Missed weed merger sets stage for poor investment returns in cannabis world

There were a couple of standout performers, but shareholders in the largest companies were in no mood to light a doobie to celebrate the closing bell on Friday.

cannabis world cannabis George-Cosh merger

Aleafia Health, which focuses on medical cannabis, seemed to defy gravity when its share price rose more than 12 percent on the week. Photo by Aleafia Health

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This week, an unnamed source created more chatter in the Canadian cannabis world than any of the well-known analysts. That’s because this anonymous tipster told BNN Bloomberg’s David George-Cosh that Edmonton-based Aurora Cannabis and Leamington-based Aphria Inc. had explored a possible merger. According to George-Cosh, talks broke down last week.

“A lot of analysts covering the cannabis space have suggested that consolidation in the industry is sorely needed to take care of a number of issues,” George-Cosh told BNN Bloomberg,

During this interview, he noted that oversupply dogs the industry. That was reflected earlier this month when Moncton-based Organigram Holdings cut 25 percent of its workforce and scaled back production.

In addition, George-Cosh told BNN Bloomberg that the industry continues to strive for an elusive “profitability marker”.

Following this bombshell, Aurora Cannabis shares plunged 3.45 percent on Friday (July 25) to close at $14 in Toronto. Over five days of trading, Aurora Cannabis stock fell 12.5 percent.

Aphria shareholders fared better. Their investment declined by less than one percent this week. The stock closed at $6.86 on Friday in Toronto.

Meanwhile, the market punished Organigram Holdings, which fell by 15.6 percent during the week. Shares closed on Friday at $1.79 in Toronto.

A poor earnings report drove down the stock. On July 21, Organigram Holdings reported an $89.6-million quarterly loss.

The country’s most valuable cannabis company, Canopy Growth Corp., also didn’t reward investors this week.

The Smith Falls licensed producer’s stock fell 8.6 percent this week to close at $22.12 in Toronto.

In light of these numbers, investors in Toronto-based Cronos Group must feel like they made it through the week unscatched.

Cronos Group shares fell less than half of one percent to $8.48 over the five-day period.

Tilray also falls but Aleafia Health and Village Farms buck this week’s trend in cannabis world

Nanaimo-based Tilray couldn’t claim the same good fortune. Its share price dropped 3.1 percent to close at US$7.12 on NASDAQ.

However, the rising Canadian dollar versus the U.S. greenback softened the blow somewhat.

So what’s left among the best-known companies? Ottawa-based Hexo Corp. shares fell a penny on the New York Stock Exchange this week to close at US$0.71.

However, we found two winning Canadian cannabis-company stocks. Aleafia Health Inc. shares jumped 12.1 percent this week to close at $0.65 in Toronto.

The Concord, Ontario–based company focuses on medical cannabis.

And Village Farms International shares rose 8.4 percent on the week to close at $7.75.

Of course, Village Farms isn’t a pure weed play. In addition to cannabis, the Delta, B.C.–based also grows premium produce in its greenhouses.

Keep in mind that cannabis comes in and out of flavour in the investment world.

But 30-year-old Village Farms has demonstrated, on the other hand, that tomatoes are forever.

Charlie Smith

I'm the editor of the Georgia Straight newspaper in Vancouver, as well as a CannCentral contributor.

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