Medical marijuana update: 20-baggers, newsletter scams and broken dreams

Chris Parry Chris Parry, Stockhouse.com
17 Comments| June 5, 2014


CONFERENCES!
 
Toronto weedco fans, I’ll be at the Greenrush Conference in your town on June 26, which is hosted by the fine folks at Next Gen Metals (CSE:C.N, Stock Forum). Unsure if Stockhouse will have a booth there or if I’ll just be winging it solo, but I will be giving my updated presentation on ‘The Dot.Bong Bubble’, including my take on how companies, investors and service providers can make money in the sector, which companies I like a lot, and why Health Canada wishes flaming lesion-covered death on everything in the sector so it can get back to telling seniors that fixing a broken hip is elective surgery.
 
I may take the chance to go talk to some east coast CEOs and look over a facility or two while I’m out there. More likely I’ll just get drunk on expensive vodka drinks and ruin a good suit. But we’ll see.
 
The Benzinga crowd is putting on a show at the end of the month in Denver, Colorado. The first annual Weedstock Conference will take place on June 29-July 1. I know there are plans to hold a Canadian weed stocks panel which I’m hoping I can get out to moderate, schedule (and border guard drug dog) permitting. The last day of the conference coincides with Canada Day, so what better way to celebrate than to explain to US investors how we do things in socialistville?
 
Creative Edge Nutrition (OTO:FITX, Stock Forum) will be there, among other companies, so it will be nice to catch up and challenge CEO Bill Chabaan to an arm-wrestling contest. He’s got the supplement advantage, while I’ve got the convict past-derived meanstreak.
 
Interesting to note that FITX has climbed a little after our stoush last month, but settled in at a lower point than it was in May. The new base puts the company, for mine, closer to where it should be as a speculative punt. If it drops below $5, hype or not, it might be value. Depends how you personally value a mid-tier production play that will unlikely be selling product before year end (as opposed to ‘the largest grow op in the world which will open when it gets its license in a few weeks’).
 
I still see talk on iHub occasionally that I’m going to be sued by FITX for the stories I’ve written about them, which is comically silly. I write about a lot of companies, and many take their kicking with grace, understanding that if you can’t reply to honest and hard questions, it’s a corporate failing – and if you can, it’s a marketing opportunity. What’s up, Satori Resources.
 
But hey, the last guy that sued me found himself defending a 32-page quarter million dollar countersuit, and that didn’t present nearly as many opportunities to have fun writing about it as a FITX fight would, so I’d suggest the cult of Bill should be careful what it wishes for.
 
On the topic of Satori Resources (TSX:V.BUD, Stock Forum), I spotted CEO Jennifer Boyle walking the floor at this week’s Cambridge House Investor Conference, and I collared her for any news she could share on that company. She didn’t have anything for me, but said there’s plenty happening under the covers and hinted that the next month might prove interesting. BUD is at a three month low right now, and presents a pretty cheap buy-in. At its new base of $0.045, any half-cent upward move is a nice return and there are a lot of people waiting for news, so playing the maybes with your spare change might prove interesting.
 
One company making a move today is Global Hemp Group (CSE:C.GHG, Stock Forum), which has joined forces with some interesting South African entities in its bid to create an African hemp producer.
 
One of those is House of Hemp, which is the sole private company permitted to grow hemp in SA, with another being House of Mandela Agricultural Holdings.
 
That company was founded by Dr. Pumla Makaziwe Mandela, the sole living daughter of Nelson Mandela and his first wife, Evelyn Mase. There are lots of Mandela’s around, but this one is legit. She’s big on the mining and petroleum circuit, has worked with the Development Bank of Southern Africa, and brings political heft to the group. 
 
Hemp – eventually – will leave medical marijuana in the dust. It’s a legitimate supercrop that has been, ridiculously, limited in its use for a century by its association with marijuana, even though it won’t get you high and provides a huge fertility boost to fields where its grown, and can grow in drought areas.
 
