The month of May definitely had its fair share of news and a few companies with a very nice increase in share prices. Unfortunately, May has a bad track record when it comes to licences being approved by Health Canada. As per the ACMPR website, only five licences have ever been approved in May and only one in 2018 which was a cultivation licence for Weed. The lack of licences is one of the main factors that lead to the lack of gains. Only 36% of the sector finished with a positive percentage change, and the Cannabis Sector as a whole finished with a decrease of -2% for the month of May. There were also three new additions to the Canadian Cannabis sector:
1) Khiron Life Sciences (TSXV:KHRN) a Canadian integrated medical cannabis company with its core operations in Colombia, started trading on the TSX Venture Exchange Inc. Khiron was one of the first companies to get their cultivation licences in Colombia, they currently have an 80,000 sq feet greenhouse completed, and have a well-established management team perfectly suitable to expanding the Khiron brand in Latin America. Khiron currently has 46.85m outstanding shares, management and board members currently own 31% of the float, and their last raise had 1.00$ shares and 1.20$ warrants, this combination will eventually allow the share price to increase significantly once more news comes out and there is more investor awareness.
2) FSD Pharma (CSE:HUGE) a Canadian company, which currently holds a licence to cultivate for their facility in Ontario, started trading on the CSE. Their first day of trading broke the all-time record for volume traded, making the company the largest volume traded in a single first day of trading in the history of the CSE. Unfortunately, FSD Pharma currently has 1.31 Billion outstanding shares more than double any other Mj company trading on the CSE. With that many outstanding shares, if there is no news, investors may get bored and the share price may stay at around 10cents. For a fairly new public company, it makes me question why management would approve to have that many outstanding shares, and new investors should definitely do their research before investing, just because the share price is low doesn’t mean it will ever reach a dollar any time soon.
3) MedMen Enterprises Inc (CSE:MMEN) is the preeminent cannabis company in the U.S. with assets and operations in California, Nevada and New York. With a half-finished website, company fillings that were incomprehensible, and some of the highest salaries and bonuses set for management, which make some of us believe that MedMen should have taken their time before going public. Just like FSD Pharma this is another company that investors need do research before investing
Now let’s analyse the top 3 companies and why they did so well compared to the rest of the sector:
1) Leviathan Cannabis Group Inc (CSE:EPIC) +112.90% is poised to be the leading multi-jurisdictional cannabis enterprise on the global stage. They first caught our eye when they were trading under the symbol JH, they had low outstanding shares and the acquisition of Jekyll+Hyde Brand Builders Inc looked very promising. Having a strong branding is definitely key in the sector. Unfortunately, their website was not up to date and it wasn’t clear if they would become growers in the future. On April 25th Epic partnered with Cannabis Compliance Inc which was their first step in a future acquisition. Fundamentally starting that date it looked like it was only a matter of time before Epic would break out. Not even a month later the news hit Leviathan agreed to acquire Woodstock Biomed Inc. A late stage applicant with a property that features a 350,000 sq. ft. facility on 29.5 acres of land. Epic also plans to rapidly increase the facility to 1 million sq. ft., this is definitely the cause of the rapid increase in the share price. Now what shareholders will need to be careful in the next couple months is that Epic will need to dilute the shares to raise the money to make this deal. They are currently doing a private placement of $0.50 shares and $1.00 warrants which are a lot lower than the current share price of Epic, therefore 4 months after the private placement closes there may be selling pressure. Lastly Epic recently appointed Martin J. Doane as CEO, Mr. Doane has a lot of experience in the sector and may have the connections and knowledge to make the shares continue being profitable for investors. We will now keep a closer eye on Epic and see if there are more signs in their news releases and technical analysis that will lead to a breakout. Hopefully we see some share price consolidation until then.
2) SpeakEasy Cannabis Club Ltd (CSE:EASY) +111.67% a late stage ACMPR applicant that is leveraging three generations of farming experience and the largest land package of LP in Canada with 290 acres. On April 5th they started trading on the CSE, with low outstanding shares, 4 generations of farming experience, and acres of land, it was just a matter of time before a breakout. Easy currently has a small 10k sq feet facility and they recently started expanding it to 80k sq feet. They recently entered a letter of intent with Valens Groworks Corp. (CSE:VGW) where Easy would supply VGW with between 2500-5000 kg of cannabis a year, where VGW will use it for extraction purposes. Easy and VGW would also partner up where Easy would be able to take advantage of VGW’s dealer licence. A couple days after the VGW LOI, Easy announced they would be doing a private placement at $1.00 per share and $1.50 per warrant and it closed pretty quickly which leads investors to believe there might be still room to grow even over 1$. If Easy is able to keep their share price over 1$ and keep consistent news, they won’t need to dilute their shares that much to get the funds they need to expand their facility.
3) The Green Organic Dutchman Holdings Ltd (TSX:TGOD) +45.76% has a funded capacity of 116,000 kg and is building 970,000 sq. ft. of cultivation facilities in Ontario and Quebec. TGOD began trading on the TSX on May 2nd, 2018. They were the biggest IPO in the sector to date. Fully diluted they have 323.4m outstanding shares, but currently, only approximately 190m shares free trading because the shares from the private placements have a 6-month hold from the IPO date. This currently gives TGOD less selling pressure, but investors will need to be careful because there will be a lot more shares free trading in a couple of months. Since their IPO TGOD has had news releases every couple of days, I believe the CBx Enterprises deal and the fact that TGOD also wants to be part of the beverage industry are some of the reasons why it had an amazing run. Its market cap is now over 1billion dollars, its currently competing with CRON to be the 5th LP with the highest market cap and ACB own 17.62% of TGOD, therefore ACB will definitely guide them in the right direction.
June seems to have started on the right foot, overall more companies are in the green, and Health Canada has approved more licences than May. Let’s hope the overall markets(sp 500 and Nasdaq) have a strong month which will bring in more investors and that the amendments to bill C45 get resolved in a timely fashion. There are a few new companies that are set to start trading, 48 North Cannabis and James E Wagner Cultivation, and then GTEC holding which will definitely be one to watch with its 5 late stage applicants and 1 future dealer licence applicant.
Disclaimer: The data found in the image of the top 53 %gains is pulled from google finance and may not be 100% accurate, but gives a good representation of how the stock did for the month. We do currently own some stocks mentioned in the article above, we do not intend to sell or buy in the near future. Once again we are not financial advisors we are just providing you with information, this is not a buy or sell recommendation for more information please view full disclaimer here.