Three Companies to Watch After Canada’s Historic Vote

Matthew Carr By Matthew Carr
Emerging Trends Strategist

Market Trends

History was made this month.

After 90 years of prohibition, Canada became the first G-7 country to legalize recreational pot use at the federal level.

Investors have been patient for more than a year. Canada’s Bill C-45, the Cannabis Act, was first introduced in the House of Commons in April 2017.

And even though the final version of the bill passed the Senate, the House of Commons and the Senate again, and received royal assent this month, investors will have to be patient just a little longer.

Canada’s $4 billion legal cannabis market will finally go live October 17.

More importantly, it’ll bring all the speculation to an end. And we’ll start seeing some serious jumps in revenue.

Of course, following government approval, cannabis stocks have already shot higher…

The Canadian Marijuana Index gained 13% from June 1 to June 21. And the index hit its highest level since March. Of course, many individual stocks performed even better.

Now, the index has trailed lower since then on profit taking. But it’s still up more than 6% in June.

And since Canada’s historic move, the market has been gifted some exciting news…

Two Cannabis IPOs on Deck

When investors talk about large licensed producers in Canada, they typically mean Aphria (TSX: APH; OTC: APHQF), Aurora Cannabis (TSX: ACB; OTC: ACBFF), Canopy Growth Corp. (NYSE: CGC), Cronos Group (Nasdaq: CRON) and OrganiGram (TSX-V: OGI; OTC: OGRMF).

Earlier this year, Cronos Group made history by becoming the first pure marijuana play to be listed on a major U.S. exchange.

A couple months later, Canopy Growth Corp. earned the silver when it was listed on the New York Stock Exchange. (It’s worth noting that Canopy was also the first publicly traded cannabis stock back in 2014. And it’s the largest player, with a market cap of nearly $6 billion.)

These dominant players have helped pave the way for the growing number of publicly traded pot stocks.

At the moment, one of Canada’s fast-growing cannabis stocks has its sights set on a U.S. initial public offering (IPO).

Tilray Inc., a vertically integrated cannabis company, filed with the SEC just days ago to IPO on the Nasdaq under the symbol “TLRY.”

Tilray would be the third pure cannabis play to be listed on a major U.S. exchange. Even more telling, the company has no plans to file for any Canadian exchange listing.

Tilray has made history in its own right. It was the first company to legally export medical cannabis from North America to Africa, Australia, Europe and South America. Though this is just a small part of its business.

Its Highland Park facility offers 13 acres of greenhouse space and just received a cultivation license in April.

Last year, Tilray’s revenue grew 63%. But the new legal recreational markets could increase revenue by as much as 600% in the year ahead.

Tilray’s IPO is expected to be worth around $100 million. So this will be a small company at its launch, but it’s well worth watching and trying to snag some shares.

Plus, Tilray’s not the only cannabis company going public…

Another one on deck may be one of the most storied in the industry: High Times Holding Corp.

The company is the publisher of High Times magazine, which has been covering the industry for four decades. And in June it launched a crowdfunding campaign to help boost its valuation before a public offering.

High Times Holding Corp. is also looking to be listed on the Nasdaq. But that will likely take place later this year.

New IPOs always garner buzz. But in the wake of Canada’s legalization, there is a big player sniffing around…

Buds to Suds

Late last year, Constellation Brands (NYSE: STZ) made headlines by acquiring a nearly 10% stake in Canopy Growth Corp.

This helped legitimize the industry and the potential for cannabis-infused beverages. Not to mention, the $190 million stake gave Canopy a multibillion-dollar valuation.

It was fascinating that the largest outside investor in the cannabis industry wasn’t a tobacco company – as so many had predicted it would be. It was a beverage company.

The beer industry is seen as the most vulnerable to recreational weed. And Constellation – best-known for its Corona and Modelo beers – was the first to shore up a partnership.

Now it appears that one of Constellation’s competitors – Molson Coors (NYSE: TAP) – is looking to do the same.

Molson is apparently in talks with “several” Canadian cannabis companies. But there are scant details.

The U.S. beermaker has been struggling with falling revenue and falling shares for years. But a deal with a Canadian cannabis producer could be just the spark sales need.

Canada’s historic vote this month marked the beginning of a new industry.

That meant a lot of excitement. Especially for companies we’ve been following since the beginning.

With the legislative battle now in the books, look for the pace of new cannabis opportunities to pick up speed. These three are just the beginning.

Good investing,

Matthew