Cannabis Stocks Advisory

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Cannabis Stocks Advisory Trade Plan Example

December 24, 2018 - Buy Canopy Growth Corp - CGC

Buy Entry: 25.25 to 27.56

Stop-Loss: 24.20

Take Profit Price Targets: 32.53 to 38.24, 42.26 to 46.27, 51.98 to 59.25 Longer-Term: Price withheld for subscribers only.

New Cannabis Products Distribution Company Going IPO

April 17 2019 - This Marijuana IPO Offers A Novel Way To Invest In Cannabis Boom By Investors Business Daily

Greenlane Holdings (GNLN), a distributor of vaping devices and other accessories to smoke shops and marijuana dispensaries, is set to price its initial public offering Wednesday, making it the rare U.S.-based company operating in the marijuana industry to go public on a big U.S. exchange. Marijuana stocks were mixed.

The company expects shares to price at $14-$16 and is offering 5.33 million shares. That includes 4.67 million from the company, with the rest from selling stockholders, who are also granting the underwriters a 30-day option to purchase up to an additional 800,000 shares.

With overallotments and a high-end pricing, Greenlane could raise as much as $98 million in proceeds.

The company plans to start trading Thursday on the Nasdaq under the ticker GNLN. Cowen & Co. and Canaccord Genuity are the lead book runners. Ladenburg Thalmann & Co., Roth Capital Partners and Northland Capital Markets are managing it.

The IPO will bring public a company whose sales stand up to the bigger marijuana stocks, but one that is losing money and remains vulnerable to U.S.-China trade friction.

Greenlane last year recorded around $179 million in net sales, according to its IPO prospectus. The company lost $5.9 million that time. Greenlane had operating cash flow last year of negative $13.6 million.

More than 80% of the company's sales came from vaping pens and so-called "desktop" vaporizers, bigger devices that are far less portable. Parts and accessories like screens, batteries and carrying cases drove a little under 9% of Greenlane's sales last year. Products like pipes, grinders, paper cones, child-resistant packaging rounded out the rest.

Juul, Pax, Move Into CBD

The distributor also does business with the big e-cigarette startup Juul Labs and its onetime parent Pax Labs, which sells cannabis vaporizers.

And while Greenlane makes much of its money channeling vaporizers, grinders and other products to stores, the company said it also began distributing hemp-derived CBD products as well. Those plans follow the signing of the 2018 Farm Bill, which legalized hemp in the U.S.

The company says it's developing is own CBD product brands, for things like vape cartridges, topicals and gel caps. Greenlane said it expected to launch those products in the third quarter.

Different From Other Marijuana Stocks

The debut will also come as the U.S. marijuana industry generates equal amounts of hype, growth, debt and losses, with still little access to banking services. The nosebleed-level valuations of Canada's marijuana stocks have come under more scrutiny as shortages, packaging costs, and other distribution choke-points temper sales expectations.

Most of the big Canadian marijuana stocks that trade on the New York Stock Exchange and the Nasdaq first went public in Canada. The exception is Tilray (TLRY), a pot producer in Canada that is controlled by a company in Seattle. Tilray's IPO took place last summer.

But Greenlane, which does most of its business the U.S. but is expanding in Canada, doesn't grow, process or sell marijuana. Thus, the company is hoping it will offer investors an indirect way into a U.S. cannabis industry that Cowen & Co. estimates could be worth $80 billion by 2030 if federally legalized.

Similar public U.S. companies that offer ancillary services to the cannabis industry include MTech Acquisition Corp. (MTEC), a public blank-check company with minimal operations that plans to acquire MJ Freeway, a provider of compliance software for the cannabis industry.

Elsewhere, Turning Point Brands (TPB) owns rolling-paper-maker Zig-Zag and other vaping companies. Innovative Industrial Properties (IIPR) is a cannabis-focused real estate investment trust.

Greenlane's customers include more than 6,600 smoke shops and "hundreds" of marijuana dispensaries, processors and cultivators, the company said in its IPO paperwork. The company in 2015 began distributing products from Juul Labs. Greenlane agreed to start distributing products from Pax Labs in 2012. Pax spun off Juul in 2017.

Dependent On 'Key Suppliers'

Still, the company notes that more than half its sales last year depended on supplies from Juul and Pax. The company also notes that some of the products it gets from China were hit by U.S. tariffs last year.

Similarly, California-based KushCo Holdings, a supplier of packaging materials and other equipment for the cannabis industry, said last week that it paid nearly $1.4 million in tariffs during its second quarter, dragging the company's margins. Kush said it was applying for an exemption.

Kush, which booked $35.2 million in fiscal Q2 net sales, gets many of its vaping products from China. Greenlane cited Kush as a competitor in its IPO prospectus.

Marijuana Stocks Mixed

Tilray rose 1% in the stock market today. Among other marijuana stocks, Aurora Cannabis (ACB) rose 0.9%. Aphria (APHA) fell 10%.

Canopy Growth (CGC) rose 2.8%. Cronos Group (CRON) edged up 0.8%. CannTrust (CTST) jumped 6.3%.

ETFMG Alternative Harvest (MJ), a marijuana-industry ETF, dipped 0.15%.

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