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Nov. 14, 2019, 2:20 p.m. EST

Canopy Growth’s earnings disappointment delivers fresh pain in brutal stretch for cannabis stocks

Sector slammed after market leader’s earnings fall short, sending exchange-traded funds down more than 5%

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By Ciara Linnane, MarketWatch

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The analyst rates the stock as neutral.

Don’t miss: Short sellers are increasing bets on cannabis stocks even after summer selloff

Green Organic Dutchman shares /zigman2/quotes/204266798/delayed TGODF +1.82%   /zigman2/quotes/206870535/delayed CA:TGOD 0.00%  fell 5.8%, even after the company said it has signed deals to raise up to C$103 million in funding. The company said in October it was planning to cut costs after failing to find funding to complete the construction of some of its facilities at an affordable price. Like Canopy, Green Organic Dutchman has struggled with the smaller-than-expected Canadian legal market.

The company now has a financing package composed of a sale-leaseback of its Ancaster Energy Centre; a construction mortgage loan term sheet; and a convertible equity term sheet.

Cresco Labs /zigman2/quotes/205276242/delayed CA:CL +1.91% fell 7% and CannaRoyalty Corp. slid 9%, after Cresco amended the terms of its takeover of the former , which does business as Origin House. The companies agreed to merge last year in a deal valued at the time at about $820 million, but now after the steep selloff in the sector this year, the value has more than halved and is now closer to $370 million, according to GMP analyst Robert Fagan.

Fagan said the amended terms are an overall positive and that Origin shareholders should be happy as the revised price is still a 30% premium over Wednesday’s closing price.

“On balance, we consider the amended terms for the OH transaction as favorable for both companies and despite a slightly longer closing timeline than previously expected, we view the increased visibility offered for this strategic acquisition as providing an overall positive read-through for Cresco Labs,” he wrote.

Click to Play

Illegal at Home but Lucrative Abroad: China Bets Big on CBD

As products made with CBD, or cannabidiol, take off in the U.S., Chinese entrepreneurs are looking cash in. The WSJ visited China’s cannabis heartland to see how they are navigating this highly sensitive industry as they try to turn their country into a CBD superpower. Photo composite: Sharon Shi. Video: Clément Bürge

Cresco Labs isn’t the first to revise deal terms after the market rout. In October, MedMen Enterprises /zigman2/quotes/201940908/delayed MMNFF 0.00%  terminated a plan to buy PharmaCann LLC, a stock deal that was valued at $682 million when it was first announced in 2018. MedMen was down 0.5%.

Elsewhere in the sector, market leader Tilray Inc. /zigman2/quotes/209129655/composite TLRY +0.41%  was down 4%, Cronos /zigman2/quotes/206842762/composite CRON -0.79% /zigman2/quotes/202715342/delayed CA:CRON -1.04%  was down 6%, Aphria Inc. /zigman2/quotes/207425803/composite APHA +2.07%   /zigman2/quotes/205566616/delayed CA:APHA +1.90%  was trading 7% lower and Aurora Cannabis /zigman2/quotes/210559470/composite ACB -0.64%   /zigman2/quotes/203734337/delayed CA:ACB -0.80%  was sliding by 11%.

Aleafia Health shares /zigman2/quotes/203485112/delayed ALEAF -0.86%   were headed 10% lower, and Hexo’s stock was down 8%.

Cannabis Watch: Click here for all of MarketWatch’s coverage of cannabis companies

/zigman2/quotes/204266798/delayed
US : U.S.: OTC
$ 0.19
+0.0034 +1.82%
Volume: 250,494
Sept. 30, 2020 3:53p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$70.54 million
Rev. per Employee
$8,428
loading...
/zigman2/quotes/206870535/delayed
CA : Canada: Toronto
$ 0.25
0.00 0.00%
Volume: 306,058
Sept. 30, 2020 3:57p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$94.23 million
Rev. per Employee
$10,924
loading...
/zigman2/quotes/205276242/delayed
CA : Canadian Securities Exchange
$ 8.00
+0.15 +1.91%
Volume: 91,333
Sept. 30, 2020 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.88 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/201940908/delayed
US : U.S.: OTC
$ 0.14
0.00 0.00%
Volume: 0.00
Sept. 30, 2020 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$88.01 million
Rev. per Employee
$49,729
loading...
/zigman2/quotes/209129655/composite
US : U.S.: Nasdaq
$ 4.85
+0.02 +0.41%
Volume: 4.74M
Sept. 30, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$616.81 million
Rev. per Employee
$62,689
loading...
/zigman2/quotes/206842762/composite
US : U.S.: Nasdaq
$ 5.01
-0.04 -0.79%
Volume: 1.61M
Sept. 30, 2020 4:00p
P/E Ratio
10.90
Dividend Yield
N/A
Market Cap
$1.75 billion
Rev. per Employee
$55,248
loading...
/zigman2/quotes/202715342/delayed
CA : Canada: Toronto
$ 6.69
-0.07 -1.04%
Volume: 476,338
Sept. 30, 2020 4:00p
P/E Ratio
11.30
Dividend Yield
N/A
Market Cap
$2.34 billion
Rev. per Employee
$70,780
loading...
/zigman2/quotes/207425803/composite
US : U.S.: Nasdaq
$ 4.43
+0.09 +2.07%
Volume: 2.30M
Sept. 30, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.28 billion
Rev. per Employee
$147,410
loading...
/zigman2/quotes/205566616/delayed
CA : Canada: Toronto
$ 5.91
+0.11 +1.90%
Volume: 1.27M
Sept. 30, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.70 billion
Rev. per Employee
$190,843
loading...
/zigman2/quotes/210559470/composite
US : U.S.: NYSE
$ 4.65
-0.03 -0.64%
Volume: 8.99M
Sept. 30, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$564.09 million
Rev. per Employee
$94,401
loading...
/zigman2/quotes/203734337/delayed
CA : Canada: Toronto
$ 6.20
-0.05 -0.80%
Volume: 2.69M
Sept. 30, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$753.48 million
Rev. per Employee
$123,163
loading...
/zigman2/quotes/203485112/delayed
US : U.S.: OTC
$ 0.37
-0.0032 -0.86%
Volume: 79,549
Sept. 30, 2020 3:44p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$109.25 million
Rev. per Employee
N/A
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Ciara Linnane is MarketWatch's investing- and corporate-news editor. She is based in New York.

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