Beyond the Bong

Pot Stocks Get Creative in Midst of Continued Bear Market

The broader markets are deep in the green for 2019.

And investors are feeling euphoric that a Santa Claus rally will push the indexes to new heights before the new year.

But there’s been one bulb out in the market’s string of lights… cannabis.

Pot stocks have had a 2019 to remember. Though not for the reasons we wanted.

But it doesn’t mean there aren’t bright spots or light bulb changes on the way. And we’ve recently seen once again how the sector continues to evolve.

High on the Holidays

This year, consumers are feeling relaxed.

And part of it might have to do with weed.

Thanksgiving Day, Black Friday and Cyber Monday all saw record retail sales. That’s an explosive start to what’s setting up to be a record holiday shopping season.

But bud is flying off the shelves as well.

Marijuana sales on “Green Wednesday” – the day before Thanksgiving that is cannabis’ version of Black Friday – surged 63% over a normal Wednesday. Meanwhile, plain old Black Friday sales increased 62% over a typical Friday.

Americans increasingly popped into their local dispensaries before the family feast and frenzied shopping.

Interestingly, the biggest winners were extracts, which surged 159%. This was followed by old-school dried flower and then edibles.

Chart - Black Friday Sales vs. the Average Day

With big family gatherings and social holidays like Christmas and New Year’s on the horizon, we can probably expect similar pops in the days before each.

In Vogue Moves

Cannabis companies are being forced to get creative.

Funding wells have gone dry as share prices wane.

And the industry is now taking a page from the biotech space.

For example, at-the-money (ATM) offerings have emerged as all the rage for cannabis companies looking to weather the current capital crunch.

This allows them to raise money by selling small increments of stock over time – at market prices – instead of issuing warrants, secondary offerings, leasebacks or underwritten deals.

Many of those increase liquidity and provide shares below market value. That’s only added to pot stock volatility and the weight on share prices.

But ATM programs are more attractive because the company can start and stop as needed.

This is a tactic biotechs used a decade ago to raise billions.

Last week, Cresco Labs (OTC: CRLBF) joined the list as the latest to hop on the ATM trend. It signed a deal with Canaccord Genuity Corp. for a $41.3 million ATM program.

So far, at least five Canadian licensed producers, as well as two American multistate operators and a real estate investment trust, have chosen the ATM path.

Though Cresco also recently announced it was abandoning its $120 million takeover of VidaCann. This is another popular trend we’ve covered. And I think we’ll continue to see it pick up speed.

The High Five

Below are our High Five, where – each Monday – I cover the five pot stocks I believe will make major moves – up or down – in the week ahead.

1) James E. Wagner Cultivation (OTC: JWCAF) will report fourth quarter earnings tomorrow after the closing bell.

The Ontario penny pot stock entered into a vape agreement with Heritage Cannabis Holdings’ CannaCure in November.

2) Medicine Man Technologies (OTC: MDCL) has been on an acquisition tear, particularly in Colorado. And one of its acquisition targets, MedPharm, announced it’s launching a landmark, double-blind, placebo-controlled clinical trial in the first half of 2020. This trial to is to see how cannabis works to treat dementia and Alzheimer’s.

3) IM Cannabis (CSE: IMCC) made history recently. It became the first Israeli medical cannabis company to list on the Canadian Stock Exchange. And its CEO, Oren Shuster, will be my guest on Thursday’s CannaBiz Now!

The nanocap medical cannabis pioneer will hold an investor call tomorrow about its expansion in Europe and its third quarter results.

4) EnWave Corp. (OTC: NWVCF) will report fourth quarter results after the closing bell tomorrow.

Analysts are looking for a 95% increase in revenue to $10.58 million with a loss of $0.01 per share. Wall Street is also looking for first quarter guidance of a 93.7% increase in revenue to $10.29 million.

5) Veritas Farms (OTC: VFRM) will host its first-ever shareholder call on Friday afternoon.

In mid-November, Veritas reported revenue jumped 165% to $1.215 million. And revenue is up 347% year to date.

But the company has plenty to discuss as it prepares for the launch of its pet CBD products.

This week’s High Five largely underperformed our benchmark, the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), over the past month.

Chart - The High Five

EnWave and Medicine Man have been the leaders during that stretch. Meanwhile, IM Cannabis, James E. Wagner and Veritas have lagged.

The mood right now among pot stock investors borders on clinically depressed. Despite all the positive news, cannabis shares can’t seem to find any footing to begin a new climb higher.

The Horizons Marijuana ETF continues to hover near 52-week lows. And since November 25, shares have traded below $7 as volume has petered out.

But in the U.S., we have a number of legislative successes recently. At the same time, sales in Massachusetts, Michigan and Missouri are off to blistering starts.

This week is the world’s largest cannabis conference, MJBizCon in Las Vegas. My team and I will be there. And I expect what we hear there will help plot investors’ courses for the year ahead.

If you have a pot stock in mind that you’d like me to discuss here, click the comment button below.

Here’s to high returns,