U.S. CBD forecasts may need to be dialed back somewhat after FDA statement
The future of the U.S. cannabidiol – better known as CBD – market may be less rosy than previously expected after the U.S. Food and Drug Administration’s statement that it cannot conclude the cannabis compound’s safety in human or animal food products. Jefferies analyst Owen Bennett said “bullish forecasts” on the U.S. CBD market should be toned down, with his firm now projecting CBD retail sales should reach US$3.5 billion by 2022 compared to estimates that reached as high as US$22 billion. Bennett added in his note that while the FDA hasn’t finalized its decision on CBD regulation, its statement does signal that its approach is likely to be stringent. It’s also an opportunity for Canadian cannabis companies, which are often better capitalized than their U.S. counterparts, will be better equipped to satisfy tough FDA requirements. Meanwhile, the popularity of CBD products led Wisconsin to sign a new law that opens the U.S. state to (possibly) becoming a major hemp producer.
Trichome Financial to delist from TSX Venture for CSE exchange to tap U.S. cannabis market
Trichome Financial, a cannabis-focused investment and finance company, announced it plans to delist from the TMX Group’s TSX Venture exchange and begin trading on the Canadian Securities Exchange. The move will allow Trichome to pursue deals in the U.S. cannabis market, which it is unable to do so according to regulations mandated by the TMX Group for its two major exchanges. TMX Group, which operates the TSX and the TSX Ventures, does not allow companies that trade on the exchange to conduct cannabis-related business in a jurisdiction where it’s not federally permissible to do so. Trichome said approval for the listing by the CSE is expected in the first week of December 2019, and it is now evaluating opportunities in Canada, the United States, and other jurisdictions. Despite the TMX Group’s regulations, cannabis companies switching exchanges doesn’t happen very often, although Charlotte’s Web recently delisted from the CSE and trades on the TSX following the U.S. government’s move to legalize the sale of hemp products.
Slang Worldwide takes $95.4M write-down after reporting Q3 results
Shares of Slang Worldwide sank on Tuesday after the company wrote down $95.4 million in an impairment charge while notching $9.3 million in third quarter revenue, the company said in a statement. Slang, which invests and distributes various cannabis-related brands, also recorded a net profit of about $393,000 in the three-month period, better than the $16.1 million loss it reported a year earlier. The bulk of Slang’s impairment, roughly $87.8 million, was attributed to a write-down on its acquisition of National Concessions Group – which distributes brands (including the O.penVAPE, a top selling U.S. legal cannabis product) – in 10 U.S. states and Jamaica. Slang reportedly acquired National Concessions Group for upwards of $200 million, according to the Green Market Report.
TGOD shares slump after pot producer raises $22M in bought deal
It was another rough day for The Green Organic Dutchman investors as the company’s shares plummeted around 20 per cent on Tuesday. TGOD’s shares were impacted by the company’s announcement that it entered a bought deal with a syndicate of underwriters led by Canaccord Genuity that would net $22 million. Terms of the offering show more than 29.3 million units – which consists of one common share and one-half of one common share purchase warrant – at a price of $0.75. The warrants acquired have a price of $1 and can be exercised for a period of 36 months from closing of the deal. Another $3.3 million in proceeds could be generated with an over-allotment option using the same unit price and 4.4 million units, the company said. The bought deal is scheduled to close around Dec. 27 and the proceeds are earmarked to complete construction of its processing facility at Ancaster and general operational purposes. Jefferies analyst Owen Bennett said with TGOD’s financing now relatively secure, the next time the pot producer needs to raise again, it may do so closer to achieving positive cash flow and raise the amount through non-dilutive means.
Cresco Labs nets US$158M after selling facilities, ending deal to buy Florida’s VidaCann
Cresco Labs made a couple announcements on Tuesday, the first informing investors that it sold two properties in Ohio and Michigan to properties to Innovative Industrial Properties for US$38 million in a sale-leaseback deal. Cresco will also sign long-term lease agreements with IIP for the two properties that represent approximately 166,500 square feet of industrial space. Additionally, Cresco said it ended its proposed deal to buy Florida cannabis operator VidaCann it first announced in March. Ending the deal is expected to save Cresco about US$120 million, the company said. Compass Point analyst Rommel Dionisio said in a report that terminating the VidaCann deal will significantly alleviate Cresco's near term need for cash, while freeing up capital for the company to fund its expansion in states such as Illinois which will see recreational sales begin in January.
-- The amount of recreational cannabis dispensary sales calculated in September in Arizona, California, Colorado, Nevada, and Oregon, according to BDS Analytics. The total is 14.7 per cent above sales reported last September, BDS said.
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