GHG hasn’t ridden the bubble run in MMJ because hemp ain’t sexy, but as marijuana loses its shackles, hemp will own all. If GHG can get it growing quickly and cheaply, Africa will become the world center of it and the economics of that region change forever.
 
Sometime in the next week I plan to throw some grocery money at that stock and not think about it again for a few years. Then, on Canada Day 2017, I’m going to buy you all a beer with the proceeds.
 
Maple Leaf Green World (TSX:V.MGW, Stock Forum) put out a news release today announcing they had “catapulted the company to the forefront of the rapidly emerging Canadian medical cannabis (MMJ) space” by leasing a greenhouse facility in Telkwa B.C.
 
Let’s be clear: They’ve done no such thing.
 
Yes, they have signed a lease on some greenhouses, but in order to be at the forefront of anything they’ll have needed to get themselves MMPR  approval (they admit they’re months away from even stage one approval), they’ll need more than Tweed’s 150,000 sq ft or so of facility space, let alone the 342k sq. ft. Supreme Pharma is playing with (they have leased 80k sq. ft. according to their release), they’ll need to have strains in their hands (the release says they have ‘50 different strains in their target selection’, which translates to them having the same number of actual strains my back has when I sleep funny), and/or a distribution channel (which, right now, pretty much nobody has).
 
Now, the Telkwa greenhouse is nice. It has a retractable roof, the greenhouses have environmental control systems in them, they have blackout curtains. That’s all fun.
 
But here comes the boom – they’re not pharmaceutical grade. They’re not secure. They’re clad in polyethylene material, which I’m pretty sure I could slice through with a box cutter. There’s 52 of them, so whatever you spend securing one, you’ll need to spend securing another 51.
 
MLGW has nearly thirty years of experience in growing, that’s not in question. But that time has been spent growing reforestation seedlings, not prime purple head explosion ganj in a pharmaceutical grade setting with government compliant inventory tracking systems.
 
Nobody is busting into a greenhouse – or even a field – to scoop an armful of reforestation pine. Nobody’s going to do that for strawberries. But for weed? I can’t see how Health Canada would ever permit the operation that you can see here to be licensed to grow marijuana without an extensive retrofit that would, frankly, cost more than it would ever be worth.
 
Now, that’s just my opinion, and while I admittedly have no experience growing weed, it seems neither do the people at Maple Leaf Grow World.
 
I’ve been saying loud and proud for a while now that grow operations are going to be seeing a reckoning at some point soon, as the bulk of them realize they’re not licensable – or profitable – especially considering their target market is people on disability that will pay $500 to get a doctor’s note and pay $8 a gram for their medicine instead of just growing their own in the toolshed.
 
The company says they think getting through ‘the remaining stages’ of the MMPR process after they get their stage one approval should be “pretty straightforward.”
 
For mine, that’s like hitting a homerun in Single-A ball and thinking that it should be “pretty straightforward” to get to the majors – especially considering Maple Leaf Green World is already throwing around phrases like “has catapulted the company to the forefront of the rapidly emerging Canadian medical cannabis space.”
 
They’ve catapulted the company to taking a lease out on a nursery. That’s all.
 
Lettuce-growers with no license and a facility that presents a crazy expensive build-out with no distribution channels and no strains and a high likelihood that motorcycle enthusiasts will drive in and clean them out… What could go wrong?
 
Also in ‘What could go wrong’ country is Green and Hill Industries (OTO:GHIL, Stock Forum), which had to put out an embarrassing  release today to counter claims being made by a newsletter promoter that the company is a must-buy slam dunk.
 
The writer of the newsletter, Eric Dickson of Breakway Stocks, reportedly says he was paid by Development Solutions to write the letter. GHIL says they don’t know who these entities are.
 
Breakaway Stocks charges morons users $495 a year for their hot tips.
 
