The Investing News Network rounds up some of the biggest company and market news in the cannabis market for the past trading week.
During the past trading week (October 21 to 25), a critical marijuana deal in the US under federal review cleared its waiting period.
The Investing News Network covered the poor performance seen by a Canadian marijuana producer, while other news in the space included a variety of critical opinions on the current state of the investment market for cannabis plays.
Here’s a closer look at some of the biggest cannabis news over the last week.
Zenabis investors face a difficult trading week
Shareholders of Zenabis Global (TSX:ZENA) saw their investment drop throughout the week as the company made a variety of critical announcements to the market.
The company faced its biggest drop for the week after it confirmed a new rights offering for current shareholders. A spokesperson for the company told INN the move had already secured guarantees of participation from insiders representing 30 percent of the entire rights offering.
Despite the commitment, the market reacted negatively to the deal and shares of the company saw a sharp decline of 39.76 percent last Thursday (October 24).
“Zenabis believes this is the least dilutive manner to raise incremental capital given current market conditions,” the company said.
Earlier in the week, the firm indicated its expansion plan for a facility in Langley, British Columbia, would be split into two phases, with the second phase getting delayed. This decision was made, according to the company, as a way to combat current market conditions and protect its cash flow.
“By early in the first quarter of 2020, we expect to have 111,200 kilograms of capacity licensed and operational with the approval of the Zenabis Langley — Part 2B amendment,” Andrew Grieve, CEO of Zenabis, said.
The company also announced a new supply deal partnership with privately held British Columbia producer Tantalus Labs.
Cresco Labs’ deal for Origin House clears review waiting period
Last Tuesday, Cresco Labs (CSE:CL,OTCQX:CRLBF) and Origin House (CSE:OH,OTCQX:ORHOF) confirmed that their much-anticipated acquisition deal had completed its waiting period under the Hart-Scott-Rodino Antitrust Improvements (HSR) Act.
Marc Lustig, CEO of Ontario-based Origin House, called the expiration of the review period an important development for the deal itself and the cannabis industry at large.
The deal was under review as the US Department of Justice (DOJ) took an increased interest into recent marijuana deals. Cresco Labs said the two firms are now working on closing the deal with new terms they can both agree on. The deal now holds a deadline of November 15 to be completed.
Expert opinions on the changing landscape for cannabis
In an exclusive interview with the Investing News Network (INN) the executive team of Cannabis One Holdings (CSE:CBIS) explained the adjustments their firm has taken in order to meet the increasing metrics from the investment market.
The company, a cannabis brand and asset aggregator, is pursuing more rigorous acquisitions and has seen its list of potential targets reduced due to enforcing stricter standards.
“We’re seeing a number of prior targets for acquisition (that are) no longer our target because the investor desire to invest in a company that is … basically operating losses is no longer the landscape we’re operating in,” Cannabis One CEO Jeff Mascio said.
Hadley Ford, CEO of iAnthus Capital Holdings (CSE:IAN,OTCQX:ITHUF), spoke with INN after his panel at a recent investor event in Toronto about the struggles for marijuana companies due to the current state of the investment market.
“The actual values that exist in the market today bear no resemblance to what the value of the actual companies are,” Ford said. In his opinion, there is a disconnect between the true values of companies compared to the current sentiment surrounding these stocks.
The executive also highlighted the change in capital raising ability seen throughout the space. “We’re all getting painted with the same brush,” Ford told INN. “Six months ago, anyone who smoked a joint could raise US$100 million. Now? It’s tough.”
During a webinar event for investors, Charles Taerk, president and CEO of Faircourt Asset Management, said investors need to be aware of the difficult investment landscape facing the marijuana market.
The expert pointed to a growing trend he expects to see more cannabis players in: a lack of available financing, especially if a company has not yet diversified its approach.
“This is a situation that many Canadian companies that are either pre-revenue, or (have) very small revenue numbers, are going to be facing because the credit facilities and the equity markets have dried up,” said Taerk.
This past week, vape pen maker company PAX Labs announced a reduction in its staff of 25 percent of workers. The company said the cuts were due to a recent “significant revenue miss” for the firm. PAX Labs holds supply partnerships with five marijuana producers in Canada. The company declined to explain in further detail if this workforce reduction would affect its plans in the Canadian market.
A report indicated Aphria (NYSE:APHA,TSX:APHA) is looking to get rid of its stake in Australian company Althea Group Holdings (ASX:AGH). This would represent the third Canadian firm with a significant investment in the Australian cannabis market to have recently announced a shift in that investment.
Previously, Canopy Growth (NYSE:CGC,TSX:WEED) and Cronos Group (NASDAQ:CRON,TSX:CRON) announced a change in their Australian investments. Canopy Growth will sell its 13.2 investment stake in AusCann Group Holdings (ASX:AC8) while.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.