Share Supply Sinks Canadian Cannabis Companies

Canadian cannabis producers saw huge losses in trading on Tuesday. While some may attribute it to the TSX policy update after the close on Monday, with the exchange threatening to delist companies with U.S. operations (i.e. Aphria), the likely culprit was a flood of share issuance from the licensed producers.

Last week, Aurora Cannabis (TSX: ACB) (OTC: ACBFF) announced a $50mm bought deal that was increased to $60mm. It followed that offering with a $6mm private placement at the same $3.00 price but with $4.00 warrants as well, in a deal announced Monday morning.

After the close on Monday, Emblem (TSXV: EMC) (OTC: EMMBF) announced two deals, including a $15mm convertible note deal and a $10mm unit sale that was increased early Tuesday to $12mm.

Aphria (TSX: APH) (OTC: APHQF announced a deal on Tuesday morning, selling over 11mm shares at $7.25 for gross proceeds in excess of $80mm in a deal set to close on or about November 7th. Supreme Pharma (TSXV: FIRE) (OTC: SPRWF) also priced a bought deal, selling $30mm convertible notes (8% interest, convertible at $1.60) with warrants at $1.80.

The action on Tuesday was entirely to the downside, with all 23 LPs closing in the red:

Despite the profit taking, the LP sector remains up strongly over the past few months, as the stocks have responded favorably to the news from the provinces thus far regarding distribution when Canada legalizes in 2018.

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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