A guide to Okanagan cannabis stocks
Published on January 20, 2021 by Corinne Doan
Cannabis stocks are poised for growth.
With more American states voting to legalize cannabis, the stigma preventing institutional investors from stepping in is waning.
At the American federal level, the Democratic Biden/Harris leadership have indicated a mandate to legalize cannabis. Internationally, Mexico and Israel are close to joining Canada and Uruguay with full legalization. This has encouraged institutional investors to finally step in to buy cannabis stocks for the very first time. However, institutional investors tend to focus on more established and more expensive senior stocks and ignore ‘penny stocks.’
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Until recently, venture capital was the only available resource to raise funds for the emerging cannabis industry. Venture capital is high risk and usually begin as speculative penny stocks. With the help of exchanges like the Canadian Securities Exchange (CSE), which provides a regulated market for venture capitalism, mostly established for oil and gas and mining companies, Canada has an extremely healthy venture equity market. The cannabis industry has benefited greatly from Canada’s venture markets. But now with the entrance of institutional investors, it’s time for the speculative investors with penny stocks that have matured to move to the next phase.
In venture capitalists’ circles there is a theory which suggests a cycle for speculative investors who bought into penny stocks and if fortunate after some time, can sell off to institutional investors at higher prices. In turn, the speculators can use their profits to reinvest back into penny stocks. With fresh funds entering the market, there are oodles of speculative cannabis penny stocks which can benefit. Let’s take a look at some cannabis stocks right here in the Okanagan.
(Note, all prices are as of Jan. 20, 2021 and the list below is alphabetical.)
Aion Therapeutics (CSE:AION) is pursuing a license from Health Canada to process raw cannabis to produce concentrated extracts from its facility in Oliver, B.C. Through its PCAI Pharma division, it is researching and developing pharmaceutical, nutraceutical and cosmeceutical products with compounds from cannabis, psychedelic mushrooms, fungi and other psychedelic formulations using data mining and artificial intelligence (AI) techniques. It last traded at $0.12.
Benchmark Botanicals (CSE:BBT) owns Licensed Producer (LP) Potonicals Green Growers in Peachland. It operates a 12,700 square foot facility. After a controversy over summer 2020 regarding unfair work conditions, union threats, and a court order for job protection, the company has decided to suspend operations to reduce operating costs. Benchmark also has a joint venture with a second facility at Pitt Meadows. The stock last traded at $0.11.
Christina Lake Cannabis (CSE:CLC) while not technically in the Okanagan, it is in the lower interior of BC which is pretty darn close. It has 950,000 square feet of outdoor grow space and its own on-site extraction facility. After exceeding expectations for its inaugural harvest with 32,500 kgs of dried bud, the stock has had a recent spurt. Since its 52-week low of $0.36 in November it is now trading at $0.99.
FIOR (CSE:FIOR) is a small Multi-State Operator (MSO) with headquarters based in Kelowna. It has invested in operations in Nevada and California. Additionally, it has also signed letters of intent (LOI) to acquire a micro cultivator and two retailers in the Vernon Okanagan area. The stock trades at $0.17.
The Flowr Corporation (TSXV:FLOWR) based in Lake Country is an LP with an 85,000 square foot purpose built facility. They have a strategic relationship for research and development with Hawthorne Canada, a subsidiary of Scott’s Miracle Grow. They also acquired and are developing operations in Portugal and Australia. The stock has been trading at its all-time lows at $0.42.
GTEC (TSXV:GTEC) is a vertically integrated company with headquarters in Kelowna. They have three modest size LPs in Alberta, Ontario and Chase, BC- all together totaling 30,000 square feet. In Kelowna GTEC has Zenalytics Laboratories which has had its license revoked under the Cannabis Act -for which the company did not respond in time for this article when asked if they had any comments. There are future plans to have a cultivating LP facility in Kelowna. The company last traded at $0.14.
