Weekly Cannabis Commentary
Cannabis Industry Performance
Last week, both U.S. and Canadian cannabis stocks rebounded amid two positive sector developments:
- A new Republican-led cannabis legalization bill is being drafted, with the final version set to be tabled later this month. We believe this is a big step towards legalization as the Republicans have generally been against legalization in the past.
- Curaleaf Holdings Inc. (CSE:CURA) acquired Tryke, a privately held Arizona-based cultivator with six dispensaries, for $132M. This acquisition has an EV/R of 1.2x vs the sector average of 6.4x. 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.
As of November 8, 2021, the Canadian big four LPs were trading at a 55% premium (down from 58% in the previous week) over their U.S. peers.
The average retail price per gram increased WoW from $11.03 to $11.04.
Canadian Retail Cannabis Stores
As of November 8, 2021, there are 2,756 retail cannabis stores in Canada, a WoW increase of 51 stores, including 25 in Ontario, nine in Alberta, three in B.C., three in Manitoba, seven in Nova Scotia, and four in Newfoundland. Except Alberta, every province has higher population to store ratios than mature markets in the U.S. We believe there is room for another 1,500 stores in the country.