Aurora Investors Should Stay Paranoid Despite Move to NYSE

Aurora Investors Should Stay Paranoid Despite Move to NYSE
More than 100 pot shops set to open as Canada legalizes weed
In this Sept. 25, 2018 photo, Devin Melnyk, a long-time marijuana grower and a consultant with Pure Sunfarms, holds trimmed marijuana as it comes out of a high-volume cannabis trimming machine at a massive tomato greenhouse being renovated to grow pot in Delta, British Columbia. On Oct. 17, 2018, Canada will become the second and largest country with a legal national marijuana marketplace. (AP Photo/Ted S. Warren)

DELTA, British Columbia (AP) — Mat Beren and his friends used to drive by the vast greenhouses of southern British Columbia and joke about how much weed they could grow there.

An NYSE listing, as well as legal sales in Canada, should give Aurora stock a short-term bump. Both Tilray and Canopy have shown that the U.S. listing brings new investors to their stock. As such, the news of ACBFF moving to the NYSE should boost the equity for now. Aurora and its peers benefit from a unique position in the market. As such, they all command high valuations. Aurora also enjoys perks related to both its medical focus and its production capacity.

Video: Canada to become largest country with legal pot

WestJet bans employees from smoking marijuana ahead of Canadas national legalization

Years later, its no joke. The tomato and pepper plants that once filled some of those greenhouses have been replaced with a new cash crop: marijuana. Beren and other formerly illicit growers are helping cultivate it. The buyers no longer are unlawful dealers or dubious medical dispensaries; its the Canadian government.

That said, I believe in Aurora as a company. Its productive capacity and medical focus will keep the company strongly positioned. Also, at some point, a shakeout will occur, and the industry will consolidate. Aurora will likely survive that phase. However, that does not make ACBFF a buy here. Despite the company’s position, I recommend not holding ACBFF stock for long after it moves to the NYSE.

On Oct. 17, Canada becomes the second and largest country with a legal national marijuana marketplace. Uruguay launched legal sales last year, after several years of planning.

Its a profound social shift promised by Canadian Prime Minister Justin Trudeau and fueled by a desire to bring the black market into a regulated, taxed system after nearly a century of prohibition.

Aurora becomes the latest Canadian cannabis company to apply to trade on a major U.S. exchange. After it gains regulatory approvals, the company expects Aurora to have its NYSE listing before the end of October. After the success of Tilray (NASDAQ:TLRY), and to a lesser extent, Canopy, it has become clear that the NYSE and the Nasdaq pave the way to a higher stock price, at least for now.

It also stands in contrast to the United States, where the federal government outlaws marijuana while most states allow medical or recreational use for people 21 and older. Canadas national approach has allowed for unfettered industry banking, inter-province shipments of cannabis, online ordering, postal delivery and billions of dollars in investment; national prohibition in the U.S. has stifled greater industry expansion there.

Canada is preparing for the day that sales of marijuana for recreational use become legal. About 100 dispensaries across the country are expected to be open on the first day of sales on October 17th. (Oct. 10)

Canopy also offers some advantages. At over 138 times sales, it trades at a higher multiple than ACBFF. However, Canopy holds a relatively strong cash position. It also enjoys the backing of Constellation Brands (NYSE:STZ). With its latest $4 billion investment, STZ now owns 38% of Canopy. This position gives Canopy built-in stability.

Hannah Hetzer, who tracks international marijuana policy for the New York-based Drug Policy Alliance, called Canadas move extremely significant, given that about 25 countries have already legalized the medical use of marijuana or decriminalized possession of small amounts of pot. A few, including Mexico, have expressed an interest in regulating recreational use.

The U.S. suffers from a paradoxical situation of weed enjoying legal status in some states while the federal government classifies it as a Schedule I drug. The Schedule I status effectively hamstrings the growth of American companies, giving their Canadian peers an advantage.

Its going to change the global debate on drug policy, she said. Theres no other country immediately considering legalizing the nonmedical use of cannabis, but I think Canada will provide almost the permission for other countries to move forward.

In addition to the NYSE listing, I like the strategic moves ACBFF has made. Despite their smaller size, they likely produce more cannabis than any other Canadian company. They also focus on medical pot. This remains critical as medical-grade marijuana commands higher prices.

