It’s been a historic week for the stock market. On Thursday the markets plunged the most since the stock market crash of 1987. Not surprisingly, the cannabis sector was hit extremely hard this week as well, with fresh 52-week lows across the board for many of the large caps.
During these unprecedented times, we need to understand what is going on here. We have never had a global epidemic hit the world when social media and the internet has existed in this capacity. Billions of people own a smartphone and the entire world is talking about the virus. This has resulted in a global panic that has affected almost every aspect of everyday life for most citizens of the globe. What is wreaking havoc on the financial markets which include the cannabis sector is the fact that we don’t know how long it will take to contain the virus. As consumers stop spending and prepare for the worst, companies will take drastic revenue hits in the coming quarter. Depending on the impact of the virus on financial markets, this could have serious repercussions for many cannabis companies looking for funding.
Aurora Cannabis (ACB) drops below $1
It has been an extremely brutal week for Aurora Cannabis. The stock hit a low of $0.63 on the NYSE this week causing investors to panic. This comes after rumors that the company would be forced to initiate a reverse stock split in order to maintain that $1 minimum price in order to stay on the NYSE. Many investors are against the thought of ACB initiating a reverse stock split as it leaves room for management to continue to be reckless instead of doing everything and anything to turn the company around. As prices plunge into no man’s land, investors can only hope that the market will find support. We are in uncharted territory and as the coronavirus situation unfolds, the cannabis sector remains one of the highest risk sectors to be in right now.
Canopy Growth (CGC) extends investment into TerraScend
Despite the market turmoil, CGC is putting capital to work, extending its $80.5 million dollar loan to TerraScend. The loan is secured to a debenture along with TerrAscend issuing 17,808,975 common share purchase warrants to CGC. During the toughest of times, this goes to show that cash is king in a market that will soon be strapped for liquidity. As stock prices dwindle, CGC continues to maintain a high cash balance on its books thanks to the initial investment from Constellation Brands (STZ). In our opinion, the companies who are best positioned to weather this fierce and hard-hitting storm are the companies with the most cash, CGC being one of them.
Innovative Industrial Properties (IIPR) adds another tenant
Innovative Industrial Properties continues to move forward, as they add yet another tenant with a $35 million acquisition of Parallel’s Florida cannabis cultivation facility. IIPR announced today that it closed on the acquisition of a property in Wimauma, Florida. This property is approximately 373,000 square feet of industrial and greenhouse space. Parallel is the parent company for Surterra Wellness which is a leader in the Florida market. The company has 39 retail locations across the state. With adequate cash on hand, IIPR is in a perfect position to capitalize on the falling prices in the market today. When fear is present and everyone is scared, opportunities present themselves, like this one for IIPR.
ACB shares were trading at $0.71 per share on Friday afternoon, up $0.01 (+1.43%). Year-to-date, ACB has declined -67.13%, versus a -21.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More…