It’s been a week since the Quebec government announced its marijuana legislation. Reaction seems to be pretty unanimous the ball was severely dropped – emphasis on Severely. Even so, this legislation represents the starter’s pistol for the legal Quebec market.
Today Aurora Cannabis Inc. (ACB.C) announced they are buying H2 Biopharma, a producer of ACMR in Quebec. This gives the company a 2nd production facility in the province. Both are close to or in the Montreal area. Their first site received a license in October.
Aurora was obviously waiting to see how the law shook out before making a bet on Quebec weed. Now the lay of the land is set, they’re making their play. What I don’t see so far is the sort of government relations and lobbying work other operators are doing. For example, I’ve noted Hyrdopothecary (THCX.V) and their clear efforts to curry political favour.
It’s a smart strategy, especially in Quebec. Being invested in ‘Quebec Inc.’ pays a lot of dividends, especially in a monopoly with juicy contracts at stake. Aurora is a 300 pound gorilla at the moment, but a nimble and connected competitor could snake them in this market.
The stock is up five per cent today on the news – a nice bump for Aurora.
But the real story is the 3 month stock ticker.
See that moment when the stock starts to take off – it coincides with the license news at the end of October. Since then the stock price has doubled. If you were holding Aurora, it’s a happy holiday for you indeed.
So is it time to short? Could be – Aurora’s pretty inflated. I think there will be some shenanigans going on here but the stock will continue to rise.
Aurora is breaking ground and growing up. Now the rubber meets the road for these weed companies. Some will be the future Imperial Tobacco or Winston-Salem, others will end up in the dustbin of history with other forgotten brands.
The consolidation has already begun.
This is an exciting time for cannabis investing, Quebec and Ontario have rules in place, it’s half a year to the federal deadline, and all these ‘hypothetical’ producers are blossoming like well, weeds. (forgive me.)
Tomorrow I want to dive deep into the Quebec reaction to the government’s laws, both in the media and from people on the ground. It can be summed up thusly:
I suspect there will be a loosening of government regs sooner rather than later.
Until then, Au revoir.
Full Disclosure: I do not own stock in any of the companies involved above.