At least 109 legal pot shops are expected to open across the nation of 37 million people next Wednesday, with many more to come, according to an Associated Press survey of the provinces. For now, theyll offer dried flower, capsules, tinctures and seeds, with sales of marijuana-infused foods and concentrates expected to begin next year.

The provinces are tasked with overseeing marijuana distribution. For some, including British Columbia and Alberta, that means buying cannabis from licensed producers, storing it in warehouses and then shipping it to retail shops and online customers. Others, like Newfoundland, are having growers ship directly to stores or through the mail.

He adds the government is “regulating the daylights” out of marijuana. Now it will be “in a strictly controlled environment with health warnings, and potency information so people can make make informed choice.”

Federal taxes will total $1 per gram or 10 percent, whichever is more. The feds will keep one-fourth of that and return the rest to the provinces, which can add their own markups. Consumers also will pay local sales taxes.

Some provinces have chosen to operate their own stores, like state-run liquor stores in the U.S., while others have OKd private outlets. Most are letting residents grow up to four plants at home.

Canadas most populous province, Ontario, wont have any stores open until next April, after the new conservative government scrapped a plan for state-owned stores in favor of privately run shops. Until then, the only legal option for Ontario residents will be mail delivery — a prospect that didnt sit well with longtime pot fan Ryan Bose, 48, a Lyft driver.

OTTAWA (NEWS 1130) – The federal government is assuring Canadians there will be enough pot to go around when sales of recreational cannabis become legal one week from today, Oct. 17.

Potheads are notoriously very impatient. When they want their weed, they want their weed, he said after buying a half-ounce at an illicit medical marijuana dispensary in Toronto. Waiting one or two three days for it by mail, Im not sure how many will want to do that.

Bill Blair, minister for organized crime reduction, says next week Canadians will see a highly-regulated system that will help battle the black market.

British Columbia, home of the B.C. Bud long cherished by American pot connoisseurs, has had a prevalent marijuana culture since the 1970s, after U.S. draft-dodgers from the Vietnam War settled on Vancouver Island and in the provinces southeastern mountains. But a change in government last year slowed cannabis distribution plans there, too, and it will have just one store ready next Wednesday: a state-run shop in Kamloops, a few hours drive northeast of Vancouver. By contrast, Alberta expects to open 17 next week and 250 within a year.

No immediate crackdown is expected for the dozens of illicit-but-tolerated medical marijuana dispensaries operating in British Columbia, though officials eventually plan to close any without a license. Many are expected to apply for private retail licenses, and some have sued, saying they have a right to remain open.

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British Columbias ministry of public safety is forming a team of 44 inspectors to root out unlawful operations, seize product and issue fines. Theyll have responsibility for a province of 4.7 million people and an area twice as large as California, where the black market still dwarfs the legal market that arrived in January.

Chris Clay, a longtime Canadian medical marijuana activist, runs Warmland Centre dispensary in an old shopping mall in Mill Bay, on Vancouver Island. He is closing the store Monday until he gets a license; he feared continuing to operate post-legalization would jeopardize his chances. Some of his eight staff members will likely have to file for unemployment benefits in the meantime.

That will be frustrating, but overall Im thrilled, Clay said. Ive been waiting decades for this.

“It is going to vary from province to province and even from campus to campus,” D’Alessio said. “It will definitely be interesting to see the way all these patchwork systems show different strengths or flaws.”

The federal government has licensed 120 growers, some of them enormous. Canopy Growth, which recently received an investment of $4 billion from Constellation Brands, whose holdings include Corona beer, Robert Mondavi wines and Black Velvet whiskey, is approved for 5.6 million square feet (520,000 square meters) of production space across Canada. Its two biggest greenhouses are near the U.S. border in British Columbia.

“I think the university is pushing for a smoke-free campus,” said Jeremiah Bowers, the president of the University of Windsor Students’ Alliance. “That’s kind of the popular trend across Canada.”

We used to joke around all the time when wed go to Vancouver and drive by the big greenhouses on the highway, he said. Like, Oh man, someday. Itd be so awesome if we could grow cannabis in one of these greenhouses. We drive by now, and were like, Oh, were here.

The popularity of cannabis among that age group is also a reason why the students’ group is wary of age restrictions on access, noting Quebec’s suggestion to raise the minimum age for legal use to 21.

