Cannabis stocks were mostly higher Wednesday, as investors awaited the results of shareholder votes on Canopy Growth Corp.’s proposal to acquire Acreage Holdings Inc. with the companies hosting separate meetings that kicked off at 10 a.m.
Canopy CGC, >+1.74% WEED, >+0.87% has an option to buy Acreage ACRGF, >+2.95% once cannabis is fully legalized in the U.S. for $3.4 billion, giving it a foothold in what is expected to become the biggest cannabis market in the world. The deal must be approved by shareholders from both companies, allowing Acreage to sell some of Canopy’s best-known brands, including Tweed and Tokyo Smoke.
Canopy, which will report its fiscal fourth-quarter earnings after the bell Thursday, has warrants in two other U.S. companies, Terrascend and Slang Worldwide, which it can exercise once federal regulations change.
Bank of America lowered its stock price target for Canopy by $5 to $75 on Wednesday, according to Benzinga. The bank is sticking with its buy rating on the stock, which was last up 1.7%.
CannTrust Holdings Inc. shares CTST, >+8.92% TRST, >+6.77% soared about 7%, after that company unveiled its plan to establish a presence in the U.S. via a joint venture with California’s Elk Grove Farming Co. LLC. The two are creating an entity that will be 50% jointly owned and will provide access to more than 3,000 acres of land in the Golden State to produce hemp with a high concentration of CBD, the non-intoxicating ingredient in the plant that is held to have wellness properties.
“The opportunity in the U.S. for CannTrust is to become a trusted supplier of consistent, standardized and high-quality hemp-derived CBD formulations at scale,” CannTrust said in a statement.
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The company will process, formulate and sell hemp-derived CBD product in U.S. markets that allow it and expects to start cultivation in 2020. Hemp was legalized in the 2018 Farm Bill, although CBD remains under the regulatory purview of the U.S. Food and Drug Administration, which is working to establish rules before it can be added to food or drinks.
Jefferies analyst Ryan Tomkins said the news is a positive for a stock has lacked newsflow catalysts, but urged some measure of caution.
“It is not operational until 2020, the hemp will be sourced from a farm that has no hemp experience, and CannTrust still lacks a branded partner, something we think will be hugely important in the hemp CBD space,” Tomkins wrote in a note to clients. The analyst rates the stock a buy, but notes it has underperformed for at least three months.
Akerna Corp. shares KERN, >+224.43% soared another 60%, adding to their prior-day gains of 28%, in their second day of trading on Nasdaq. The cannabis-software company was formed by the merger of MJ Freeway with a blank-check company called MTech Acquisition and started trading on Tuesday, as MarketWatch’s Max A. Cherney reported.
The company offers seed-to-sale software required by states such as Washington and California, which tracks cannabis through its eventual sale to consumers; and “enterprise resource planning” software for cultivators, pot stores and manufacturers, similar to what Oracle Corp. offers for other industries.
In regulatory news, a congressional committee has moved a series of cannabis-related amendments to the House floor for consideration, according to advocacy site Marijuana Moment. The measures include a spending rider that would block the Justice Department from using funds to interfere in the industry in states that have legalized.
They also include proposals to protect tribal cannabis laws and allow veterans to receive medical cannabis from government doctors.
Representative Earl Blumenauer, a Democrat from Oregon and the sponsor of the rider, told Marijuana Moment that he is confident it will pass, as a similar amendment fall short of approval by nine votes in 2015. Since then, the number of states with medical or recreational bills has more than doubled, meaning more lawmakers are representing constituents with an interest in the sector.
From New York comes the news that an effort to enact a bill legalizing recreational cannabis has failed in the face of opposition from lawmakers representing suburban areas, as the Wall Street Journal reported. Gov. Andrew Cuomo signaled his intention to legalize weed earlier this year, but lawmakers have been unable to agree on a regulatory framework.
The number of full-time workers in the U.S. cannabis industry is expected to grow 34% in 2019 from 2018, according to the 2019 Marijuana Business Factbook, released by Marijuana Business Daily. The report is forecasting 175,000 to 215,000 employees in the sector this year, up from between 130,000 and 160,000 in 2018. That is more than the number of flight attendants in the U.S., which numbered about 116,600 in 2016, according to the Bureau of Labor Statistics.
Valens GroWorks Corp. VGWCF, >+9.61% rallied 9%, after the company said it has increased annual extraction capacity to 425,000 kg, and plans to expand further to more than 1 million kg by the first half of 2020.
The ETFMG Alternative Harvest ETF MJ, >+1.36% was up 1.7%, with 23 of its 38 components gaining. The Horizons Marijuana Life Sciences ETF HMMJ, >+0.53% was up 0.9%, with 39 of its 56 components gaining.