Canopy Growth Corp (OTCMKTS:TWMJF) Holds the Trend as Legalization Approaches in Canada

Canopy Growth Corp (OTCMKTS:TWMJF) Holds the Trend as Legalization Approaches in Canada


Canopy Growth Corp (OTCMKTS:TWMJF) has been working through a corrective period along with many players in the Canadian cannabis patch over the past few weeks. The movement has been glued to the stock’s 50-day simple moving average. This level is coming in confluence with the longer-term upward trendline. All of this suggests the market is still pricing this stock as a live issue in its current growth trend. We would expect this to be the case through the final stage into the full recreational legalization of cannabis in Canada sometime in July of this year.

As far as recent catalysts, the company announced that it has closed its previously announced short form prospectus offering on a bought deal basis. According to the release, “a total of 5,800,000 common shares in the capital of Canopy Growth were sold at a price of $34.60 per Share, for aggregate gross proceeds of $200,680,000. The Offering was underwritten by a syndicate of underwriters co-led by GMP Securities L.P. and BMO Capital Markets and including Canaccord Genuity Corp., Eight Capital, Beacon Securities Limited, and PI Financial Corp.”

Canopy Growth Corp (OTCMKTS:TWMJF) is one of the bigger growers in the industry. The company produces and sells medical marijuana in Canada. It offers dry cannabis and oil products primarily under the Tweed and Bedrocan brands. It also sells its products through online.

According to company materials, “Tweed is the most recognized marijuana production brand in the world. It has built a large and loyal following by focusing on quality products and meaningful customer relationships. Tweed doesn’t just sell marijuana, it facilitates a conversation about a product we’ve all heard about but haven’t met intimately yet. It is approachable and friendly, yet reliable and trusted. As marijuana laws liberalize around the world, Tweed will expand its leading Canadian position around the globe.”

Also from their materials, “Bedrocan is the epitome of medical-grade cannabis. Bedrocan BV pioneered medical cannabis in Holland through decades of selection and refinement, leading to standardized, whole bud cannabis strains that patients can rely on. Bedrocan Canada supplies the same standardized strains to the Canadian market through exclusive licensing rights to the American continents, an arrangement it will also enjoy for all future genetic advancements. Due to its consistency over time, Bedrocan’s strains have been used in clinical research in seven European countries. That commitment to research didn’t stay on the east side of the Atlantic – Bedrocan Canada recently launched one of the largest clinical cannabis studies in the world, the EQUAL Study, to evaluate quality of life before and after medical cannabis use.”

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As noted above, the company just closed on a massive $200 million bought deal which could help fuel the company’s aggressive growth strategy into full recreational legalization in Canada on tap for this coming summer.

According to its latest release, “Canopy Growth intends to use the proceeds from the Offering for capital expenditures for domestic and international capacity expansion over the next 18 months as well as for general corporate requirements. In addition, Canopy Growth intends to use proceeds from the Offering for general working capital purposes, such as brand augmentation, channel development, technology investments, research, and developing new product offerings. Canopy Growth may reallocate these funds as market and regulatory indicators warrant in light of the legalization and implementation of a national recreational cannabis market.”

The chart shows 15% during the past week in terms of shareholder gains in the company, but this action is running counter to the larger trend in the name. The situation may be worth watching. TWMJF has evidenced sudden upward volatility on many prior occasions. In addition, the company has seen interest climb, with an increase in recent trading volume of exceeding 150% over what the stock has registered over the longer term.

Currently trading at a market capitalization of $2.35B, TWMJF has a significant war chest ($108.9M) of cash on the books, which is balanced by about $1.6M in total current liabilities. TWMJF is pulling in trailing 12-month revenues of $57.9M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 106.7%. You can bet we will update this one again as new information comes into view. Sign-up for continuing coverage on shares of $TWMJF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $TWMJF, either long or short, and we have not been compensated for this article.

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