Next to Canopys greenhouse in Delta is another huge facility, Pure Sunfarms, a joint venture between a longtime tomato grower, Village Farms International, and a licensed medical marijuana producer, Emerald Health Therapeutics. Workers pulled out the remaining tomato plants last winter and got to work renovating the greenhouse as a marijuana farm, installing equipment that includes lights and accordion-shaped charcoal vents to control the plants odor. By 2020, the venture expects to move more than 165,000 pounds (75,000 kg) of bud per year.

Some longtime illegal growers who operate on a much smaller scale worry they wont get licensed or will get steamrolled by much larger producers. Provinces can issue micro-producer licenses. But in British Columbia, where small-time pot growers helped sustain rural economies as the mining and forestry industries cratered, the application period hasnt opened yet.

Flannagan added “we would have had it done already” but for the government’s late announcement that cannabis use would follow the same guidelines as the Smoke Free Ontario Act.

Sarah Campbell of the Craft Cannabis Association of BC said many small operators envision a day when they can host visitors who can tour their operations and sample the product, as wineries do.

Like many other Ontarians, post-secondary policy makers were thrown a late curveball by Premiere Doug Ford’s recent announcement that smoking cannabis would be allowed in public spaces.

Officials say they intend to accommodate craft growers but first need to ensure there is enough cannabis to meet demand when legalization arrives. Hiccups are inevitable, they say, and tweaks will be needed.

While the rules vary slightly among the provinces and territories, for the most part, the cannabis must remain sealed in its original packaging and out of reach of anyone in the vehicle. These regulations echo existing laws for transporting alcohol in your vehicle.

Leaving it to each province to decide whats best for their communities and their citizens is something thats good, said Gene Makowsky, the Saskatchewan minister who oversees the provinces Liquor and Gaming Authority. Well be able to see if each law is successful or where we can do better in certain areas.

Bill Bogart, a law professor at the University of Windsor and author of Off the Street: Legalizing Drugs, told CTVs Your Morning Wednesday that many Canadians think its OK to consume marijuana and get behind the wheel.

British Columbia safety minister Mike Farnworth said he learned two primary lessons by visiting Oregon and Washington, U.S. states with recreational marijuana. One was not to look at the industry as an immediate cash cow, as it will take time to displace the black market. The other was to start with relatively strict regulations and then loosen them as needed, because its much harder to tighten them after the fact.

When it comes to cannabis, some provinces are more strict, however. For example, Manitoba specifies that the drug must be transported in the vehicles trunk, or in an external compartment.

WestJet employees wont be able to smoke weed, despite Canada legalizing the drug for recreational use.  (iStock)

Of course, driving while consuming cannabis or while under the influence of cannabis will be strictly illegal across the country and could lead to a fine or possible jail time.

While thousands of Canadians can soon legally light up a bowl, airlines in the country are banning their employees from partaking in the recreational activity.

Possible fines for violations also vary from province to province, ranging from $237 in Manitoba, to as much as $5,000 and possible jail time in British Columbia.

WestJet Airlines updated its Alcohol and Drug Policy ahead of the country’s marijuana legalization, which goes into effect Oct. 17.

Employees of the company were notified of the changes Tuesday morning, which prevents specific employees in "safety-sensitive” positions from using cannabis either on or off duty. Some such positions include flight and cabin crew members, flight dispatchers, aircraft maintenance engineers and station attendants, CBC.ca reports.

P.E.I., on the other hand, allows for the transportation of marijuana in open packaging, provided it is out of the driver or any passengers reach.

“We believe these changes reflect our reputation as an industry leader in safety and our expectations that all employees report fit for duty and remain fit for duty at work,” a WestJet Airlines spokesperson told Fox News.

When cannabis becomes legal next week, motorists will have to be careful about where they store the drug while driving.

“With the utmost priority placed on safety, the use, possession and distribution of cannabis will be strictly prohibited on company premises, company work sites, while on duty and at company social functions,” the spokesperson said.

Canada became the second and largest country to legalize a national marijuana marketplace. Uruguay launched legal sales last year, after several years of planning.

It’s a profound social shift promised by Canadian Prime Minister Justin Trudeau and fueled by a desire to bring the black market into a regulated, taxed system after nearly a century of prohibition.


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