Brochstein on the recent cannabis stock price correction
In the current New Cannabis Ventures report, Alan Brochstein provides another perspective on the cannabis stock price correction recently. He concludes that the silver lining is lower valuations for the Canadian licensed producers makes it more likely that further Constellation/Canopy Growth transactions will take place.
Brochstein points out that just prior to legalization in Canada, six LPs posted all-time highs on the stock market. A week later ten different LPs posted 2018 lows. Last week the New Cannabis Ventures Canadian Cannabis LP Index dropped 13.9% (the LTB LP Index lost 8.5% at the same time) and is down 25.8% from the recent peak of October 15, 2018. The NCV Global Cannabis Stock Index slipped 17.8% on the week and is down 26.3% since mid-month. Over the previous year, the indexes are still up 55.7% and 99.5%, respectively. Brochstein points out the recent dip in cannabis stock prices makes it easier for out-of-industry buyers to pursue acquisitions noting that both of Constellations investments in Canopy Growth happened at periods of lower cannabis stock prices.
Brochstein concludes, “Whether it is consolidation from within the industry or investments or acquisitions by alcohol, tobacco, consumer package goods or pharmaceutical companies, we continue to see the Canadian LPs as having strategic value to a broad array of companies . The decline in prices, in our view, increases the likelihood that we see some transactions ahead.”
We agree. Read Brochstein’s full article plus other news (here).