Cannabis Stock Report: Aurora Goes Hostile, Maricann Goes Gold, Mutual Funds Go Empty

Originally published on 11.21.2017

Aurora Plans Hostile Takeover of CanniMed

CanniMed Therapeutics Inc. (TSX:CMED) rejected a merger offer from Aurora Cannabis Inc. (TSX:ACB) The move set in motion a planned hostile takeover of the Canadian cannabis company. It follows CanniMed’s announcement of the acquisition of Newstrike Resources Ltd. (CVE:HIP) for CAD $248 million. Aurora will go straight to CanniMed shareholders. They will argue a merger creates more value and an “expanded international presence.”

Investors will receive stock offers in Aurora with a value of CAD $24 per CanniMed share. The offer is an increase of 57 percent over CanniMed’s final closing price from before Aurora’s offer. Aurora has the support of investors holding 38 percent of CanniMed shares for the merger. To further complicate things, Aurora told investors that the Newstrike deal is “oppressive.” They cited the CAD $9.5 million termination fee CanniMed would have to pay if they went with an alternative deal.

The kerfuffle was good news for investors, as shares of all three companies rose on word of the takeover. CanniMed was up 4.5 percent, Aurora was up 2.7 percent, and Newstrike was up 14 percent. A CanniMed spokesperson said the company has no immediate comment at this time.

McKesson Turns Maricann Into Cannabis Gold

McKesson is the largest pharmaceutical distributor in the U.S. and Canada. They are aiming to make medical marijuana grower Maricann (CNQ:MARI) a name in the cannabis market. A recent partnership deal between the two has made Maricann one of the hottest stocks in Canada.

Maricann only received a stock market listing this past April. Their model is direct patient sales, a strategy that brought in $4 million dollars last year. Current projections for 2018 are $23 billion. With the McKesson deal, Maricann now has a distribution channel through local pharmacies. The move has investors taking a second look at the growing company.

Experts believe that Maricann is undervalued at present. It is a well-financed company that is selling at a 50 to 60 percent discount to others in the marijuana industry. This is according to the MMJ Reporter. Canaccord Genuity named Maricann one of its “Top Picks” among marijuana stocks for the year.  

Cannabis Stocks Lacking In Mutual Funds

While cannabis stocks rally, mutual fund managers are ignoring the marijuana sector. As noted earlier, Aurora Cannabis is making a large play for CanniMed. Constellation Brands, distributor of Corona beer bought a stake in Canopy Growth Corporation. Marijuana stocks are becoming more mainstream.  And yet the benefits of this popularity are not seen in Canadian equity indexes or managed mutual funds.

Since March, funds without Canopy lag the benchmark index around seven basis points. Fundata Canada pointed out that out of hundreds of possible funds, only 17 held Aurora, Canopy, or rival Aphria Inc. at any time this year. Experts agree that if the rally continues more fund managers will need to include the stocks.

“What started out as a humorous and seemingly innocuous one-off index inclusion of Canopy Growth (WEED) Canada’s largest marijuana stock turned into a serious problem for Canadian fund managers deciding whether to include marijuana stocks in active and passive mandates,” TD Securities wrote in a recent bulletin.

Market Watch

Isodiol International (CNSX:ISOL) delivered last week, staging a 150 percent rally. The company, a partner of Canopy Growth, announced plans for a non-cannabis bioactive cannabinoid derived from Hops. In early November they partnered with Nutritional High (CNSX:EAT) for expansion of its  its Pot-O-Coffee brands in several U.S. states. Experts believe it is a company on the rise.

AeroGrow International, Inc. (OTCMKTS:AERO) closed the quarter that ended September 30 up 156.1 percent compared to the same time last year. They posted revenues of about $5.7 million. The company is the maker of the AeroGarden, a product used by many consumers who grow cannabis at home. Gross profits for the quarter came in at 28.9 percent.

Sunniva Inc. is the first cannabis stock to hold an IPO following new regulations in Canada. The Vancouver company owns a California greenhouse. In the U.S. marijuana is illegal at the federal level. Regulators outlined warnings for investors looking towards cannabis firms with U.S. holdings. Sunniva recently received conditional approval for listing on the Canadian Stock Exchange.


News and Notes

Terra Tech Corp. (OTCQX: TRTC) appointed the Founder, Chairman, President and CEO of Anna’s Linens, Alan Gladstone to the Company’s Board of Directors. The company is a vertically integrated firm, focused on cannabis agriculture. “Alan is a leader in the retail sector, with proven business and analytical skills, and we are excited to have him join our Board of Directors,” CEO Derek Peterson remarked.

IC Potash Corp. (TSX:ICP) (OTCQB:ICPTF) will move from the Toronto Stock Exchange at the the CSE on Thursday, November 23. The company expects to change its name and receive a new stock ticker symbol prior to the move.  ICP’s subsidiary, ICP Organics’, works in the research, development and investment in the fertilizer and medical cannabis sectors.



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