Weekly Cannabis Commentary

Cannabis Industry Performance

Source: FRC

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.

Valuation

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.

Source: S&P Capital IQ, FRC

 

Source: S&P Capital IQ, FRC

 

Source: Online Provincial Cannabis Stores, FRC

 

The average retail price per gram fell WoW from $11.04 to $11.03.

Source: Online Provincial Cannabis Stores, FRC

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.

Source: Provincial Websites, FRC

 

Source: Provincial Websites, FRC

Weekly Cannabis Commentary:

Source:https://www.researchfrc.com/weekly-cannabis-commentary-107