Did Canopy Growth Corp. Just Change The Trajectory Of The Cannabis Industry With The Acquisition Of Wana Brands?

Earlier this month, Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) announced an agreement to acquire Wana Brands, a leading cannabis infused edible brand in the United States (US). 

The agreement negatively impacts Indiva Limited (TSX Venture: NDVA) (OTC: NDVAF), a mid-tier Canadian Licensed Producer (LP) that had been selling Wana Brands gummies in Canada. We analyzed Indiva’s most recent earnings report and was able to determine that Wana has been a core growth driver for the business. 

Prior to Canopy Growth’s acquisition, Indiva had been considered a leading play on Canada’s cannabis 2.0 market and had the largest amount of market shares in several major provinces (according to cannabis data analytics firm Hifyre). 

The day after Canopy Growth reported to have entered into an agreement to acquire Wana Brands, , Raymond James Financial (NYSE: RJF) downgraded Indiva to Outperform from Strong Buy and lowered its price target to C$1.25 from C$1.75. We are not surprised by the downgrade and expect other mid-tier Canadian LPs to be impacted by agreements that are similar to the one between Canopy and Wana Brands. 

Due to the development, we conducted due diligence on mid-tier Canadian LPs that could be impacted in a similar way. We believe the company that is the most at risk is Auxly Cannabis Group Inc. (TSX: XLY) (OTC: CBWTF). Like Indiva, the Canadian LP has formed strategic sales agreements with high-profile US brands. 

Over the next year, we would not be surprised if a large-scale Canadian LP or US multi-state operator (MSO) acquired one of the brands that Auxly has a relationship. We consider this to be a major risk for the mid-tier Canadian LP and believe that our readers need to be aware of this possibility. 

If you are interested in learning more about companies that could be impacted by agreements that are similar to Canopy Growth’s, please send an email to support@technical420.com with the subject “Canadian LPs that at Risk” to be added to our distribution list. 

For the fastest access to data on mid-tier Canadian LPs that could be impacted by agreements that are similar to Canopy and Wana Brands, sign up for our free newsletter!

Share

Tags

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

Top Stories