On October 26, 2018, The Green Market Report released its Cannabis Company Index 2018 Third Quarter Summary. After a rocky start this year, the Index has started to pick up steam and is continuing to build up momentum. During the third quarter, the Index rose by 56%; and with the commencement of adult-use cannabis sales in Canada at the start of the fourth quarter, the Index could rise even higher.
After a quarter filled with mergers, acquisitions, and buyouts; several cannabis companies have added to the Index and several more have been removed. Here are the cannabis companies that made the cut this quarter, as well as the ones that didn’t.
Charlotte’s Web (CWEB.CN) – Best known for the creation of a low-THC, CBD-dominate cannabis strain of the same name, Charlotte’s Web has enjoyed considerable success recently. Last year the company took in $40 million in revenue with a 35% EBITDA margin. During the third quarter the company went public on the Canadian Securities Exchange, and since then has seen its stock double in value; making its addition to the Index an easy choice to make.
Tilray (NASDAQ: TLRY) – Ever since going public on the NASDAQ, Tilray has seen an explosion in revenue and its stock value. Initially trading at $17 a share, Tilray is now trading at around $100. Additionally, the company has signed adult-use cannabis supply agreements with seven Canadian provinces and has also signed a deal with Canada’s largest Pharmacy Chain, Shoppers Drug Mart Inc.
Green Thumb Industries (GTII.CN) – It has been a good year for GTI. In June the company went public through a reverse takeover of Bayswater Uranium Corporation, raising CAD$87 million (USD$67 million). Revenue for the company rose by 25% over the last quarter, from $10.9 million to $13.6 million; thanks mainly to its chain of retail stores and wholesale cannabis distribution. The company’s debt is low, approximately $7.9 million, and its assets are high, roughly $230 million (which includes $112.7 million in cash or cash equivalents). All of this combined makes GTI a reasonable addition to the Index.
Sunniva Inc. (OTC: SNNVF) – Although the company’s stock has underperformed this year, in the long run, Sunniva looks like a good bargain. The company owns and operates seven clinics in Canada the specialize in medical cannabis, offers software solutions to customers, and sells vaporizers and related accessories. By the Fourth Quarter, Phase 1 of the company’s cannabis cultivation facility is expected to become operational and will carry the distinction of becoming the first large-scale facility that produces cannabis without the use of pesticides and other contaminants.
Aleafia Health Inc. (OTC: ALEAF) – Aleafia Health has flown under most analysts radar this quarter, but there are several good reasons why the company has been added to the Index. With 22 clinics nationwide, Aleafia owns the most extensive medical cannabis clinic network in Canada; touting over 50,000 patients. The company is also working with Cronos Group (CRON) in a cannabis sleep study and has plans to list its stock on the NASDAQ in the near future.
MedReleaf – After merging with Aurora Cannabis (NYSE: ACB), MedReleaf quit trading its stock; and as such, has been removed from the Index.
Hiku Brands – Likewise, after being acquired by Canopy Growth (NYSE: CGC), Hiku also ceased trading and has been removed from the Index.
Axim Biotechnologies (OTC: AXIM) – So far this year, Axim has performed poorly, and there is little indication that there will be any improvements. Revenue is down, losses are up, and the company has very few products coming down the pipeline. Should conditions change, Axim may make it back on the Index, but for now, it has been removed.
Terra Tech (TRTC) – Unlike Axim, Terra Tech has performed reasonably well this year. However, several lawsuits against the company have curtailed those successes. In a fast-growing industry like cannabis, where more and more companies are going public every day, the Index can take its pick of well-performing companies that don’t have to contend with a slew of litigation.
Namaste Technologies (NXTTF) – Similarly, Namaste has performed admirably over the last quarter, has a robust platform behind it, and was even added to Horizons ETF. Unfortunately, the company has suffered from negative press surrounding accusations that the company is not disclosing related party transactions, and when combined with poor marketing decisions made by the company, removing Namaste from the Index became the right choice to make.
July 1 kicked off the quarter with new regulations on products for sale in the adult-use cannabis market in California. Many brands in California either weren’t ready or decided the new rules were too onerous and left the business. Several dispensaries staged fire sales to clear the shelves ahead of the new rules and producers had to destroy inventory that didn’t meet the new regulations.
There were two other big events that shifted the market into high gear. An almost $5 billion investment by alcohol company Constellation Brands (NYSE: STZ) into Canopy Growth (NYSE: CGC) excited almost everyone in the cannabis industry. Constellation had made an earlier investment in the company late last year and this recent move brings its total ownership up to 38%.
In other beverage news, Bloomberg reported that Coca-Cola (NYSE: KO) was considering doing a beverage deal with Aurora Cannabis. Both firms denied they were in talks but left some wiggle room saying they always look at various deals. Still, the market went nuts about Coca-Cola making a CBD drink.
During the quarter, Tilray priced its $153 million IPO at $17 a share, above its estimated $14-16 range. The stock was listed on the NASDAQ and immediately traded higher, to over $23 a share for a gain of 35%. The stock got as high as $300 (recently trading around $120) and has joined a list of richly valued cannabis stocks.
Other big events during the quarter included the DEA rescheduling the GW Pharmaceutical (NASDAQ: GWPH) drug Epidiolex to a schedule 5 drug. Schedule 5 drugs are considered to have a low level of abuse and include substances like Robitussin cough syrup or Lomotil diarrhea medicine. While the cannabis industry had been excitedly anticipating the rescheduling, it had no larger effect on cannabis products.