Medical marijuana update: Weed stocks back on track as SEC fears ebb

Chris Parry Chris Parry, Stockhouse.com
4 Comments| April 17, 2014


To paraphrase LL Cool J: Don’t call it a comeback, they’ve been here for.. well, a few weeks.

I’m calling it: The first Canadian medical marijuana bubble has burst.

But that was two days ago. Today a new bubble is rising in its place and it is one less built on daytrading madness and more on genuine business plans.

On significantly lower volume than was seen earlier in the month, companies are beginning to move up on news of confirmed business rather than raising a hand and saying words like ‘agriculture, tech and biomed opportunities’.
Enertopia (CSE:C.TOP, Stock Forum) announced today it is generating revenue from warrants and option exercising, as two of its joint venture projects, World of Marihuana and Green Canvas continue their licensing/build-out plans. They’ve also added Jeff Paikin, President of the New Horizon Development Group, to their advisory board in return for 400k+ shares. Not sure what value a real estate developer brings to the group, but it can’t hurt.

Enertopia has made a habit of jumping into the plans of other companies rather than putting all their eggs in one basket, which will likely result in a couple of dropped balls along the way but also some home runs.

In a sector that, at this point, could see any company turn turtle if they have a Health Canada licensing slip-up, diversity isn’t a bad plan. That said, I’ve also heard from several industry insiders that Enertopia management is very promotional and not so detail oriented, so expect to see plenty more profitable stock volatility in the weeks ahead but use your own due diligence if you’re looking at it as a long hold.

Enertopia is up 23% on the day, 73% in the last two days, and 350% since January 1, though it is down over 50% from its mid-March high of $1.00.

With volatility like that, Enertopia is the nitro-glycerine of the dot.bong world.
 

BONG HITS:
One of the medical marijuana markets big issues over the last month or two has been establishing legitimacy in the eyes of big investors. With Growlife (OBB:PHOT, Stock Forum) currently SEC-stomped and Advanced Cannabis Solutions (CANN) having been face-palmed by the feds weeks earlier, the recent two-day weed stock crisis came firmly out of suspicions that some large ganjcos were (no pun intended) smoke and mirrors, and were about to be found out.

So what does Creative Edge (OTO:FITX, Stock Forum) partner CEN Biotech do to fight that idea? They hire a 33-year veteran banker, securities fraud examiner, and IRS whistleblower as their new Chairman of the Board.
Which is kind of like having Bill Gates check your computer science homework.

If anyone had wondered if Creative Edge and co. had been playing fast and loose with trades or paperwork, chances are they’re not wondering anymore. And their recent lightning quick decision to sever all ties with Growlife, a company that stands suspected by the SEC of having cut corners in trades and accounting, doubles down on the credibility front.

Creative Edge is already a $267.7 million market cap player with 3.4 billion shares outstanding, so they might not be in the sights of the Canadian daytrading penny play crowd, but as an example of how to de-risk your game, they’ve set a solid example for others.

The market agrees: FITX is up 23.5% today, building up off a dip.

 
Seaway Energy Services (TSX:V.SEW, Stock Forum) has been trade-halted, at the company’s request, with pending news. Seaway shares have quietly and consistently climbed to a near 52-week high of $0.34, up from $0.10 in early March when it announced it was becoming a potco. It has an ultra-tight share structure and just a $1.4m market cap, so if the news coming is brand-building in nature, holders are about to be VERY happy.

 
Also trade-halted is Supreme Pharmaceuticals (TSX:V.SL, Stock Forum), though this one is 'pending review of change of business,' which has had Chlormet stock tied up for over a week now and could see a long delay while paperwork is filed and reviewed.


Tweed (TSX:V.TWD, Stock Forum) is showing some wild swings in price over the last week, with the company having gone from $3.60 down to $2.40, and now back to $3.40 in just the last five trading days. Other than a deal to bring a brand of vaporizers into the Tweed customer offerings, there’s been no news to warrant that kind of movement in either direction.

