News on cannabis stocks and on developments in the industry haven’t let up in today’s volatile markets. Here are this week’s stories that we believe will mean the most to you as a Canadian investor.
1. Premier Doug Ford’s decision to cancel his predecessor’s plan for government-run bricks-and-mortar cannabis stores cost more than $10 million, according to newly released financial statements.
The agency’s financial statements show it spent $1.2 million on leases and lease terminations and $8.9 million on writing off equipment and renovation costs for those stores.
The expenses stem from Doug Ford’s decision in August 2018 to shift Ontario’s cannabis market to a private-sector system. The previous Liberal government had planned a network of government-owned stores similar to the province’s liquor stores.
At the time of that 2018 announcement, four stores had already been leased and renovation work was underway. Randstad, a Montreal-based HR agency, was interviewing applicants to work in a store network beyond the original four stores, people applying for the positions told Global News at the time.
The Ontario retail cannabis agency had also hired a number of store managers and was in the process of hiring front-line sales staff.
2. Shopify Inc. is now expanding its platform in the U.S. with features specifically for hemp and CBD sellers.
The decision follows the U.S. government’s move to legalize the production of hemp. That’s also been interpreted as sanctioning the production of hemp-derived CBD oils—a non-psychoactive compound, also found in cannabis, and increasingly used for its medicinal properties.
Shopify’s platform is already widely used for online sales of recreational cannabis in Canada, where the drug was legalized 11 months ago. Government-run websites in several provinces, including Ontario and British Columbia, as well as private companies like Canopy Growth Corp., Aurora Cannabis Inc. and Hexo Corp., use Shopify’s point-of-sale system.
Shopify has yet to share estimates on how big the cannabis business could become for the company. It is, however, citing a recent forecast from BDS Analytics and Arcview Market Research that the U.S. CBD market could be worth as much as $20 billion U.S. by 2024.
3. Another cannabis producer appears to have run afoul of Health Canada’s compliance rules.
The federal agency has now suspended Evergreen Medicinal Supply Inc.’s licence to grow and sell marijuana.
Health Canada spokesperson Tammy Jarbeau confirmed to BNN Bloomberg in an email that the government agency suspended Evergreen’s ability to “cultivate, process and sell dried and fresh cannabis, cannabis plants and cannabis seeds” in August following an unannounced inspection. The visit resulted in a non-compliance order on the company.
“On Aug. 9, Health Canada suspended Evergreen Medicinal Supply’s licences to protect public health and safety, including preventing cannabis from being diverted to the illegal market, as a result of non-compliance with certain provisions of the Cannabis Act and Cannabis Regulations,” Jarbeau said.
Evergreen Medicinal’s suspension is the second time that Health Canada has enforced such an action on a licensed cannabis producer. Earlier this year, Health Canada suspended the sales licence of Winnipeg-based cannabis producer Bonify Holdings Corp. after the company was found to be selling marijuana it obtained from illicit sources.
It also comes as investors await Health Canada’s ruling on what penalty it will enforce on CannTrust Holdings Inc., after the regulator found thousands of kilograms of cannabis being grown in unlicensed rooms. Possible penalties for CannTrust range from a $1-million fine, to a suspension or revocation of the company’s ability to produce and sell legal cannabis in Canada.
4. The Ontario Securities Commission is mounting its first fraud case in Canada’s cannabis sector.
In addition, three individuals involved with the firm are accused of making misleading statements in communications with investors.
None of the allegations against Canada Cannabis or any representative of the firm have been proven. An initial hearing is scheduled to take place Sept. 30 in Toronto.
The OSC alleges that Canada Cannabis raised about $3.2 million as well as $8.8 million U.S. from about 125 investors. About half of them are in Ontario.
That money, according to the OSC case, was to have been used to develop and operate CCC (Canada Cannabis). It was, however, allegedly used to make a loan to a firm owned by one of the company’s executives.
The OSC also maintains that investors were not told a 2014 licence application by the company was withdrawn in 2016.
5. The federal government is set to spend nearly $100 million this year on cannabis for veterans suffering from PTSD and other service related conditions.
Veterans Affairs has paid for medical marijuana for veterans since 2008. That followed a court decision requiring reasonable access to the drug when authorized by a health-care practitioner.
The growth in veteran requests for reimbursement has more than doubled since then, with 10,000 repayments in 2018-19 compared to 4,500 in 2016-17.
The number of clients started to climb in 2014 when regulatory changes at Health Canada and a new Veterans Affairs policy established the limit of 10 grams per day.
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