Why Canadian LPs Have Stalled and 11 Stories from New Cannabis Ventures

This is a copy of the July 15th edition of our weekly Newsletter, which we have been publishing since October, 2015.


The Canadian Cannabis LP Index managed by New Cannabis Ventures has retreated to its lowest close of the year, a level not seen since mid-December, and is now down over 19% in 2018. To keep things in perspective, the index has still rallied substantially over the past year despite the recent correction:

Looking deeper into the sector, there has been a vast difference in the performance by stage of maturity. We break the LPs into three tiers, with Tier 1 representing the largest LPs in terms of sales, Tier 2 representing the remaining LPs that are permitted to sell and Tier 3 representing those LPs that can cultivate but not yet sell.

Here is how the three tiers have performed year-to-date:

  • Tier 1: +10.2%
  • Tier 2: -19.3%
  • Tier 3: -24.3%

We have heard from several readers seeking an explanation about the luke-warm reaction to the news last month that Canada will be officially legalizing cannabis in October, so we thought we would share our thoughts.

One of the most difficult lessons for investors is figuring out what’s priced in, and it’s important to remember that legalization was widely expected. Another factor may be the slight delay, as the October 17th date was 45-60 days further out than most had expected. Weighing beyond this “sell the news” factor, though, are several dynamics, including supply of shares and a proliferation of new LPs.

In recent weeks, the market has absorbed several large offerings, including $100 million from CannTrust, $17 million from Emerald Health and $52 million from Newstrike in May and $259 million from Aphria and $600 million from Canopy Growth (convertible notes) in June. Heavy selling early in the year also weighed on the market.

Also, since April, the universe of publicly-traded LPs has expanded from 32 to 40, with the recent additions of 48North, Eve & Co, FSD Pharma, GTEC Holdings, James E. Wagner Cultivation, Pure Global Cannabis, Sproutly and The Green Organic Dutchman. Tilray, which will be a  “Tier 1” stock, should debut mid-week on the NASDAQ. There is likely more ahead too.

Finally, we believe the market may be beginning to factor in concerns about a less-than-robust rollout of retail cannabis this Fall due to constrained inventories and few stores open in key provinces like Quebec and Ontario.

Cova’s cannabis compliant retail software is helping to solve some of the biggest challenges in the cannabis industry. To learn more, visit the company’s page on New Cannabis Ventures and click the green Get More Info button.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:

The Benzinga Cannabis Capital Conference is the premier gathering of cannabis entrepreneurs and investors in North America. Held at Arcadian, 401 Bay St, Toronto, ON M5H 2Y4, Canada on August 16-17, 2018Purchase your tickets here.

No other conference offers the level of access and seamlessness of interaction between entrepreneurs building future billion-dollar cannabis enterprises and the investors whose capital will make that happen.

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers.

View the Public Cannabis Company Revenue Tracker, which ranks the top revenue producing cannabis stocks that generate industry sales of more than $2.5m per quarter.

Consider subscribing to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013 for more in-depth information and market intelligence about the publicly traded cannabis sector.

Discover your place in the cannabis industry by visiting our Careers and Jobs Page and learn which companies are hiring aggressively.


Alan & Joel

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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