revenue in excess of C$2.5 million to be included in this tier.
This group included Aleafia Health (TSX: AH) (OTC: ALEAF), Auxly (TSX: XLY) (OTC: CBWTF), Cronos Group (TSX: CRON) (NASDAQ: CRON), Decibel Cannabis (TSXV: DB) (OTC: DBCCF), Entourage Health (TSXV: ENTG) (OTC: ETRGF), Indiva (TSXV: NDVA) (OTC: NDVAF) and Valens Company (TSX: VLNS) (NASDAQ: VLNS).
Among these companies, Auxly saw the largest decline, 8.8%, while Aleafia had the largest gain, 9.5%.
Tier 3, which included the 12 qualifying LPs that generate cannabis-related quarterly sales of C$2.5-C$7.5 million, fell 4.2% as it closed at 42.67. It ended at 47.42 in 2021, declining 19.9%, and is now down 10.0% in 2022. The worst performer was MediPharm Labs (TSX: LABS) (OTC: MEDIF), which fell 22.0%. The best performance among this group was from IM Cannabis (CSE: IMCC) (NASDAQ: IMCC), which rallied 27.5%.
The returns for the overall sector varied greatly, with 1 name posting a double-digit gain and 6 declining by more than 10%. The entire group posted a median return of -9.2%:
For March, the overall index will continue to have 24 constituents. Neptune (TSX: NEPT) (NASDAQ: NEPT) has joined the index (Tier 3), while Avant Brands (TSX: AVNT) (OTC: AVTBF) no longer qualifies.
In the next monthly review, we will summarize the performance for March 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.