From the release:
 
The Company further advises that there are numerous false statements in the newsletter including:

 
  • Inference that a huge profit and giant sized returns might be made from trading in the Company's stock
  • Inference that Ross' Gold will be sold in USA where in fact, the Company has no plans to enter the USA marketplace 
  • Inference that Ross' Gold is a marijuana company where in fact it is a licensing and branding company
  • Inference that the Company is the first publicly traded Marijuana Company in Canada
  • Inference that the Company's CEO made money for outside investors as a real estate developer where in fact no money was made for outside investors
  • Inference that there is NASDAQ.com report, to wit the Company is unaware.
  • Inference that the Company could be the subject of a buy out where in fact the is no buyout or planned buyout

The BC Securities Commission pushed the issue with GHIL and, to their credit, GHIL responded in the right way. The company says it did not trade in the stock during the promotional activity in question, though it did recently put out a press release that claimed success at a trade show drove a massive spike in volume, saying, in part, “Green and Hill Industries […] saw its share volume skyrocket on June 3rd with 399,146 shares exchanging hands, 74 times higher than its three month daily average volume of 5,392 shares.”
 
Huh. That’s some low average volume for a company with a market cap of $113m and 101m shares out.
 
I can’t see GHIL maintaining that market cap. It’s a long way from revenue and a much longer way from the sort of revenue that warrants a $100m play.
 
Let’s talk Supreme Pharmaceuticals (CSE:C.SL, Stock Forum). They’ve closed the acquisition of their 342k sq. ft grow space. I’m okay with that. And if growing MMJ turns out to be a gangbusters great business, they’ll win it all, because they’re working toward a massive footprint. Goodo.
 
But I’ve been accused by some commenters of being biased against Supreme because I don’t write about them much. Here’s why I don’t cover their every move:
 
They cover their every move.
 
Nobody promotes their news like Supreme does. They look at a grow space, there’s a news release about it. They sign an LOI to lease it, news release. They sign a lease, news release. Close the deal? News release.
 
What can I add to that?
 
I worry about Supreme’s all-in on growing. I worry about their taking on debt of those setting up facilities that aren’t necessarily license-ready. I worry about the massive buzz on them last month making them a too fast, too soon deal.
 
But I don’t hate the company. In fact, I have had it in my presentations at various conferences where I say, if you’re looking for a grow play, they’re right up there.
 
I just don’t see the grow play as being where I want to be. There’s already downward pressure on prices – what was being talked of as $12 a gram market six months ago is now a $7 a gram market, with cheaper on the street. Add all this mega-capacity and a really tight bottleneck on the patient end, and I can’t see where all this weed is going to go.
 
Now, if a company plans to grow weed to feed its own value-adding products downstream, that makes sense to me because it secures quality, consistency and price for that company. And if weed gets cheaper in that scenario, you can always quit growing and just buy up everyone’s excess for your product.

Affinor Growers (CSE:C.AFI, Stock Forum), to me, is a great demonstration of this in action.
 
Worth noting: Affinor is hedging its bets on growing Mary Jane, and is going to start out growing strawberries. That’s called diversifying your business plan and giving yourself an out if things get hairy.
 
This is part of the reason that Affinor has exploded upwards since mid-March, going from sub-$0.05 to twenty times that at $1.03 today. It’s a spec deal like anyone else, but with downside safety built in.
 
Does Supreme have that out?
 
If exports become a reality, then it won’t need one. If recreational use becomes a reality, it won’t need one. If it rolls up the Tweed’s and Creative Edge’s somehow, it won’t need one.
 
But for now? I worry. The company is delivering on what it has promised. But I wonder if that promise is a good long term play.
 
Here’s what I will say about Supreme: It’s a straight up, blow your hair back, empty your pension BUY based on current market cap if the market caps of GHIL or FITX have even a shred of common sense to them.
 
