Today we’ve dug up some Canadian cannabis stocks that have been hit the hardest since the recent marijuana sector selloff
SmallCapPower | December 7, 2018: On December 3, 2018, Quintessential Capital Management and Hindenburg Research co-authored a short-seller report describing Aphria Inc. (TSX:APHA) as a “blackhole,” sending shockwaves throughout the industry. The report resulted in an industry-wide decline led by Aphria, which fell in excess of 30% driven by negative allegations outlined in the report. It appears this spooked cannabis investors, as the report raised many questions about financial reporting and disclosure quality across the industry in general. This resulted in a harsh selloff across the industry, regardless of fundamentals. This may present an attractive entry point for investors looking to build positions in the cannabis space, as valuations across the board have come down since the highs of October. Today we’ve identified three Canadian cannabis stocks that may be ripe for a rebound, as investors dissociate Aphria concerns from the broader industry.
*Market Cap and share prices as of December 5, 2018. 3-day returns are for the period December 3 – 5.
Sunniva Inc. (CSE:SNN) – $3.30
Sunniva is a Canada-based cannabis producer of medical marijuana. The Company is vertically integrated with operations divided between production and clinics. The Company is currently expanding its existing facility and constructing a second that it hopes will yield a combined 200,000 kg/annum by 2020. On November 27, 2018, Sunniva announced the acquisition of LTYR Logistics, a California-based cannabis distribution company headquartered in San Diego. The acquisition will play a vital role in Sunniva’s goal to become a vertically-integrated cannabis company within California. On December 3, 2018, Sunniva reported its Q3 2018 financial results. The Company reported $13.4 million in revenue for the nine months YTD, compared to $10.2 million during the same period in 2017.
Emerald Health Therapeutics Inc. (TSXV:EMH) – $2.44
Emerald Health Therapeutics operates an indoor cultivation facility in Victoria, British Columbia, and intends to expand into additional greenhouses. Emerald estimates its 2020 capacity to be as much as 71,000 kg/year. On October 16, the Company announced that it had filed 17 provisional U.S. patent applications covering Emerald’s unique Defined Dose cannabis dosage forms including technologies for smoking, vaping, capsules and edibles. On December 4, 2018, the Company announced it is selling 4 million common shares at a price of $2.70 a share, generating gross proceeds of $10.8 million. The recent Aphria news, combined with a future dilution of equity, have taken a toll on EMH’s stock price.
Planet 13 Holdings Inc. (CSE:PLTH) – $1.62
Planet 13 Holdings produces and distributes both medical and recreational cannabis in Nevada. Offering cannabis extracts, infused products and hand-selected plants, the Company operates under the Medizin and Planet 13 brand names. PLTH closed its bought deal public offering on December 4th, raising C$26.4 million in gross proceeds. Opening one of the largest and most advanced dispensaries in the world adjacent to the Las Vegas strip, the Company plans to use the net proceeds for Phase Two of the project. This includes expansion of production capabilities, general corporate purposes and other working capital functions.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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