Last week the cannabis industry saw two very similar IPO’s that both generated a lot of excitement. Perhaps too much excitement.
Top cannabis dogs brought their investment arms public last week; Canopy (WEED.T) through Canopy Rivers (RIV.T), and Aurora (ACB.T) through Australis. (AUSA.C). In the era of the Tilray, TGOD and Charlotte’s Web IPO’s, cannabis companies going public that have promotion dollars behind them generate tons of excitement.
Australis went public on Wednesday. The company did a recent financing at $0.25, Aurora shareholders who invested in ACB prior to August 24th also got in on the deal, acquiring 1 share of AUSA per 34 shares of ACB.
The pre-market went nuts with some bids coming in through TD as high as $300.00, the stock was halted until 9:30 AM EST and opened at $10.00. Within minutes the shares shot up to $16.00, and just as fast lost half their value and eventually closed at $2.90.
The AUSA IPO was a lesson for investors to do their due diligence and not buy purely based on hype of fear of missing out. The sector is starting to heat up very quickly, it’s easy to get caught up in the emotion and adrenaline.
Canopy Rivers IPO
Investors were keen on Australis, but there was even more hype on the Canopy Rivers IPO.
RIV had its private offering back in June-July and raised $104 million at $3.50 per share. According to Canopy’s Q1 2018 filings, RIV had long term investments of $226M.
RIV opened on Thursday at $10.75 and fell to $8.75 on 22,844,070 shares traded. The drop wasn’t nearly as drastic as Australis, but it was a similar scenario in a few ways. The recent financing RIV did was at $3.50, nearly 1/3 of the opening price, there wasn’t a massive selloff like what we saw with Australis, but there was some profit taking.
The main difference between Canopy Rivers and Australis is what the companies have currently. Australis is a very early stage company that on paper only has a business plan and its recent financing. Canopy Rivers on the other hand does have an established portfolio with 3 cannabis pubco’s in it already.
With Canopy’s 5 billion dollar investment from Constellation Brands it gives the company the ability to dominate not only the Canadian market, but the world market. Investors who believe in Canopy will be prone to believe in Canopy Rivers as well.