Hexo's Feeling The Crunch -- 30x More Potent Than THC?

THIS IS 2020

HTTPS://WWW.FLICKR.COM/PHOTOS/PHOTOBYSIMON/

Last year was "the cannabis industry's annus horribilis," wrote Bloomberg's David George-Cosh, who lamented overstocked, overpriced products in "unattractive packaging"—and the ongoing corporate reckoning across the sector.
Bloomberg

Explaining "Why Canada's cannabis bubble burst," the BBC blamed inflated stock prices, a laborious rollout of retail stores frequently located far from population centres, and the high price of legal REC.
The US is well-placed to become a major cannabis exporter, except the product remains federally illegal, so it will fall to Canada to continue meeting export needs. Materia Ventures CEO Deepak Anand discussed the banking challenges LPs face in going international.
New Hampshire Union Leader, Health Europa

Is there any good news? There's been no apparent surge of addictive behaviour, impaired driving, or workplace accidents. Legalization doesn't seem to have had much negative social impact.
Winnipeg Free Press

Due to hemp oversupply, US CBD prices are plummeting. This is ominous news for companies like Aurora, which announced major plans to target the US CBD market in November, and Canopy, which launched its US CBD brand First and Free in 31 states in early December.
Globe and Mail, CTV News, Bloomberg

STILL COMING SOON: 2.0 EVENTUALLY

NICOLAS VÖLCKER / WIKIMEDIA COMMONS / CC-BY-SA

The rollout of 2.0 products has occurred even more patchily than last year's rollout of legal flower and oils. Within five days of the first products arriving in Nova Scotia stores on December 23, initial shipments of edibles, tea-bags, and vape pens were selling out, with gummies and chocolates selling out first. (Don't worry, reinforcements are on the way.)
Halifax Today, CTV News

Alberta said its first products will be in stores by mid-January, though the province is holding back the release of vape pens over health concerns many believe have been resolved.
Edmonton Journal, CBC Calgary, CTV News, Leafly

To begin with, the 59 new products available in Ontario will primarily be vape pens, as well as a few edibles, and one infused tea-bag. (The Globe's Jameson Berkow noted neither Canopy's Tweed nor Organigram's Edison brands had products on Ontario's list.)
Financial Post, Twitter—Jameson Berkow

Some new products are expected on Ontario shelves next week—first in stores on January 6 (for some—January 8 for others), then online via the Ontario Cannabis Store website on January 16.
OCS, CTV News, Twitter—David George-Cosh, Jameson Berkow
New extract products (hash, shatter, rosin, kief) will come onto the Ontario market between February and March.
Twitter—Jameson Berkow
Though the OCS expects to sell out of 2.0 products "within the first week of availability," an OCS spokesperson predicted supply shortages on 2.0 products won't last as long as last year's dry-flower drought.
Twitter—Jameson Berkow

Predictably, the cost of legal vape pens is a great deal higher than unregulated vape pens.
Twitter—Travis Lane

Legal edibles aren't cheap either, and they're capped at 10mg THC per package. That means consumers with a 40mg tolerance would require four 10mg chocolate bars—roughly priced between $7 and $15—to get their desired effects.
Vice

QUEBEC AGE INCREASE BECOMES LAW

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Quebec increased the age for cannabis possession and consumption from 18 to 21 as the new year and decade dawned. The province also legalized a limited selection of REC beverages on Wednesday. (Sweetened edibles and beverages are banned in Quebec.) Those aged 18 to 21 who bought REC legally before the age increase are now subject to laws banning them from possessing/consuming.
CBC Montreal, Montreal Gazette

The age increase contradicts the advice of a variety of public health and psychological professionals, who warned it will prompt young people to buy unregulated products of uncertain potency.
CTV News
Quebec is now the only province to have an age of cannabis consumption greater than 19. (Quebec's age to purchase tobacco and alcohol remains 18.) Citing this disparity, the Quebec Bar Association predicted a constitutional challenge related to age discrimination.

