APHA - Cannabis Weekly Round-Up: MSO Asks for Change in Listing Rule
During the past trading week (October 7 to 11), an executive for a US-based cannabis firm said he held meetings with exchange regulators to discuss the possibility of an update to current listing requirements.
Also making headlines was the cancellation of two significant deals in the public marijuana space, as well as the poor performance of a Canadian cannabis stock due to recent changes.
Here’s a closer look at some of the biggest cannabis news over the last week.
Curaleaf asks for regulation adjustment to benefit MSOs
During a recent investor event in Toronto, Curaleaf Holdings (CSE:CURA,OTCQX:CURLF) Chairman Boris Jordan said he had met with executives of the TMX Group, the NASDAQ and New York Stock Exchange to ask for a change in the ruling currently preventing the listing of marijuana multi-state operators (MSOs) in the US.
These senior listings would offer a boost to the firms, which many investors have expressed interest in. However, due to the federal illegality of the drug in the states, companies are still prohibited from listing. This doesn’t include exchanges that have allowed it, like the Canadian Securities Exchange (CSE) and the NEO Exchange.
A TMX spokesperson would not confirm or deny the existence of the meeting to the Investing News Network (INN), but admitted it regularly monitors the legislation for the marijuana sector.
In a statement to INN, the MSO said it “routinely meets with members of the financial community. This includes representatives from stock exchanges regarding ways to increase accessibility and liquidity for investors.”
Elliot Johnson, chief investment officer and chief operating officer at Evolve Funds Group, told INN a shift in the ruling from the TMX would give it a great benefit in comparison to the senior American exchanges.
“I think they would rather take them now than wait until the law changes in the States and have those companies move down to the NYSE,” Johnson said. “The TSX needs to compete and they’re maybe needing to play catch up.”
HEXO investors take a hit
During the past trading week, shareholders of Quebec-based cannabis producer HEXO (NYSE:HEXO,TSX:HEXO) felt the pressure of the market as the firm faced two critical developments.
The marijuana firm was forced to revisit its financial projection for its 2020 fiscal outlook. Yearly net revenue is now projected to be between C$46.5 million and C$48.5 million. Sebastien St-Louis, HEXO CEO, had previously stated the revenues in Q4 would double the nearly C$13 million generated during Q3.
“Given the uncertainties in the marketplace, we have determined that it is the appropriate course of action. We are also placing a greater focus on profitability. We are evaluating our plans and operations to see where we can be even more efficient,” said St-Louis.
After it was announced its CFO Michael Monahan would step away from his role at HEXO, an analyst in the US used the shift as a way to downgrade his rating of the company.
“We think it’s reasonable to assume the corporate finance organization was less developed than what Monahan had realized, perhaps indicating there remains much work to professionalizing said organization than what he (or the Street) fully appreciated,” Bank of America Merrill Lynch analyst Christopher Carey wrote in a note, according to a Bloomberg report.
Change of plans for cannabis agreements
On Tuesday (October 8), Aleafia Health (TSX:ALEF,OTCQX:ALEAF) announced it would end a supply deal agreed between its licensed producer subsidiary Emblem and Aphria (NYSE:APHA,TSX:APHA). The deal was terminated since Aphria failed to issue the agreed product, according to Aleafia Health.
“As a large shareholder of Aleafia, Aphria made good faith efforts to ensure continuation of the Agreement understanding it was in the best interest of all parties involved,” Aphria said in a statement.
Aphria was scheduled to deliver 25,000 kilograms of cannabis products in the first year of the total five year deal.
Below the border, MSO MedMen Enterprises (CSE:MMEN,OTCQX:MMNFF) informed investors it would drop its planned acquisition of private cannabis firm PharmaCann.
The MedMen executive team argued this deal had changed in value since it was originally agreed upon in October 2018.
“The cannabis sector has evolved tremendously since we first announced the PharmaCann transaction and based on the current macro-environment and future opportunities that exist for our business, we believe it is now in the best interest of our shareholders to deepen, rather than widen, our company’s reach,” MedMen CEO Adam Bierman said.
Market updates
During the past trading week, the Mexican governing party indicated legalization of cannabis is planned for the end of October now. According to a report from Marijuana Moment, Sen. Ricardo Monreal of the MORENA party in Mexico, said the Chamber of Deputies in the country will see a legalization bill this month.
“We’re thinking that we’ll bring the law out, approve it, at the end of October,” Monreal said. “That’s the schedule we have.”
Shares of The Green Organic Dutchman (TGOD) (TSX:TGOD,OTCQX:TGODF) took a big hit last week after the firm issued an update to shareholders saying it would need to pursue additional sources of financing for its operations.
“(TGOD) will prioritize any financing secured to accelerate commercial production in order to ramp-up revenues,” the firm said.
Former British Columbia Premier Christy Clark joined the board of directors for Constellation Brands (NYSE:STZ) and commented on the performance of Canopy Growth (NYSE:CGC,TSX:WEED) as an investment for the alcohol firm.
“There aren’t really any other companies in the cannabis space at the moment that have this level of capacity,” the ex-politician told BNN Bloomberg.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.