"Bear markets are no fun. I hate them, you hate them, Republicans hate them, Democrats, progressive, technical traders, fundamental value investors; even my dog hates bear markets. We all hate them. In the strange world of quantum physics, a particle may be in two places at once, and that's what's happening in the cannabis market today ...
Our peers have put up good numbers so far during the earnings season, but their stocks are off as well. This is where we are today. The business of cannabis is doing fine, the stocks not at all. Two separate realities existing at the same time. And like quantum physics, I can read the words, I can see the facts, but I just don't understand it."
- Hadley Ford, CEO of iAnthus, on the company's Q2 conference call (08/28/19).
"The last question that doesn’t always have an answer, (that) we frequently get, is: 'why is the stock down?'. Generally, I don’t think it’s a great practice for us to comment specifically on the stock, but it’s a natural question. The pressure on the broader sector has been significant, and like other industries, one’s investment neighborhood tends to be very important. I think many of our peers have been showing good progress, so I’m hopeful our neighborhood starts to reflect that broadly."
Josh Rosen, CEO of 4Front Ventures, on the company's Q2 conference call (09/03/19).
"Volatility related to other macro concerns within the broader financial markets haven’t helped. But near-term challenges shouldn't deter long-term investors who believe cannabis is going to establish a prominent position among other leading consumer branded products in the United States. Compelling arguments could likely be made that valuation levels of many sector participants have fallen below the fair value of combined asset portfolios."
- Dr. Kyle Kingsley, CEO of Vireo Health, on the company's Q2 conference call (08/29/19).
The most recent earnings season brought about noticeable similar messaging from company CEO's: the stocks of US cannabis companies are on sale.
As can be easily discerned at first glance by the chart below, the US-cannabis sector is in a noticeable downtrend. In the last 6 months alone, the stock performance average of all the companies that we track are down nearly -48% (excluding Planet 13, whose share price has risen roughly 12%).
Even if we factor in Planet 13's outlier performance, the team batting average is still at a startling -43%.
This sector-wide devaluation has rolled in as a headwind counter to the most recent quarterly financial reports where we have seen numbers trending in the right direction for most: increasing reported revenues and increasing pro-forma revenues, narrowing net losses, positively trending EBITDA figures, accretive M&A acquisitions across key states, Illinois passing adult-use legislation, and other positive, forward advancements for both individual companies and the overall sector-at-large.
Keeping with outlining Illinois and their successful effort to pass an adult-use program that's set to launch on January 1st, 2020, we should highlight that, although New York and New Jersey missed the mark on their legalization efforts, Florida and Arizona - states with flourishing medical marijuana markets - both seem poised to vote on adult-use legalization on their respective 2020 state ballots, with more than 50 percent of voter approval (67% voter support in Florida, and a "steady 50%" in Arizona).
There are also positive progressions being made on various federal legislation initiatives, such as the SAFE Act, which has made it to the House Floor for a Wednesday vote. Slowly, yet surely, strides are being made across these various macro and micro landscapes. Just earlier this week there was a report that the Governors of New York, Connecticut, and New Jersey plan to meet to have a discussion and "create consistency within each state’s respective marijuana programs as they move forward with plans to legalize".
Editor's note: The day of publishing, the House of Representatives passed the SAFE Act by a vote of 321 to 103 -- the bill will now move on to the Senate. And, earlier on Wednesday, Pennsylvania Governor Tom Wolf signaled to state lawmakers that recreational cannabis should be legalized in the state; and, "acknowledging it’ll likely take longer to (pass full, adult-use legalization legislation), Wolf and (Gov. Lt.) Fetterman urged the General Assembly to immediately pass legislation to decriminalize non-violent and small cannabis-related offenses as well as find a way to expunge past convictions of those who have those kind of offenses on their criminal record."
Companies are continuing to execute and demonstrate their operational prowess. State-specific legalization efforts, in tandem with positive federal legislation developments, are either advancing, or being born, on what seems like a daily basis.
With all the above in mind, we retrace back to the initial narrative -- the sentiment expressed by various MSO CEO's:
'The stocks of US cannabis companies are on sale.'
... Alright, then. So, which insiders have been buying?
The below graph visualizes the net sum of all insider transactions that have occurred since April 1st, 2019:
Continue reading for a more detailed breakdown of which insiders bought or sold shares within the last 6 months (04/01/19 - 09/27/19).
Lastly, if you would like to learn more about each company, please click through their company logo to be taken to their profile page where we detail specific information such as fully diluted market cap, share count, quarterly financials, and also extrapolate on their licenses by way of a highly-detailed footprint map.
Leo Gontmakher (COO) - 338,200 shares purchased
Brad Kotansky (CFO) - 123,200 shares purchased
Andrew Thut (CIO) - 145,000 shares purchased
Kevin Murphy (CEO) - 154,000 shares purchased (news release)
Dominic Sergi (Board Member) - 4,554 shares purchased
Randy Podolsky (Board Member) - 10,000 shares purchased
Brian McCormack (Board Member) - 14,000 shares purchased
Pete Kadens (former CEO) - 958,500 shares sold
Hadley Ford (CEO) - 80,000 shares sold
Beth Stavola (CSO) - 50,000 shares purchased
Julius Kalcevich (CFO) - 20,000 shares purchased
Randy Maslow (President) - 20,000 shares purchased
Patrick Tiernan (COO) - 5,000 shares purchased
Dallas Imbimbo (Co-Founder, Board Member) - 300,000 shares sold
Nick Kovacevich (CEO) - 200,000 shares sold
Andrew Modlin (Co-Founder, President) - 198,018 shares purchased
Afzal Hasan (President, General Counsel) - 3,000 shares sold
Michael Harman (Board Member, Chair of the Audit Committee) - 25,943 shares sold
David Farris (Director of Sales & Marketing) - 1,575 shares sold
Kim Rivers (CEO) - 31,000 shares purchased
Jason Pernell (CIO) - 347,900 shares sold
Richard May (Board Member) - 125,000 shares sold
Michael O'Donnell (Board Member) - 295,100 shares sold
George Hackney (Board Member) - 300,000 shares sold
Thank you for reading. If you got this far, you deserve to know that the working title of this piece was "Dr. Insider or: How I Learned to Stop Worrying and Buy The Dip".