I’ll talk to the Supremos soon and get their take on what I’m missing, and I’ll be happy to report back if they make their case well. It would be nice for a grow play to establish a solid business plan from seed to sale, and I hope C.SL is the company that can do it. If only so the comment trolls will quit the conspiracy theories.
 
In good news, Cannabis Technologies (CSE:C.CAN, Stock Forum) listed on the OTCQB two days ago and exploded. If you followed my reporting earlier in the month and bought in, you’ve basically doubled your money.
 
YOU ARE WELCOME.
 
THE MOVERS:
ROSTOCK VENTURES CORP   0.035 +0.009 +34.23% 340.8k
Terra Firma Resources Inc.   0.020 +0.005 +33.33% 130k
Cannabis Technologies Inc   0.620 +0.130 +26.53% 2.39m
Jourdan Resources Inc.   0.025 +0.005 +25.00% 1.93m
Weststar Resources Corp.   0.030 +0.005 +20.00% 237k
Next Gen Metals Inc.   0.160 +0.020 +14.29% 31k
Anexco Resources Ltd.   0.160 +0.020 +14.29% 28k
Satori Resources Inc.   0.045 +0.005 +12.50% 228.14k
Calyx Bio-Ventures Inc.   0.060 +0.005 +9.09% 119.1k
EASTON PHARMS INC   0.025 +0.002 +8.41% 12.6m
Maple Leaf Green World Inc.   0.070 +0.005 +7.69% 478.7k
Affinor Growers Inc.   1.030 +0.060 +6.19% 1.43m
PMX COMMUNITIES INC   0.018 +0.001 +4.73% 163.5k
Crailar Technologies Inc.   1.050 +0.020 +1.94% 7.04k
CREATIVE EDGE NTRTN INC   0.060 +0.000 +0.33% 18.85m
88 Capital Corp.   0.060 0.000 0.00% 0
Alchemist Mining Inc.   0.075 0.000 0.00% 0
Ansell Capital Corp.   0.050 0.000 0.00% 0
Global Hemp Group Inc   0.075 0.000 0.00% 801k
Pan American Fertilizer Corp.   0.070 0.000 0.00% 0
Seaway Energy Services Inc.   0.340 0.000 0.00% 0
Thelon Capital Ltd.   0.045 0.000 0.00% 0
Senator Minerals Inc.   0.090 0.000 0.00% 0
Windfire Capital Corp.   0.165 0.000 0.00% 0
Prominex Resource Corp.   0.040 0.000 0.00% 0
Cavan Ventures Inc.   0.040 0.000 0.00% 285k
Chlormet Technologies Inc.   0.465 0.000 0.00% 0
GeoNovus Minerals Corp.   0.035 0.000 0.00% 1,000
West Point Resources Inc.   0.050 0.000 0.00% 0
Majescor Resources Inc.   0.055 0.000 0.00% 0
Spearmint Resources Inc.   0.040 0.000 0.00% 0
Arrowhead Gold Corp.   0.040 0.000 0.00% 0
Totally Hip Technologies Inc.   0.100 0.000 0.00% 0
AXE Exploration Inc.   0.025 0.000 0.00% 85.06k
GreenBank Capital Inc.   0.120 0.000 0.00% 465
Victory Ventures Inc.   0.025 0.000 0.00% 0
PREMIER BRANDS INC   0.001 0.000 0.00% 12.33m
Lexaria Corp.   0.290 0.000 0.00% 0
NEXT GENERATION ENERGY   0.023 0.000 -0.43% 334.81k
Tweed Marijuana Inc.   2.770 -0.030 -1.07% 144.6k
Naturally Splendid Enterpr...   0.285 -0.005 -1.72% 57k
Enertopia Corp.   0.190 -0.005 -2.56% 180.45k
Abattis Bioceuticals Corp.   0.750 -0.030 -3.85% 292.07k
Growlife Inc   0.120 -0.005 -4.00% 8.68m
Papuan Precious Metals Corp.   0.090 -0.005 -5.26% 485.38k
Supreme Pharmaceuticals Inc   0.080 -0.005 -5.88% 3.13m
MODERN MOBILITY AIDS INC   0.145 -0.010 -6.39% 190.4k
Pacific North West Capital...   0.065 -0.005 -7.14% 37.7k
Southbridge Resources Corp.   0.400 -0.080 -16.67% 500
GREEN AND HILL INDUS INC   1.120 -0.300 -21.13% 562.15k
Green Swan Capital Corp.   0.070 -0.020 -22.22% 34k
 
