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Cannabis Summary for July 21, 2020

2020-07-21 19:30 ET - Market Summary

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by Stockwatch Business Reporter

The S&P/TSX Cannabis Index slipped 0.44 point to 150.79 Tuesday, while the Canadian Securities Exchange Composite Index gained 8.95 points to 438.61. Seed-to-sale cannabis producer Organigram Holdings Inc. (OGI) fell 20 cents to $1.84 on 4.72 million shares after releasing its fiscal third quarter results for the period ended May 31, 2020. Organigram had net revenue of just $18-million in fiscal Q3, down from $23.2-million in fiscal Q2. The company attributed the drop to both a lower volume of marijuana sales and a lower average selling price on the marijuana. Organigram also noted that the presence of COVID-19 delayed the company's launch of a "large format value offering," presumably meaning a large amount of cannabis sold at a discounted price.

(This "value offering" has become popular among Canadian cannabis producers. It started with Hexo Corp. (HEXO: $0.98) near the end of 2019, when the Quebec-based cannabis producer offered 28 grams, or an ounce of marijuana, at about $4.50 a gram, compared with the average legal price of $7 a gram. Many competitors, including Village Farms International Inc. (VFF: $7.98) and Aurora Cannabis Inc. (ACB: $15.64), have launched a similar offer. It has become a good way for companies to offload their lower quality marijuana. For the consumer, it is a considerable discount but you have to be willing to buy a large quantity. One gram of marijuana would make one large joint, so buying 28 grams is probably only worth it for regular users.)

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