Pot and gold stocks moving in opposite directions
TOP NEWS OF THE WEEK
Aurora lays off another round of staff in latest effort to turn a profit
Aurora Cannabis announced another round of layoffs as the former cannabis giant continues to reshape itself into a leaner organization. Aurora confirmed in an email to The Canadian Press that it was shedding 12 per cent of its workforce, but didn’t disclose the exact number of workers it planned to lay off. The company last said in a Sept. 2021 filing that it had 1,643 employees. The layoffs are part of Aurora’s plan to cut $70 to $90 million in costs to attempt to become profitable, and previously announced plans to shut down several facilities including its flagship production plant in Edmonton. Still, Aurora shares experienced a move upward on Friday after one analyst raised their recommendation on the company’s stock given its exposure to the German and European markets.
Hexo places Zenabis subsidiary in creditor protection, Sundial makes bid
Hexo announced on Monday that its Zenabis subsidiary would be filing for creditor protection in a move aimed at restructuring its business and financial affairs. Hexo, which bought Zenabis for $265 million last year, was part of the company’s effort to essentially buy market share in the hyper-competitive Canadian market alongside other acquisitions such as Redecan Pharm and 48North. Following the announcement, rival producer Sundial Growers said it will make a stalking horse bid to acquire Zenabis’ various assets – including a pair of facilities based in Atlantic Canada – for an unspecified amount. Sundial bought nearly $60 million of Zenabis’ debt in Dec. 2020, which should place it near the front of the line in Zenabis’ creditor list. The move could give Sundial additional exposure to the European cannabis market.
Toronto club to open outdoor cannabis consumption space
The owner of a Toronto club has created a space for clubgoers to consume cannabis legally, the CBC reports. The Grand Bizarre, located on the grounds of Exhibition Place, launched its “Cannabis Carnival,” believed to be the first dedicated place to smoke cannabis that is onside with Ontario’s Smoke Free legislation. "I think cannabis smokers in general need a safe, responsible place to smoke when they go out," said Zlatko Starkovski, president of Grand Bizarre. The consumption space was created in collaboration with Mothers Against Drunk Driving and the Ontario Cannabis Store as educational partners, the CBC said. The space will be open throughout the summer with the potential to be open year-round.
Canadian pot sales up nearly 4% in April: StatsCan
Canadians bought a whopping $372.4 million of cannabis in April, a monthly increase of 3.7 per cent, driven by increased sales in Ontario and Quebec, according to Statistics Canada. On an annualized basis, Canada’s cannabis market operates at a $4.46 billion run rate. Ontario continued to lead all provinces with $150 million in cannabis sales, a monthly gain of four per cent, while Alberta and Quebec also reported a sales improvement in April from March. Sales in Toronto rose five per cent to $51 million as more pot stores continued to open in the country’s biggest city despite concerns of a saturated retail market.
U.S. LEGALIZATION WATCH
SAFE Banking dropped from U.S. omnibus spending bill
Cannabis legalization in the world’s biggest consumer market hit a roadblock last week after the pro-marijuana Secure and Fair Enforcement (SAFE) Banking Act was stripped from an omnibus spending bill, drawing the ire of industry activists long-frustrated by the delays in getting any legislation passed. If passed, the SAFE Banking Act would allow banks and other financial institutions to more easily provide services to state-licensed marijuana-related businesses. Meanwhile, Politico reports that Senate Democrats are trying to find a compromise solution amid reports that Senate Majority Leader Chuck Schumer doesn’t have enough support to pass his own cannabis reform bill. Politico reports there’s a “greater sense of urgency,” according to one lawmaker, to get something passed over the next six months before the November mid-terms that could see the Democratic Party lose control of Congress. That solution appears to be placing elements of the SAFE Banking Act within another piece of legislation, although some policy experts believe the bill would be dead on arrival if it failed to add any criminal justice or social equity provisions.
ANALYST NOTE OF THE WEEK
Cantor Fitzgerald trims Tilray price target
Cantor Fitzgerald Analyst Pablo Zuanic said investor sentiment on Tilray is expected to improve despite deciding to cut his 12-month price target on the company’s stock to US$5.75 from US$6.15. Zuanic made the move after re-rating the entire sector and reducing estimates on the company’s future sales. “While we rate the stock neutral, we expect sentiment for the stock to improve in the months ahead on the back of news flow from Germany on the legalization of recreational sales,” he said. Tilray is one of three licensed producers that operate in Germany (Aurora is one of the others, and Zuanic upped his recommendation on that company’s stock as well) and is one of the country’s market leaders in the extracts and dried flower categories. Zuanic does note that Tilray has become a “meme stock” and its stock moves are often volatile as retail investors react swiftly to any U.S. legalization news.
CANNABIS SPOT PRICE
$5.22 per gram
-- This week's price is up 0.5 per cent from the prior week, according to the Cannabis Benchmark’s Canada Cannabis Spot Index. This equates to US$1,826 per pound at current exchange rates.
- The amount of Flowr Corp.’s workforce that the company said would be laid off in an effort to save $4 million a year. The company also announced it would sell its 17 acres of an outdoor cannabis production facility for $3.4 million.