HEXO SLIDES

JESSE STANIFORTH

Hexo was forced to take a $2.4M writedown on its inventory of cannabis trim (lower-cannabinoid leaves and stems, collected for processing into extracts for edibles and vapes). Cannalyst Andrew "Mollytime" Udell said, "Producers were accumulating this byproduct for cannabis 2.0. There’s so much of it," which is a problem considering producers may also be holding large stockpiles of high-value, high-cannabinoid buds.
Financial Post

The company announced on Boxing Day (when markets were closed) it would offer up 15M new shares for $32.6M (USD$25M), a steep 14% below market value—thus devaluing existing stock. In response, uneasy investors drove the LP's stock down to a 26-month low.
NewsWire, Investing.com, Globe and Mail

These are the latest signals Hexo is struggling. In late October, it laid off 20% of its workforce, while in early November, the company announced a loss three times greater than analysts predicted.
Bloomberg

The Boxing Day offering is Hexo's second recent questionable fundraising move. In October, company executives and board members bought $8.67M worth of a total of $70M raised through convertible debentures, a risky fundraising instrument that may leave companies with major debt.
Ottawa Citizen, MJ Biz Daily, Financial Post, Globe and Mail
Hexo also moved its head office from Gatineau, Quebec (across the river from Ottawa) into Ottawa proper so the company could secure Directors and Officers Liability Insurance, not available in Quebec.
The company's production facility in Masson-Angers, outside Gatineau, will not be affected by the move.
MJ Biz Daily

Along with Organigram and the Green Organic Dutchman, Hexo has announced plans to reduce production until the market can bear it.
Nasdaq

LP ROUNDUP

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On Christmas Eve, Aurora confirmed it asked Chief Corporate Officer Cam Battley to resign as part of the company's evolving leadership strategy. For many, Battley . Stocks fell as a result of his departure.
Lexichronic, American Stock Trader, Victoria Times-Colonist, MMP Connect

Battley rose to the CCO role after stints as senior and executive VP for the company, He announced he was joining MedReleaf Australia, a MED company in which Aurora owns 10% stake and holds 50% voting rights. MedReleaf Australia is in partnership with MedReleaf Corp, wholly owned by Aurora.
Following his severance, Battley tweeted cryptically, "I don’t know enough about General Tso […] but clearly the man knew his chicken. And he apparently outranked Colonel Sanders," followed by a winking happy-face emoticon. Analysts wondered whether this was a reference to the burgeoning market for cannabis products in China, potentially served through Australia.
Twitter—Cam Battley, Yahoo
Braydon Sutton, Aurora's former business development director turned chair of US MSO 1933 Industries, argued Aurora CEO Terry Booth "fired me and hired Cam Battley" […] "because I couldn't say what Cam would," though Sutton suggests he was tired of working for Aurora and didn't want to do the promotional work he was asked to do. "Hype and promotion just wasn’t me. I was too conservative, too introverted and just too real," he writes.
Cannabis Health

Investor James Hodgins argued regardless of ups and downs in the sector, Canopy will survive.
Cantech Letter

Canopy requested permission to expand on-site housing for temporary migrant workers from 72 to 116 beds.
Delta Optimist

Coca-Cola again quashed rumours it will debut THC or CBD products. "As we have stated many times, we have no plans to enter the CBD market," the company told Bloomberg.
Bloomberg

Of the 52 publicly traded LPs, 25 have six months' worth of cash on their books, or less.
Twitter—David George-Cosh

Though banks in the sector are freezing cannabiz out, TerrAscend increased its oversubscribed USD$24M private placement to USD$30M.
New Cannabis Ventures

Reviewer WhatsMyPot took LP 7Acres to task for selling pre-rolled joints (made by Indiva) containing only sugar leaves, which it called "low end shake [trimmings] hot dogs."
Twitter—WhatsMyPot

ROLLING STONED

DILARA EDIPBALKIR

An internet-based poll on behalf of the Canadian Automobile Association found 26% of Canadians between 18 and 34 had either driven while high, or had been passengers in the vehicle of a stoned driver.
NewsWire

While 86% of respondents said it was important to change travel arrangements after drinking, only 70% felt it was necessary to avoid driving after consuming cannabis, and 15% said they believed cannabis had either no effect or improved drivers' abilities.
Global News, Vancouver Sun

Cannabis in cars is a problem even if you're not consuming it, as a Corner Brook, NL man found out when he was found guilty of unlawful cannabis in his vehicle. Police caught him allowing a passenger to roll a joint in his seat.
CBC Newfoundland and Labrador

NEW CANNABINOID THCP: NEXT YEAR’S CBD?