Considering their turns have matched the US sector’s crazy run of late, it likely points to that company having a large US investor base that should be considered by Canadian buyers going forward. If the US sector hits another snag, Tweed will feel it more than, say, Affinor or Seaway. Today, they’re up 12%.


In the US, as the dust settles on the Great Weed Short War, AvWorks Aviation (OTO:SPLI, Stock Forum) has, as I predicted, flown upwards. Having been horrifically oversold from $0.45 back to $0.05 over a little more than a week, it has jumped 30.9% today to $0.12, with plenty more room to move.

The company will be competing in the Cannabis Cup at the Colorado-based High Times conference coming up, which one Vancouver broker tells me he’s attending, despite it being sold out, because he found tickets on StubHub.
Think back only a year ago, when a collection of Colorado weed smokers would likely soon end up with felonies to their names – now we’re buying tickets to weed conferences (that, in this case, includes a ‘smokers pit’ on the convention floor) on freakin’ StubHub.
 

I’ve pretty much ignored Jouran Resources (TSX:V.JOR, Stock Forum) since they’ve joined the bud hub-bub, because I’m just not so big on the prospects of fertilizer plays attached to the mary jane market. I’d rather see a fertilizer company sell a billion tonnes of product to Con-Agra than a few sacks of phosphate at a time to Satori Resources, but credit where it’s due, Jourdan is making solid moves that could make them the first genuine two-sector play in this space.

Jourdan announced today they’ve acquired a 100% interest in the Picnic Phosphate project in Quebec. The twist on that area is they’re more than a little likely to find themselves yanking iron, titanium, copper, nickel and cobalt out of the ground as they’re going in for the phosphate.

The company already has a ‘growth media and slow release natural phosphate fertilizer’ testing arrangement with ChroniCare Canada, but their mineral exploration strategy continues moving forward, so my reading of this company isn’t that they’re a stoner-come-lately; more that they’re finding a genuine middle ground between mining and medical marijuana that could see them dive in on either end of the equation, depending on how the next six months go.
Alternately, they may find revenue on both ends of the deal which would be a great upside. The company is up 14.2% today.

 
Rango Energy (OTCQB:RAGO, Stock Forum) has been crawling California, I’m told, looking for medical marijuana patient-facing acquisitions. Stock is up 17.6% today on the news the company is focusing on delivering ‘integrated patient healthcare solutions’.

I *think* this means they’re looking to buy clinics and create a franchise of sorts, but your guess is as good as mine based on the following:

“We intend Verde Science [Rango’s soon-to-be name] to be one of the initial corporate players in the medical marijuana industry that currently lacks sophistication, controls, standards and innovation. Verde is assembling a highly experienced team that will deploy state-of-the-art technology and a superior methodology to enter and take meaningful market share that can be repeated and expanded as more and more jurisdictions adopt legal use of cannabis products to address health care issues. But we want to stress that we are being meticulous, measured and diligent and as we move forward with an absolute focus on compliance while offering the patient community unsurpassed, fully integrated, holistic health care programs."

That plan makes sense but for, in my opinion, two reasons. First, they’re late to an already hugely well-established market that, although fragmented, isn’t likely to experience the kind of growth other areas will in the coming years.
My second caution on the Rango plan is, hey, weed is still illegal on a federal level, and California dispensaries, though perfectly legal and regulated on a state level, are still subject to raids, shutdowns and seizures by federal officers, which fail to recognize medical marijuana as being legal.

Also worth noting, it’s illegal to profit from marijuana sales in California, so Verde would need to find ancillary ways to make money.

For a public company, a federal raid would be devastating, which is why nobody has de-fragmented this market to this point. You wanna be the Subway of weed? You better hope the federal stance on medical marijuana changes soon.
 

IN BRIEF:
Affinor Resources (CSE:C.AFI, Stock Forum) is listed on the Frankfurt Exchange.

