Markets We saw slightly mixed markets this past holiday shortened week. US equity markets were somewhat quiet in anticipation of Friday’s US PCE inflation data for February which came in right on target. The DOW managed to close on Thursday up 0.8% for the week while Nasdaq was lower by 0.3% and the TSX finished up 0.8% DOW +0.8%, Nasdaq -0.3%, TSX +0.8% |
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With another inflation data point coming in tepid equities likely continue their march higher on Monday and for the near future until we get something that scares the markets. For now it’s party on! Financials Tame inflation data likely keeps interest rates in check. This past week rates were more or less flat and likely continue that way on this recent PCE data. |
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There wasn’t much news to move Canadian treasury yields this past week and we continue to see Canadian 5-year bond yields stick around the 3.5% level. |
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Gold reached new all-time highs in US dollars breaking out again late in the week. This is telling me that investors are betting that the US, and most major economies, will see lower interest rates and would rather not be holding dollars. I think bitcoin and equities for the most part are telling me the same things. |
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Gold has become less of an inflation hedge and more a bet against higher interest rates and the US currency. Another sign that, for now anyway, it’s time to party on! |
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Oil continues to rise slowly and steadily. Signs of a tighter market amidst ongoing geopolitical tensions buyers are prepared to bid oil higher. WTI oil closed at new 4+ month highs above $82 per barrel. Stocks Equities seem to be defying gravity. Almost weekly we are seeing US equity indexes trade to new all-time highs and this past week the TSX finally traded above the all-time high previously reached in early 2022 when oil skyrocketed past $100. |
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Welcome to the party TSX! |
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Has the party started up again in the cannabis space? I’ve been noticing more strength in the sector of late. Some of the small cannabis related stocks with decent fundamentals have had solid moves over the past year but of late some of the lesser quality companies have started to move. The sector as a whole seems to be moving for some reason. In the US it seems to be driven by ongoing expectations of a change in legal status of cannabis while in Canada it looks to me to be driven by potential changes in how many cannabis players are being taxed. |
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One of the Canadian cannabis stocks hitting new 52 week highs this past was Organigram Holdings (OGI.T) which took advantage of the strength to announce a new US$25 million equity financing. If there is one thing investment bankers are good at its sniffing out investor demand that they can turn into financing fees! |
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Other cannabis stocks hitting new 52 week highs this past week included Cronos Group (CRON.T),Auxly Cannabis (XLY.T), and cheapie with a chance list stock Good Shroom (MUSH.V). |
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Most cannabis companies continue to burn large amounts of cash and we will see more companies’ burn themselves into bankruptcy.
Next month the Canadian federal government will release its budget and many in the cannabis sector are hoping for a change in excise tax legislation. Many companies are struggling under the weight of higher excise taxes and lower product prices with many companies far in arrears in the payment of these taxes. In essence the government is financing these companies who are in arrears and would likely be bankrupt if they were forced to pay up on their debt. A lowering of the excise tax could be a boon to many companies as well as a potential life saver to those companies that are currently struggling to pay their taxes. A lot of cannabis investors will be watching whether the federal government makes any changes.
Consolidation will continue and the strong will grow and thrive. I think there is a very good investment opportunity in strong operators with cash flow and strong balance sheets who can source out and acquire assets on the cheap. I’m upping my exposure to the space and want to spread a few dollars amongst some of the smaller players. (see (HASH.V below)
As far as other new 52 week highs this past week we had another handful of portfolio and watch list stocks on the 52-week high list. Tantalus Systems (GRID.T) which we interviewed this past Thursday continued its rocket ship ride higher having more than doubled in the past 30 days. |
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Cipher Pharma (CPH.T) continued its winning ways and Gatekeeper Systems (GSI.V) and Namesilo Technologies (URL.C) all hit new highs. |
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I wanted to highlight another interesting event this past week. VitalHub (VHI.T) one of the past year’s market darlings announced a bought deal financing signalling more institutional financing appetite. The company announced that Cormark Securities will be leading a $35 million bought deal financing at $6 per share. Institutional capital continues to come down- market. |
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And speaking of down-market Canadabis reported Q2 financial results that showed a 26% drop in revenues. According to the company: “The Company again generated positive earnings after tax of $109,901 and $817,018 for the three and six months ended January 31, 2024. The reduction in our earnings is due to price compression in the market from increased competition. Our company’s mission is based on quality and price point. During the Q2 2024, management also engaged in a marketing and promotional campaign to reposition itself as the leader of resin infuse pre-roll as well as the Super Slim Cigarette Style Pre-Rolls, the Electric Dartz. As part of this initiative, the Company has invested extensively across Canada on its new and existing SKUs.
Pricing pressures and competition will likely continue and the company will need to rely on new product innovation and smart acquisitions to re-establish a growth profile until then I think the stock is a hold at best.
Other Stuff
This past week we announced that we were able to secure an exclusive financing opportunity for our members into a recently listed cannabis company called Simply Solventless (HASH.V). I’ve included the note below.
From time to time we find companies that we are interested in but because of the lack of liquidity we try to find other ways for our members to be able to participate and one means to do that is to try and negotiate a financing. Unfortunately, this one is only available to accredited investors. Demand has been significant and this private placement is well oversubscribed but we will do our best to make sure everyone qualified has an opportunity to participate so if you are interested and haven’t responded with your request please respond as quickly as possible.
This won’t be the last opportunity like this so stay tuned for the next one and, if we are able, subject to all applicable security rules, make any other opportunity available to non-accredited investors as well. |
Simply Solventless Concentrates Ltd TSX.V: HASH
We have arranged a Private Placement with Simply Solventless Concentrates (TSX.V: HASH) for Smallcap Discoveries members only. Both Paul and Trevor will be participating in this offering.
Terms: Non-brokered private placement of up to 3,333,333 units (“Units”) at a price of $0.15 per Unit for aggregate gross proceeds of up to $500,000 (the “Financing”). Each Unit consists of one common share and one common share purchase warrant (“Warrant”) of SSC. Each Warrant is exercisable for one common share of SSC at a price of $0.20 per share for a period of three years from the date of issue. All securities issued under the Financing will be subject to a hold period expiring four months and one day from the date of issue.
Use of proceeds: SSC intends to use the net proceeds of the Financing to facilitate accelerated production of its Astrolab, Frootyhooty and Lamplighter products for delivery into the Ontario and Alberta recreational cannabis markets, and for capital expenditures related to production efficiencies.
● Participation is for Accredited Investors only.
If you wish to participate please send a confirmation email, along with your requested amount to: Trevor@smallcapdiscoveries.com and please CC: paul@smallcapdiscoveries. |
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Current structure: Issued and Outstanding: 50.48 million Warrants: 11.3 million $0.20 exercise, expiring August 28, 2026. Options: 4.25 million weighted average exercise of $0.19 Fully Diluted: 66.03 million No debt Pre-money Market Cap: $8.08 million Corporate presentation - Click here Most recent financials below: |
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To your wealth,
Paul and Trevor |
