Australis Has A Big Advantage Over Canopy Rivers

The comparison between Canopy Rivers (RIV.V) and Australis (AUSA.C) is one we have made in the past as they are strikingly similar for three reasons.

  1. They are both the investment arms of two of the biggest cannabis LP’s worldwide: Canopy (CGC.N) and Aurora (ACB.T)
  2. They both share the same business models with a lot of the same goals
  3. They both went public the same week

However, they do have some differences, one major one being that according to BNN Bloomberg, Canopy Rivers (RIV.V) is barred from investing in US cannabis companies, none of its current investments have direct access to the 300 million plus American market.

Aurora Cannabis announced the Australis deal in June, the stock had a fully-diluted share-count of about 145 million shares according to the Filing Statement. It priced a private placement round at $0.20 recently, raising $17 million. The stock opened a $10.00 on opening day back in September, 50 times the deal price, giving it a market cap of C$1.45 billion.

This is why we don’t take Australis’s current chart very seriously.

This was during a time where cannabis IPO’s were all the rage. Investors watched Tilray (TLRY.Q), Charlottes Web (CWEB.C) and The Green Organic Dutchman (TGOD.T) to name a few absolutely crush their IPO expectations by ridiculous levels. Unfortunately for those who waited for Australis and Canopy Rivers IPO dates, it hasn’t been a fun ride so far.

In the bigger picture, with Australis doing a $0.20 raise just this summer their current share price is still respectable, even-though it has fallen off a cliff down from $10, but it should have never gone that high in the first place.

The Australis IPO was FOMO in the market having its finest hour.


Vegas, Baby!

Australis’s advantage over Canopy Rivers is that it doesn’t seem to be afraid of going after the US market. With over 10x the population of Canada, the US cannabis market is one that everyone will be going after once the plant is legal. Through Australis’s investment in BaM (BAMM.C), they are taking more of a first mover approach and getting in while valuations are still sensible.

With a market cap of $35.3 million and a price/book ratio of 2.5, BaM is one of these undervalued US companies who haven’t had their evaluation blown out of proportion like many Canadian companies over the past 12-18 months.Smart move by Australis.

BaM’s stock has also had some really nice movement since midsummer, reaching a high of $1.20 earlier this month, a 263.6% increase from where it was in July.


Marijuana legalization is sweeping the US: In June, Oklahoma voted to legalize medical marijuana, joining the number of other states that already have medical marijuana laws on the books. In January, Vermont became the first state to legalize marijuana through the legislature, rather than a ballot initiative, when the governor signed the bill into law.

Last week we wrote about the recent wave of medical cannabis legalization sweeping across the US:

Support for the drug reached new highs in 2018. A Gallup poll showed that 64% of Americans favor legalization, and even a majority of Republicans back it. Ten states and Washington, DC have now legalized marijuana for recreational use for adults over the age of 21. And 33 states have legalized medical marijuana.

Canadian retail investors are also likely to re-invest their gains in the US cannabis sector because they already understand:

  1. The array of different cannabis products
  2. What news is actually important
  3. What causes buying in the market
  4. How much growth potential is in the sector
  5. What fundamentals to look for to determine a winner
  6. The risk/reward ratio of investing in emerging sectors

Most importantly, If they are keeping up with the sector they also see that the US is an extremely undervalued market, even some of the bigger US holdings like Charlotte’s Web (CWEB.C), CuraLeaf (CURA), MPX (MPX.C),  Greenthumb (GTII.C) and iAnthus (IAN.C) have reasonable valuations (compared to the Canadian giants at least).


Disclaimer: Body & Mind is a paid client of High Energy Trading, click here to read full disclosure.

High Energy Trading is not a licensed broker-dealer, market maker, investment advisor, or underwriter. All information that we provide is for informational purposes only and should not be construed as an offer or solicitation of an offer to buy or sell securities.

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