Thelon Capital (TSX:V.THC, Stock Forum) is testing Canadian Mining Company's B.C. zeolite as weed fertilizer, with an option to buy into the business should that test prove fruitful. 

Chicago-based would-be potcos are annoyed that, in order to be considered for legal growing, you need to front "a $2 million surety bond, $250,000 in liquid assets, $25,000 for an application fee, $200,000 for a permit fee and an approved site," according to a Chicago Tribune story. Then you have to actually build out the facility...

Interview with the owner of the private MMPR holder MedReleaf at the Toronto Star is a good read.

A Vancouver Sun blog post by pot activist Dana Larsen makes a good point about Health Canada language screwing over marijuana patients: Because HC won't call it a prescription, but rather 'doctor permission', "Doctors aren’t allowed to charge extra to write a prescription, but they can legally demand an arbitrary fee to fill out paperwork like a medical marijuana access form. Since they aren’t “prescribing” it, doctors can and do charge a few hundred bucks for patients who need access to cannabis medicine."


UPPERS:
Naturally Splendid (TSX:V.NSP, Stock Forum) jumped 25% in late trading with no news to accompany the rise. That company’s CEO made contact with me in the last few days with an invitation to come snoop around and chat about their plans, which I hope to take them up on in a week or so. They’re pushing into the hemp-based health food space and have some distribution deals in the works, and they recently appointed the former CEO of Arrowhead Water to their advisory board. Legit.
 
Next Gen Metals (CSE:C.N, Stock Forum) got a share rise today after several weeks of overselling, as their debut Greenrush Marijuana Investors Conference looms May 7 in Vancouver. I’ll be speaking at the event and happy to meet any and all investors, exhibitors, CEOs and non-stoned industry enthusiasts. Stock up 14% today.
 
Satori Resources (TSX:V.BUD, Stock Forum) is up 10%. I mention this because over the last few weeks, a rise has been as rare as a Satori news release on what they plan to do with their nifty ticker symbol.
 
Papuan Precious Metals (TSX:V.PAU, Stock Forum) is up 9% as Fission Uranium CEO Dev Randhawa continues to trawl the MMJ world looking for a good place to put his substantial wedge of dough. Stock is up 200% since April 1, when the company jumped into the stonersphere.

Based purely on who’s in charge, V.PAU continues to be on my five weedcos to watch list, along with Southbridge Resources, Chlormet, Tweed, and Affinor. Enertopia leaves the list based on volatility.
 

DOWNERS:
Greenbank Capital (CSE:V.GBC, Stock Forum): Down 16%. And I have NO IDEA WHY.
 

