A cannabis plant grows inside the Organigram facility in Moncton on Oct. 12, 2019.John Morris/The Globe and Mail
Organigram Holding Inc.’sOGI-T shares surged 30 per cent Monday morning after the company announced a $124-million investment from a British tobacco giant, which it will use in part to create a new strategic innovation fund.
BT DE Investments Inc., a subsidiary of British American Tobacco BATFF, will be issued 38 million shares at a price of $3.22 per share in three tranches, about double the $1.59 that shares were trading at the end of the previous close on Friday.
The investment brings BAT’s common voting share ownership to 30 per cent and overall equity interest to 45 per cent (including preferred shares), the company said in a press release Monday morning. BAT has made a number of investments in Organigram since 2021, when it acquired 20 per cent of the company’s equity.
Of the total investment, Organigram will use $83-million to create “Jupiter,” a strategic fund designed to expand its geographic footprint outside of Canada.
In an interview, Organigram chief executive officer Beena Goldenberg said the company will take advantage of current markets globally, where many cannabis companies are undervalued.
“The whole cannabis market has continued to decline pretty consistently since highs of 2021,” Ms. Goldenberg said. “Most cannabis companies are trading at all-time lows.”
She said the company is particularly focused on advancing its non-combustible products, which includes edibles, beverages and vapes.
The company will also consider any Canadian businesses that complement its existing portfolio, though this would not fall under Jupiter, Ms. Goldenberg said.
“There will be a shake-out in Canada. There are too many players with not enough cash runway, and very little available cash to raise today in the market. If there’s the right opportunity in Canada, we’ll look at it.”
The rest of BAT’s investment will be used for general corporate purposes.
Royal Bank of Canada analyst Douglas Miehm called the transaction a positive for the cannabis company.
“In our view, this partnership strengthens OGI’s strategic and financial positioning for product development and geographical expansion,” Mr. Miehm in a note to investors Monday morning.
BAT’s investment is the latest in a number of major plays made by tobacco companies aiming to diversify into pot products and find efficiencies in manufacturing and distribution.
In 2018, U.S. cigarette maker Altria Group, Inc. bought a 45-per-cent stake in Cronos Group for $2.4-billion, with the option to invest an additional $1.4-billion for a further 10 per cent. But last year, Altria let its warrants expire, and in July the company said it was exploring options to sell its Cronos stake.
In 2019, British tobacco manufacturer Imperial Brands PLC invested $123-million in Auxly Cannabis Group Inc. XLY-T, giving the Vancouver pot company licences to its vaping technology. In July, the companies agreed to extend the debenture by two years to 2026.
Five years after federal legalization, the Canadian pot sector continues to struggle. Organigram’s stock started Monday down 66 per cent from the beginning of the year. In its latest quarter reported in July, the company posted a $120-million net loss, most of which it attributed to a $191-million writedown of its goodwill, property, plants and equipment.
Tilray Brands Inc. TLRY-T and Canopy Growth Corp. WEED-T, two other large cannabis producers, were down 31 per cent and 73 per cent from the beginning of the year, respectively, as of Monday morning.
More broadly, the Horizons Marijuana Life Sciences ETF, which includes a basket of North American cannabis stocks, is down about 30 per cent since the beginning of 2023, and by nearly 67 per cent since the start of last year, according to Alberta-based financial services company ATB Financial.
In a survey of 23 Canadian and U.S. institutions conducted in October, ATB found that the majority were bearish on Canadian cannabis retailers and producers, and have either reduced or kept their net exposure unchanged over the past six months.
However, ATB found that investors are more positive about the U.S. pot market, given hopes that cannabis will be reclassified from Schedule I to Schedule III in the next 18 months. Doing so would mean the drug is still federally illegal, but would be a step toward full legalization.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
