The Canadian marijuana stocks we’ve identified have significantly higher Debt/Equity Ratios than the 21% industry average
SmallCapPower | November 8, 2018: Leaders in the cannabis industry have spent the past year expanding cultivation facilities or making strategic acquisitions in efforts to ramp up cannabis production to meet consumer demands. The capital required to complete these investments was raised in one of two ways: by issuing shares (equity) or by taking on loans (debt). In Canada, raising capital through debt can be advantageous as interest fees are expensed, thus reducing the amount paid on income tax. However, taking on too much debt can make a company a riskier investment – should a debt-bearing company’s projected cash flows not come to fruition, there is a risk of default. Today, we have discovered five Canadian marijuana stocks with Debt/Equity ratios significantly higher than the industry average of 21% (calculated from the 35 largest cannabis companies by market cap). Note: all prices reflect closing prices as at November 6, 2018.
Wildflower Brands is a Vancouver-based cannabis company focused on developing and designing branded cannabis products. The Company produces both CBD and THC products, employing a vertically-integrated business model that includes R&D, manufacturing, distribution, marketing and retail. It sells its CBD branded products online and to more than 200 retailers throughout the United States. Its THC products are marketed and sold in regulated cannabis jurisdictions. In 2017, Wildflower acquired King Extracts, a California based company focused on cannabis technology and delivery systems. On October 4, 2018, the Company announced that it had grown its online sales by 300% this year with revenues approaching $1M.
- Market Cap: $51.6 Million
- Total Debt (Last Quarter): $8.1 Million
- Total Debt to Equity Percent (Last Quarter): 153.6%
- 1-Month Total Return: -25%
Organigram Holdings Inc. (TSXV:OGI) – $6.51
Organigram is a Canada-based marijuana producer operating in New Brunswick. The Company currently produces 22,000 kg/year out of its 134,000 sq. ft. facility. OGI plans to expand this facility, increasing production to 65,500 kg by April 2019 and 113,000 kg by April 2020. The Company has signed Memorandums of Understanding with New Brunswick for the supply of five million grams in 2018 and Prince Edward Island for the supply $8M-$12M worth of cannabis to the recreational market.
- Market Cap: $840.2 Million
- Total Debt (Last Quarter): $98.7 Million
- Total Debt to Equity Percent (Last Quarter): 59.9%
- 1-Month Total Return: -12.6%
Canopy Growth Corporation is the largest cannabis company listed by market cap on the TSX and NYSE. To position itself in the Canada’s recreational market, the Company has secured agreements with the Provinces of Quebec, Prince Edwards Island, New Brunswick, and Newfoundland & Labrador to supply their adult consumer market with high-quality cannabis. The Company has the largest licensed production platform in Canada, with over 600,000 sq. ft. of production space. To further solidify their leading position in the market, the Company expects to have up to an additional 5,000,000 sq. ft. of production over the next 12 months. The Company has also acquired the necessary agreements to export medicinal cannabis to Australia, Brazil and Germany.
- Market Cap: $18,939 Million
- Total Debt (Last Quarter): $620.3 Million
- Total Debt to Equity Percent (Last Quarter): 50.7%
- 1-Month Total Return: -8.7%
Sunniva Inc. (CSE:SNN) – $5.12
Sunniva is a Canada-based cannabis producer of medical marijuana. The Company is vertically integrated with operations divided between production, clinics, and paraphernalia. 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 October 17, 2018, Sunniva announced they had signed a letter of intent to acquire the Oakland Vision Project, a licensed cultivation and genetics facility located in Irvine, California.
- Market Cap: $186.5 Million
- Total Debt (Last Quarter): $23.3 Million
- Total Debt to Equity Percent (Last Quarter): 34.8%
- 1-Month Total Return: -2.9%
iAnthus Capital Holdings Inc. (CSE:IAN) – $7.40
iAnthus Capital Holdings is a cannabis-focused company operating ~275,000 sq. ft. of cultivation and 39 dispensaries across six U.S. states. The Company’s primary asset, GrowHealthy, operates a 200,000 sq. ft. facility and 30 dispensaries in Florida, out of 13 state cultivation licenses and 35 open dispensaries. In August, the Company announced a US$8.1M investment to expand the Company’s Lake Wales facility. The expansion will increase capacity to 11,689 sq. ft. and includes a 500 sq. ft. mock dispensary used for staff training. On October 18, 2018, the Company announced its acquisition of MPX Bioceutical in a deal worth $835 million.
- Market Cap: $545.7 Million
- Total Debt (Last Quarter): $41.5 Million
- Total Debt to Equity Percent (Last Quarter): 31.1%
- 1-Month Total Return: 2.8%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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