THE MOVERS:
Naturally Splendid Enterpr...   0.300 +0.060 +25.00% 52.9k
CREATIVE EDGE NTRTN INC   0.079 +0.015 +24.21% 43.47m
PMX COMMUNITIES INC   0.025 +0.004 +18.01% 20.88k
RANGO ENERGY INC   0.080 +0.012 +17.65% 527.04k
Next Gen Metals Inc.   0.240 +0.030 +14.29% 104.48k
Jourdan Resources Inc.   0.040 +0.005 +14.29% 17k
Cavan Ventures Inc.   0.045 +0.005 +12.50% 210.2k
Enertopia Corp.   0.410 +0.045 +12.33% 361.8k
MODERN MOBILITY AIDS INC   0.128 +0.013 +11.30% 295.15k
Abattis Bioceuticals Corp.   1.290 +0.120 +10.26% 768.27k
Satori Resources Inc.   0.055 +0.005 +10.00% 422.1k
Tweed Marijuana Inc.   3.450 +0.300 +9.52% 1.66m
West Point Resources Inc.   0.060 +0.005 +9.09% 5.2k
Papuan Precious Metals Corp.   0.060 +0.005 +9.09% 373k
Pacific North West Capital...   0.080 +0.005 +6.67% 13.33k
Spearmint Resources Inc.   0.085 +0.005 +6.25% 118k
Calyx Bio-Ventures Inc.   0.090 +0.005 +5.88% 68.2k
Crailar Technologies Inc.   1.130 +0.010 +0.89% 300
EASTON PHARMS INC   0.028 +0.000 +0.36% 12.79m
88 Capital Corp.   0.180 0.000 0.00% 0
Ansell Capital Corp.   0.050 0.000 0.00% 0
Global Hemp Group Inc.   0.090 0.000 0.00% 17k
Growlife Inc   0.502 0.000 0.00% 0
Seaway Energy Services Inc.   H   0.340 0.000 0.00% 0
Southbridge Resources Corp.   0.440 0.000 0.00% 0
Terra Firma Resources Inc.   0.015 0.000 0.00% 0
Supreme Pharmaceuticals Inc.   0.050 0.000 0.00% 0
Prominex Resource Corp.   0.025 0.000 0.00% 0
Weststar Resources Corp.   0.045 0.000 0.00% 314.73k
Chlormet Technologies Inc.   0.465 0.000 0.00% 0
Majescor Resources Inc.   0.070 0.000 0.00% 0
Bayhorse Silver Inc.   0.115 0.000 0.00% 84.35k
Arrowhead Gold Corp.   0.100 0.000 0.00% 13
AXE Exploration Inc.   0.035 0.000 0.00% 69.4k
Affinor Resources Inc.   0.365 -0.015 -3.95% 461.37k
Meridex Software Corporation   0.240 -0.010 -4.00% 291.76k
Green Swan Capital Corp.   0.095 -0.005 -5.00% 41k
Thelon Capital Ltd.   0.075 -0.005 -6.25% 273.7k
Maple Leaf Green World Inc.   0.065 -0.005 -7.14% 76.9k
Senator Minerals Inc.   0.135 -0.015 -10.00% 2.5k
Totally Hip Technologies Inc.   0.180 -0.020 -10.00% 30.04k
Victory Ventures Inc.   0.040 -0.005 -11.11% 6k
Pan American Fertilizer Corp.   0.075 -0.010 -11.76% 28.25k
GreenBank Capital Inc.   0.125 -0.025 -16.67% 22.5k
Alchemist Mining Inc.   0.095 -0.020 -17.39% 63.15k
NEXT GENERATION ENERGY   0.032 -0.008 -20.00% 2.79m
ROSTOCK VENTURES CORP   0.053 -0.016 -23.48% 212.08k
Windfire Capital Corp.   0.085 -0.030 -26.09% 288k
 

Check back daily for the latest news in this sector.

For more stories on this sector, see our Medical Marijuana section.

Follow me on Twitter at @ChrisParry

Send tips, news, suggestions to chris(dot)parry(at)stockhouse(dot)com


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Comments

antonaki1
Notice CANN today Chris. Actually topped $25 at it's high today. That's actually above it's prehalt low if you can believe that. Talk about a sector with staying power. Own Seaway and fully expect an MMJ related announcement type LOI or acquisition. Great share structure.
2.5 stars
April 17, 2014
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howestreetbull
Chris, a new entrant emerged today with plans for a 28 acre facility on Van Island near Parksville I believe... SUN.c currently halted on the COB announcement... Sunorca acquires B.C. medicinal pot business 2014-04-16 16:02 ET - News Release Mr. Nashirudeen Meghji reports SUNORCA CHANGES DIRECTION, ENTERS MEDICAL MARIJUANA BUSINESS Sunorca Development Corp. has entered into an agreement to acquire all the assets related to a medical marijuana business. The cusiness currently ...
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April 18, 2014
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cparry
Yeah, Seaway is looking like a good bet at the moment. Can't go wrong with a handful of shares out.
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April 17, 2014
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SlyLupp
I agree on Seaway baseline but Tweed a US base investor?
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April 17, 2014
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