Investor Ideas Potcasts, Cannabis News and Stocks on the Move: (TSX: FAF), (TSX: AVCN), Canadian Cannabis Regulations and a Drop in Analyst Coverage
Delta, Kelowna, BC - May 29, 2023 (Investorideas.com Newswire) investorideas.com, a global news source covering leading sectors including marijuana and hemp stocks and its potcast site release today's podcast edition of cannabis news and stocks to watch plus insight from thought leaders and experts.
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Investor Ideas Potcasts, Cannabis News and Stocks on the Move: (TSX: FAF), (TSX: AVCN), Canadian Cannabis Regulations and a Drop in Analyst Coverage
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Today's podcast overview/transcript:
In today's podcast we go over a few public company announcements, the state of cannabis regulations in Canada and the lack of analysts covering the US cannabis industry.
In a recent story from CTV News, in a submission to Health Canada and a panel reviewing cannabis legislation published Friday, the Competition Bureau positioned changing tetrahydrocannabinol (THC) limits and giving pot companies more freedoms around packaging and marketing as a way to boost competition.
"The bureau believes that stronger competition in the cannabis industry would help foster innovation and benefit consumers by providing them with increased choice and quality," it wrote in its submission.
"Importantly, these benefits would serve to further displace illicit market activity and bolster the legal cannabis industry."
A 2022 survey from Health Canada found nearly half of the 10,048 respondents who used cannabis in the past year purchased the substance exclusively from legal sources, an increase from 43 per cent in 2021.
Some believe the true share of the illicit market is higher because of the stigma around revealing cannabis use.
Cannabis producers and shops have long felt THC and packaging changes would chisel away at the market share illicit sellers have and help them reduce the hefty number of layoffs, facility closures and write downs they've taken in recent years to keep their businesses afloat.
Stakeholders have told the bureau increasing the limit to 100 mg "could make edible cannabis products more appealing to consumers, especially those currently sourcing them from the illicit market."
The bureau suggested easing restrictions on cannabis promotion, packaging and labelling would also give producers more room to innovate and help consumers make more informed purchasing decisions.
The bureau also took aim at the cannabis licensing process and compliance costs, suggesting they be made "minimally intrusive to competition, where possible."
The process currently requires cannabis producers to have facilities nearly completed -- a process often costing millions -- before they can receive licenses. Then, there are "lengthy and costly" security requirements and annual regulatory fees.
"By minimizing the regulatory burden of the licensing process and reducing compliance costs, where possible, decision-makers can reduce barriers to entry and expansion, as well as stimulate even more effective competition," said the Bureau.
Rounding out its recommendations was a suggestion regarding excise duties, an area outside of the panel reviewing the act's purview.
The duties are imposed on products when they're delivered to buyers. For dried and fresh cannabis, plants and seeds, they amount to the higher of $1 per gram or a 10 per cent per gram fee.
For edibles, extracts and topicals, it's a flat rate based on the number of milligrams of total THC in the product. There are additional duties in Alberta, Nunavut, Ontario and Saskatchewan.
The total amount of unpaid cannabis excise duties has risen since legalization, the bureau said. As of September 2022, 66 percent of licensees required to remit excise duties had an outstanding debt with the Canada Revenue Agency, the bureau said.
"Many stakeholders interviewed by the bureau raised Canada's excise duty framework -- and excise duty rates specifically -- as a major barrier to competition in the cannabis industry," the submission said.
"These stakeholders told the bureau that the current excise duty regime makes profitability and viability in the industry very challenging."
Avicanna Inc. (TSX: AVCN) (OTCQX: AVCNF) a biopharmaceutical company focused on the development, manufacturing and commercialization of plant-derived cannabinoid-based products announced the execution of the definitive Asset Purchase Agreement between Shoppers Drug Mart® ("Shoppers") and Avicanna for Avicanna's acquisition of assets of the Medical Cannabis by Shoppers business with a final closing date set for July 31, 2023.
"Since the initial announcement in March 2023, we have worked diligently and collaboratively to develop and execute a seamless process for transitioning patients, and address various patient, product and operations matters through the buildout of MyMedi.ca. We wish to express our thanks to everyone involved, and in particular to the Shoppers Drug Mart team, for getting us to this exciting milestone," stated Aras Azadian, CEO of Avicanna Inc.
