MACRO

For the trading week ended 4/3/20 my Canadian Cannabis Company Index (MCCCI) declined 12.4%.as the bearish trend continued unabated during 2020. This index consists of 25 stocks, many of which are among the most widely-held holdings of the 3 ETFs (MJ, CNBS and THCX) that I consider to be a reliable barometer of the status of the industry as a whole. The MCCIs differentiated business model is both weighted and market capitalization based because I believe that this approach best represents the current landscape of the Canadian cannabis industry. In my view, there will be widespread carnage in this sector for the foreseeable future, including but not limited to business failures, consolidation, and a pronounced downtrend in valuation. Let’s look at this week’s good, bad and ugly stocks.

MICRO

THE GOOD

Delta 9 Cannabis Inc (OTCQX: VRNDF) gained 11.7 % to close the week at $0.33 and like many other Canadian cannabis companies went public via a “reverse takeover transaction” which I consider a sub-optimal event. My cursory review of VRNDFs 12/31/19 audited financial statements indicates that the company is woefully undercapitalized and faces serious financial challenges going forward.  The company’s anemic market cap of ~ $24M ranks it in the bottom 10% of the MCCCI which mutes its positive performance

THE BAD

MediPharm Labs Corp. (MEDIF) declined 22.3% and among the company’s many dubious distinctions of 2019 was being delisted from TSX Venture Exchange. MediPharm found a new home at the Toronto Stock Exchange where it now trades under the symbol “LABS.”and closed at $1.10 on 4/3/20.

AND THE UGLY

HEXO Corp (HEXO), which trades on both the NYSE and TSE, decreased 38% and closed the week at $0.67. HEXO was the subject of a “code blue alert” article I published on 1/8/20  at  Seeking Alpha, which is a partner of TalkMarkets. It now appears to me that the company’s financial and operational issues I cited then have mushroomed and may very well put HEXO in danger of being delisted by the NYSE. The stock is down more than 50% since the publication of my article, and I simply do not see the light at the end of the tunnel for HEXO for the foreseeable future.

RECAP

It was a very challenging week for Canadian cannabis companies. The relative strength indicator decrease of 14.1% was more than the overall index decline of 12.4% since the mark caps of both LABS and HEXO weigh more heavily on the relevant index metrics. Now that Q1 is over, let’s see what Q2 has in store for us at the same time next week shall we?