Canadas Black Market Marijuna Remains Stronger Than Legal Market
Cannabis stocks were mixed on Monday as new data emerged about the state of Canada’s legal market and Aurora Cannabis Inc. completed its acquisition of a British Columbia–based medical weed company.
Data from the Canadian government shows that the black market for cannabis remained strong in the fourth quarter of 2018, accounting for C$1.17 billion ($878.7 million) of sales, compared with $307 million in legal market sales.
The black-market purchases were 8% lower than in the third quarter, the first to follow full legalization of cannabis for adult recreational use on Oct. 17. On a percentage basis, illegal sales accounted for 79% of the overall market, down from 90% in the third quarter, the data showed. The development of the legal market was hampered by shortages of product after many provinces underestimated demand.
In the U.S., a recent Farm Journal survey of crop farmers and livestock producers found farmers are becoming more accepting of growing and using cannabis, although they are more comfortable with the nonpsychoactive ingredient CBC and medical applications than of the psychoactive ingredient THC and recreational applications.
Farming and ranching are traditionally conservative professions, with 80% of surveyees aged 55 and older, according to MJBizdaily.com.
In company news, Aurora Cannabis Inc. ACB, +4.50% ACB, +3.85% completed the acquisition of Whistler Medical Marijuana Corp.by buying all of Cronos Group Inc.’s CRON, +1.21% 19% stake in a deal valued at C$175 million in stock. Cronos has received about 2.5 million Aurora shares worth about C$24.6 million and will receive another C$7.6 million upon reaching certain milestones.
Whistler, which was founded in 2013, is one of Canada’s original 10 licensed producers and was first to obtain organic certification. The company has two indoor licensed production facilities with combined production capacity of more than 5,000 kilograms a year and the capacity to expand to over 15,000 kilos.
Cronos shares were last down 2.8%, while Aurora fell 3.1%.
CannTrust Holdings Inc. shares CTST, -2.10% TRST, -0.17% fell 5.9% after the company said it has filed a shelf registration to sell up to C$700 million of debt or equity. The registration statement has been filed with the SEC but has not yet become effective, meaning the company cannot issue securities for now.
Aphria Inc. shares APHA, -0.38% APHA, -0.51% rose 2.1%, after the company said the health ministry Health Canada has approved the addition of an extra 800,000 square feet of facilities that will enable it to produce 80,000 kilograms a year. That will boost its annualized production capacity to 110,000 kilograms.
Arcadia Biosciences Inc. shares RKDA, -4.51% soared 13.7%, after the food-ingredients and nutritional-oils company said it was granted its first industrial hemp pilot progam license in Hawaii. The license allows Arcadia Specialty Genomics, the company’s cannabis-focused business unit launched last week, to begin research and cultivation of hemp, planted on 10 acres of leased land.
“Industrial hemp, along with all strains of cannabis, are decades behind other agricultural crops in terms of improved plant genetics,” said Arcadia Chief Financial Officer Matt Plavan. “With the explosive legal market growth projected in the industrial hemp and derivative markets, growers will need the very best hemp strains to meet demand, minimize waste, and ensure consistent quality.”