Weekly Cannabis Commentary
Cannabis Industry Performance
Last week, both Canadian and U.S. cannabis stocks fell 4%. Key sector developments (mostly negative) are listed below:
- Columbia Care (CSE:CCHW/ MCAP:$1.4B), a U.S. cultivator in 18 states, acquired Medicine Man, a Colorado based cultivator with four dispensaries, for $42M, comprised of $8.4M in cash and $33.6M in stock. Although acquisition multiples were undisclosed (as Medicine Man is a private company), this transaction is in line with our thesis that the industry will see a significant increase in M&A over the next 1-2 years.
- BDSA data showed that cannabis sales in Arizona, Illinois, Maryland, and Massachusetts increased YoY, but declined in Oregon, California, Colorado, and Nevada, in September. We were surprised to see sales declines in multiple states, including mature states such as Colorado. We are looking further into this to better understand the reason for lower sales.
- Tilray (NASDAQ: TLRY/ MCAP: $4.98B) was selected by Luxembourg’s Ministry of Health to supply certified medical cannabis to the country’s medical cannabis program.
- NY regulators announced that cannabis business permits will not be given until 2023; this is disappointing, as the state had legalized adult use cannabis earlier this year.
As of November 1, 2021, the Canadian big four LPs were trading at a 58% premium (up from 53% in the previous week) over their U.S. peers.
The average retail price per gram fell WoW from $11.04 to $11.03.
Canadian Retail Cannabis Stores
As of November 1, 2021, there are 2,705 retail cannabis stores in Canada, a WoW increase of 20 stores, including 12 in Ontario, four in Alberta, and four in B.C.