HTTPS://COMMONS.WIKIMEDIA.ORG/W/INDEX.PHP?TITLE=USER:BRAINSRUSDC&ACTION=EDIT&REDLINK=1

The industry was abuzz with news that Italian researchers isolated a new psychoactive phytocannabinoid called THCP (Δ9-Tetrahydrocannabiphorol), along with a corresponding non-psychoactive CBD homologue, CBDP.
Nature

The new phytocannabinoids occur in minuscule measurements, but THCP is some 30 times more potent than THC.
BC cannabis geneticist Ryan Lee stressed, "The current methods labs use are not sufficient to identify or quantify these newly identified compounds," which required specialty equipment to discern.
Twitter—Ryan Lee
That means there won't be consumer THCP boom for some time. Lee argued, "We need to trial these molecules for safety before we release them into the world for people to consume. If we don't we get the same problems we're seeing with the synthetic cannabinoids."
Twitter—Ryan Lee

GENERATE COMPLIANT PUBLICITY: DO NICE THINGS

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Ontario REC retailer Superette has figured out how to generate free, legal publicity despite Health Canada's stringent anti-advertising regs: doing nice things for their community. Jumping in on a post by cannabis reviewers WhatsMyPot showing a mountain of plastic packaging waste from a year's worth of legal product, Superette offered to pay to ship the containers to be recycled.

Additionally, they accepted the containers as part of an ongoing challenge: for every empty container returned, they'll give one can to the Ottawa Food Bank. Maybe they'll take yours too? Nice work, Superette!
Twitter—WhatsMyPot, Superette

This follows CannTrust's June partnership with local charities Project Share and Hospice Niagara. Whatever else one may say about that scandal-plagued LP, supporting those organizations was a classy move.
St. Catherines Standard

Quick Hits

Any company wishing to submit a proposal to take over the entire REC retail infrastructure of New Brunswick has until January 10 to submit their paperwork for 10 years of control of New Brunswick's province-wide private REC stores (and no competition, as yet).
Twitter—Matt Lamers
The GrowthOp asked REC retailers which branded strains sell the best.
GrowthOp
AdCann celebrated their "10 Best Canadian [REC] Store Brands." AdCann

SCHEER DEMOTED PRO-LEGALIZATION MP

PUBLIC DOMAIN

Conservative MP Scott Reid said he was sacked from his shadow-cabinet position as Conservative critic for democratic institutions in January 2018 because he voted for the Liberal government's Bill C-45, the Cannabis Act. He stressed he "consulted [his] constituents and [was] given a mandate [55% of 3,100 respondents] to do so."
Scott Reid (Website)

He argued the Conservatives caucus "was divided" over the Bill, with "between one quarter and one third" of Conservative MPs in favour of legalization. In spite of these divisions, Reid said, "the leadership simply imposed a decision from above."
National Post
Reid alleged then-newly-elected Conservative leader Andrew Scheer offered him the choice of voting against C-45, resigning his post, or being sacked from the party. Scheer has since resigned following his party's election defeat in October, and allegations he used party funds to pay for his children's private school.
Hamilton Spectator

THE NEW ILLICIT

PUBLIC DOMAIN

Just before Christmas, Aleafia reported a truckload of its product as stolen, opening a rat's nest of regulatory worries about transportation.
GrowthOp, Twitter—David Hyde

Security expert David Hyde noted that REC stores combine the high-dollar product of jewelry stores with the presence of large amounts of cash on hand, which makes them like cheque-cashing companies. This combines too aspects desirable to robbers.
Globe and Mail
Hyde also noted federal regulations say far too little about transportation, meaning producers are largely free to use their own trucks or standard freight, which may not be suitable or secure enough to move cannabis.
But who, exactly, buys legal REC on the illicit market? One presumes it's unscrupulous retailers, but given the intensity of Health Canada and provincial oversight of REC retail, it's hard to imagine how easy it would be to pass off stolen REC as licensed product.
Fin24

Quick Hits

Durham Regional Police, immediately east of Toronto, charged more than 100 people with impaired driving over the holidays, but charged only seven people with cannabis offences.
CTV News
Communities across Ontario's Niagara region have voted to freeze licensing of cannabis production sites.
Niagara This Week

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