Heritage Cannabis Holdings (CSE:CANN) is a vertically integrated cannabis company with two LP’s, one large 122,000 square foot facility in Fort Erie, Ontario and the second is on the north western skirts of the Okanagan Valley in Falkland, BC named Voyage Cannabis. Voyage is a 44,500 square foot purpose-built facility. The stock last traded at $0.185.
Lotus Cannabis (CSE:J) is a licensed producer near Armstrong in the Okanagan’s north end. Lotus has a 22,000 square foot purpose-built facility on its 23 acres of land with possible future expansion plans up to 52,000 square feet. Currently, it has an annual production capacity of 2,000 kgs and just reported its first-year end net income of $1.5 million. Lotus has a strategic partnership with another licensed producer, Auxly Cannabis (XLY:TSXV). The arrangement with Auxley provides a streaming partner which carries the bulk of burden for marketing and distribution. Lotus last closed at $0.175.
Pac Roots Cannabis (CSE:PACR) is an LP applicant with two facilities. One is in Cowichan and the other in Lake Country, BC. The Okanagan facility named Go Green, is planned to be 12,000 square feet with possible expansion to 22,000. Last summer it was reported Go Green had passed the security phase of its licensing application. It last traded at $0.19.
SpeakEasy (CSE:EASY) is based in the Okanagan’s south end near Rock Creek, BC. This year they boasted harvesting Canada’s largest outdoor grow operation to date with an estimated 72,000 kgs of harvest. They have their own onsite 53,000 square foot production facility to process the outdoor crop. At the beginning of this year, EASY entered an extraction agreement with RC Frontier labs. The stock last traded at $0.52.
THC BioMed (CSE:THC) is an LP based in Kelowna. It has been kicking around since the early days of publicly trading cannabis company for medicinal purposes long before legalization in 2018. Its niche was and still is, the ability to ship clones in special mail packaging while keeping the plant safe. Two other product lines released are THC Kiss, a cannabis beverage shot, and Canada’s first filtered joints. The stock last traded at $0.135.
True Leaf (CSE:MJ) is an LP with an 18,000 square foot facility based in Lumby, BC. Its business platform includes a pet food line. True Leaf has faced several challenges. It was one of the first 10 LPs on the queue for legalization in Canada during the early days but was forced to relocate from Vernon after the city refused its approval. When it relocated to Lumby, the company’s application was bumped on the Health Canada queue which delayed operations for several years. Because of the delays, MJ has narrowly avoided financial devastation a few times. In November 2020, the BC Supreme Court approved its refinancing and restructuring process. At the end of 2020, the company had a 9 for one share consolidation. The stock is at $0.49.
The Valens Company (TSX:VLNS) based in Lake Country is a manufacturing company which provides extraction, analytical testing, formulation, product development, and custom manufacturing services to third party licensed producers. It employs 300. Out of all the Okanagan cannabis stocks, it’s the only one that has graduated to a bigger board on the TSX. With recent trades above $2, it is also the only Okanagan publicly trading cannabis company that is not a penny stock.
With proper due diligence, a speculative investor may pick a winner from these penny stocks. However, it must be cautioned, many of these stocks will not survive. In my opinion, some of these stocks do not pass the sniff test, so I can’t emphasize enough to do your research. Having said that, I also believe a few of these stocks are worth the venture. Cannabis is an emerging industry and emerging industries are always high risk. In the stock market there is a saying, ‘the higher risks, the higher the rewards.’ If you do invest and if good fortune is on your side, maybe someday you can be selling off your shares to an institutional investor at higher prices.
About the author
Corinne Doan (Cori) was a licensed investment advisor with a focus on venture capital markets in Calgary, Alberta. She held investment industry (IIROC) relevant licenses with the Canadian Securities Course (CSC), options and branch managers. Also, Cori has an MBA with specialty disciplines in public relations and communications. Any data or Information that is not directly cited in this report is believed to come from reliable sources. Calculations are on best efforts basis and the reader is encouraged to do their own due diligence. This report is not meant as a solicitation to buy or sell securities. Any recommendations are opinion only. At times, the writer may or may not own some of the securities discussed in the report. Cannabis is an emerging industry and as such the investment risks are high.