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Cannabis Wheaton, MedReleaf Corp., Aurora Cannabis Lead Sector Lower

— James West

Cannabis Wheaton Income Corporation (CVE:CBW) (OTCMKTS:KWFLF) (FRA:3KF) is getting hammered today, as is MedReleaf on the first day of its IPO, despite having closed a $100 million financing. Cannabis Wheaton is already underwater on their most recent proposed financing, which saw the lead syndicate bow out after internal pressure from their respective compliance departments and Mackie Research Capital Corp step in on a best-efforts basis, while Aurora Cannabis Inc.(CVE:ACB) (OTCMKTS:ACBFF)(FRA:21P) is also taking a hit thanks to the release of a large number of escrow shares into the freely tradable float. Cannabis Wheaton is off $0.16 or 14.16 percent, trading at $0.97 in early afternoon Wednesday June 7th, which has it $0.03 below the special warrant price of $1.  Unfounded rumours circulating on the street have created a hugely negative sentiment toward the entire cannabis sector. At the heart of the issue is the sense that Ontario’s securities regulators are asleep at the switch, having allowed a ludicrous valuation and capital structure to emerge around Cannabis Wheaton that has even the most cynical Bay Street pros shaking their heads.

Canopy Growth has lost over 60 percent of their value since November 16, 2016

Canopy Growth Corp (TSE:WEED) (OTCMKTS:TWMJF) (FRA:11L1) and Aphria Inc (CVE:APH) (OTCMKTS:APHQF) – formerly the darlings of the space –  have not been able to avoid the disdain for all things marijuana either. Canopy’s shares are off $0.04 to $6.78 on volume of 1.6 million, but the heart-stopping reality for the entire sector is that this company, which is the world’s biggest and was Canada’s first MMPR-licensed grower, has shed 62 percent of its value since touching its all time high in November 2016 of $17.86. That was the day regulators stepped in and halted Canopy 5 times as they sought to contain the wild exuberance that resulted from the Government of Canada’s Task Force on Cannabis Legalization and Regulation released its Framework for the Legalization and Regulation of Cannabis in Canada.

Aphria is also off its all time high of $8.77 by 45 percent in roughly the same time frame, trading today at $4.76 up $0.05 on the day on volume of 1.25 million shares. This despite Aphria’s focused expansion to what will be over 1 million square feet of operations, and their recently announced U.S. expansion strategy.

 

James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

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