As part of the Agreement's terms, Avicanna will acquire specific assets of the Business, including inventory and equipment, for approximately $2.6M and will pay Shoppers an earn out, based on net revenues, for a period of two years. During the transition period, patients of Medical Cannabis by Shoppers are still able to purchase products on the Medical Cannabis by Shoppers platform until the closing of the transaction at the end of July. The MyMedi.ca platform will be launched on the closing date of the transaction, at which point, patients may make purchases through MyMedi.ca.
Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWF), announced that it has engaged a financial advisor to assist the Company with reviewing strategic options including financing options. As disclosed in the Company's interim financial statements and management discussion and analysis released on May 15, 2023, the Company will require additional financing and is actively pursuing financing options to raise additional capital in order to fund its operations, meet its future growth targets and continue to operate as a going concern. There is no assurance that these initiatives will be successful, timely or sufficient.
Reference is made to Fire & Flower's financial statements and management discussion and analysis which are available on Fire & Flower's SEDAR profile at www.sedar.com and on Fire & Flower's website at https://investors.fireandflower.com including the disclosure under "Liquidity and Capital Resources" in the Company's interim management discussion and analysis and "Note 1-Nature of Operations and Going Concern" in the Company's interim financial statements.
Lastly, in a recent article from MJBiz Daily, apparently fewer research analysts are covering the U.S. cannabis industry, which experts say reflects the challenging economic headwinds facing the industry, including high taxes, high interest rates, rock-bottom stock prices and the slow pace of federal MJ reform.
New York-based Cantor Fitzgerald and Cowen are among the more notable financial-services firms that have dropped coverage of U.S. plant-touching cannabis companies.
"It speaks to the unhealthy state of our industry," Jesse Redmond, the managing director of the cannabis sector and head of research at Florida-based Water Tower Research, told MJBizDaily.
The AdvisorShares Pure US Cannabis ETF – which tracks major U.S. marijuana stocks under the symbol MSOS – has fallen to just over $5 from a high of more than $56 in February 2021.
In addition, cannabis companies are increasingly turning to debt financing rather than equity raises, which means there's a smaller audience for research.
Low share prices and fewer mergers and acquisitions, initial public offerings and other types of banking activities mean there's less revenue to fund research, Redmond said.
"Without that activity, there aren't the revenues to justify paying the person to write the research," he said.
The recent shake-up includes:
- New York-based Cantor Fitzgerald, which has stopped covering all U.S. marijuana companies except for WM Technology, which operates the Weedmaps platform, after the departure of analyst Pablo Zuanic.
- New York-based Cowen, which was recently acquired by Canada-based TD Bank, is no longer coveringS. cannabis companies. But analyst Vivien Azer will include the industry's larger trends as part of her beverages, tobacco and cannabis portfolio.
- Jon DeCourcey, a former analyst covering the cannabis industry, is no longer with financial services firm BTIG, which specializes in investment banking, institutional trading and research. He is now head of investor relations at Florida-based multistate cannabis operator Ayr Wellness, according to DeCourcey's LinkedIn profile.
Neither Cantor Fitzgerald, Cowen nor BTIG responded to requests from MJBizDaily for comment.
Many other financial-services firms are still providing coverage of U.S. plant-touching companies, such as Florida-based Water Tower Research, New York-based capital markets company Viridian Capital Advisors, Toronto-based Echelon Wealth Partners and Vancouver, British Columbia-based Canaccord Genuity.
Back in 2019, both operators and service providers were optimistic that federal legalization and/or the SAFE Banking Act would be passed in Congress.
Industry officials also were increasingly hopeful that big institutional investors would take an active interest in the U.S. cannabis industry – a move that could have provided key funding to companies.
But none of that has happened.
Instead, retail investors still make up the bulk of investment in U.S. cannabis, Water Tower's Redmond said.
Matt Karnes, founder of New York-based cannabis financial consultancy Greenwave Advisors and a former sell-side and buy-side analyst, told MJBizDaily that plenty of cannabis companies are still finding their footing trying to pivot out of oversaturated legal markets and looking for promising paths to profitability.
"You make your investment based on what comes out on a quarterly report," Karnes said.
"And then two quarters later – oops! How is that supposed to give any investor confidence?"
With fewer analysts covering cannabis, Karnes said, it could contribute on a small level to the enormous difficulties U.S. plant-touching companies are having attracting investment in the industry.
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