 
NOTE: Next Gen Metals and Cannabis Science are Stockhouse Publishing marketing clients. They have not paid for coverage in this column, nor do I own the stock. As a rule, I don’t own any stocks that I write about. If I trash your deal, it's because you need to do better, not because it'll send my kid to college.
 
Find more marijuana sector coverage at http://www.stockhouse.com/discovery/marijuana

Twitter: http://www.twitter.com/chrisparry
Email: Chris(dot)Parry(at)Stockhouse(dot)com
Passenger pigeon: 49.287317 N, -123.125311 W
Desk: The one that smells like old cheese.



 
 
 
 


Rate this article
5 stars
v
Usefulness

Clarity

Credibility

Interested in these industries and sectors?

Receive investor kits and email updates from Stockhouse and directly from these companies.

"Industrial Metals & Minerals"
"Metals & Mining"
Agriculture

I consent to receiving investment related electronic messages from Stockhouse and the companies selected.
I may withdraw my consent at any time.

Comments

StockGru2013
Great article Chris. Well this month is going to be interesting for Satori Resources BUD.V. As we have all see that there due diligence period (8 weeks from April 21,2014) is closing in and only a matter of days away. Sounds like exciting things maybe taking place with BUD in the very near future.
2 stars
June 5, 2014
Rate this comment
3 stars
v
Usefulness

Clarity

Credibility

kingscorpion
Well Chris I think the problem with the downward pressure on the ganja prices will be taken care of with the current frenzy in the M&A activity. By buying out your competitor you are in essence limiting competition therefore control on the ganja prices longterm. You should still write on SL or any other company regardless of their self promotion.
4 stars
June 6, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

celcius
How come never a mention of cmt.
2 stars
June 5, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

smithgee
Nice you picked up on the GHG news today ... only a matter of time before people realize what this play is all about.
2.5 stars
June 6, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

smithgee
Nice you picked up on the GHG news today ... only a matter of time before people realize what this play is all about.
2.5 stars
June 6, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

thedave2006
trade the bubbles.
4 stars
June 6, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

G4General
Certainly delighted about AFI and CAN most recently. Look's like Satori Resources BUD.V will be budding up this month. Look like the due diligence period went great for the company.
2.5 stars
June 5, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

rcash1
Good article. With the exception of you obviously never have grown, so have no idea the profit involved. Even if MJ is 3$ a gram that's still 1350$ a lbs, with a cost if done efficiently of .25 to 50 cents a gram there's still lots of margin. Guys that grow lots now ,are already selling wholesale at that 1350$ buy the lbs on the streets and still making lots a $.Do the math Tweed is licensed for 15 thousand kg that's 33000 lbs x 448 grams x 3 dollars is over 44,500,000 million a y...
0.5 stars
June 6, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

ottawa4life
supreme delivering again... Wall street joutnal today http://www.marketwatch.com/story/supreme-pharmaceuticals-inc-commences-construction-of-required-security-measures-2014-06-06
2 stars
June 6, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

supserstar
by the way Chris, mgw didn't put that out in a press release, it was a promo article written about them by a third party. you know like the ones you write quite a bit..I guess they should have put you on the payroll before they did that so as to not put you off
2 stars
June 5, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

Leave a Message

You must be logged in to access this feature.