You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.
Friends,
After sharing our optimism about the second half of 2022 for the cannabis sector, the market enjoyed a decent July and August, but this September took cannabis stocks to new lows, with the Global Cannabis Stock Index falling 25.9%. Q3 turned into a massive loss of 23.7% for the index.
The month was the worst one in the past three years:
Despite including the worst month in three years, the quarterly return, which was also bad historically, was not nearly the worst:
While the quarter didn’t stand out for the size of its loss, it was the sixth straight quarterly decline. Year-to-date, the Global Cannabis Stock Index has declined 65.7%, and it is down 75.0% from a year ago.
Despite the terrible market performance, the continued decline seems unjustified. There were no negative industry news or known material changes in company operations. We remain optimistic that the cannabis sector will perform better. In our view, the valuations are very low, and the investor sentiment is overly negative. The big downward move in early 2020, related to COVID fears and a large decline in the S&P 500 of 19.9% in Q1, was followed by a one-year return of 165.3%. Of course, the S&P 500 was rallying then too, with its return over that year at 53.8%.
We think that the return of the bear market to stocks, which posted a new low last week, has delayed a resumption of interest in our sector from investors. We believe that the upcoming earnings season, if it passes without large disappointments, could help investors to better appreciate the sector’s valuation and growth prospects.
Be sure that you have the latest updates by upgrading your NCV News App to the latest version today!
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
Exclusives
22nd Century Group’s acquisition of GVB Biopharma helped the company expand its cannabis and hemp footprint, which it now operates on a global scale. Its platform offers customers high-quality cannabis and hemp ingredients and white labeling to optimize product formulation. Hops is the company’s newest venture. In an exclusive interview CEO Jim Mish provides an inside look at the company’s business model and its position in the cannabis industry.
Global cannabis stocks suffered a bit of a meltdown in September, according to NCV’s Global Cannabis Index. After breaking a long negative streak in July by rallying up 4.3%, the index dipped by 1.3% in August and in September it posted a new all-time closing low by ending the month down 25.9%. The index is now down 65.7% so far this year. The four weakest stocks were all down by more than 40%. Leafly fared the worst. In Q4, the index will expand to 28 members. CEA Industries and Leafly will be leaving the index. Both failed to have the minimum $800K of average daily traded value.
Cannabis revenue growth remained stalled in the September reports, according to the Public Cannabis Company Revenue & Income Tracker.
Financing
Greenlane Holdings completed the sale of its headquarters in Boca Raton, Fla. as part of its previously announced non-dilutive liquidity plan. Greenlane will remain in the same building but the headquarters will move to a new space. “We continue to execute well on our liquidity initiatives, despite the extremely challenging macro environments. Additionally, we are always evaluating areas within the portfolio to unlock value that currently isn’t represented in our public market capitalization,” said CEO Nick Kovacevich. In July, the company sold its stake in VIBES Holdings LLC.
Sanity Group received a $37.6M Series B financing round – Europe’s largest cannabis investment round to date. The Germany-based company said the funding will fuel its growth, enable European expansion and strengthen research and development activities. Founder and CEO said the company’s goal is to “leverage the full potential of the cannabis plant and to explore and harness the different cannabinoids.” Sanity Group was founded in 2018 and has approximately 120 employees in the medical, consumer health and science sectors.
Divestiture
Canopy Growth is exiting its Canadian cannabis store operations. The company entered into agreements to divest its retail business which includes stores operating under the Tweed and Tokyo Smoke retail banners. Canopy Growth reached an agreement with OEG Retail Cannabis and existing licensee partner that owns and operates the company’s franchised Tokyo Smoke stores in Ontario. The company has also reached an agreement with 420 Investments Ltd. for it to acquire the ownership of five retail locations in Alberta.
Mergers
SHF Holdings completed its previously announced acquisition of SHF, LLC, d/b/a Safe Harbor Financial. The company’s Class A Common Stock and warrants will continue to be listed for trading on the Nasdaq Capital Market. The company also closed a PIPE in the amount of $20.45 million of convertible preferred stock and warrants. “Today represents a significant milestone in Safe Harbor’s journey. We are thrilled to complete this transaction and eager to continue scaling our business and expanding our offerings to meet the needs of the cannabis industry in the United States.” said Founder and CEO Sundie Seefried.
New Leadership
Ascend Wellness has new leadership. The multi-state cannabis operator announced that Chief Financial Officer Daniel Neville and President & Co-founder Frank Perullo have been named Interim Co-CEOs, effective immediately. In addition, Chairman and Founder Abner Kurtin will transition to executive chairman of the board. Meantime, the company’s board of directors has begun a search for a new CEO. Kurtin was arrested in September and charged with battery against his domestic partner. The company acknowledged the incident and said it was conducting an investigation. On Friday, Kurtin said that the charges were dropped.
Earnings
iPower Q4 sales fell 3% sequentially to $22.1 million, but were up 50% to a record $22.1 million year-over-year. For all of FY 2022, the company’s revenue rose 47% to a record $79.4 million. iPower’s non-hydroponic portfolio accounted for approximately 54% of revenue in the fourth quarter. “Throughout the year, we focused on prioritizing our in-house product mix and strategically diversifying our product offerings into categories outside of hydroponics,” said CEO Lawrence Tan. The company completed several strategic initiatives in fiscal 2022, including the expansion of its business to Europe, the launch of two joint ventures, and closing its first M&A transaction.
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.
Get ahead of the crowd! If you are a cannabis investor and find value in our Sunday newsletters, subscribe to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013. Gain immediate access to real-time and in-depth information and market intelligence about the publicly traded cannabis sector, including daily videos, weekly chats, model portfolios, a community forum and much more.
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 as well as the American Cannabis Operator Index and the Ancillary Cannabis Index.
View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.
Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.
Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.
Sincerely,
Alan & Joel
