Cannabis stocks were mixed on Wednesday, with Green Thumb Industries Inc. climbing after posting a big jump in revenue in its latest quarter, while packaging company KushCo fell sharply after saying 2018 losses may double after it uncovered accounting errors.
Green Thumb shares GTBIF, +0.99% soared about 5%, after the company said revenue rose to $20.7 million in the fourth quarter from $6.2 million in the year-earlier period. Like its peers, the company had a net loss in the period, the first since full legalization of cannabis in Canada in October. Green Thumb’s net loss came to $3.1 million, wider than the $2.4 million posted a year ago. Net losses including non-controlling interests came to $8.9 million.
The company, which lists on the Canadian Securities Exchange under the ticker symbol GTII as well as over the counter in the U.S., does not receive enough analyst coverage to generate a reliable FactSet consensus estimate.
KuschCo Holdings Inc. stock KSHB, -7.76% slid 6.5%, after it said it would restate financial statements for fiscal 2018 and fiscal 2017, after uncovering accounting errors. KushCo said it expects net losses for fiscal 2018 to more than double to $24.3 million from $10.2 million, but for fiscal 2017 net income to increase to $1.7 million from net income of $100,000.
KushCo, which sells cannabis packaging, among other products and services, said that it recorded milestone payouts related to its acquisition of CMP Wellness and Hybrid Creative as equity when they should have been recorded as liabilities. Such liabilities would need to be adjusted for their fair value in the company’s consolidated statements of operations.
KushCo said it plans to file amended reports “as soon as practicable.” KushCo said separately that as a result of the restatements it would not be able to file a quarterly form 10-Q for the fiscal second quarter 2019 within the required timeline by the Securities and Exchange Commission. KushCo is traded over the counter.
The company is not the first in the new and growing sector to be pushed to restatements; Canopy Growth Corp. CGC, +1.10% WEED, +0.86% had to restate one earnings metric a week after posting fiscal third-quarter earnings, because of a formula error in a spreadsheet. That stock was up 1.4% on Wednesday.
Hexo Corp. HEXO, +2.22% is well positioned to capture its fair share of the Canadian market, according to Oppenheimer analysts Rupesh Parikh and Erica Eiler in a note published Wednesday. The stock rose 0.7%.
Analysts came away from a meeting with management that included co-founder and CEO Sebastien St-Louis and head of investor relations Jennifer Smith confident in the company’s strategy.
Among the issues that bolstered confidence; Hexo said it is comfortable with its revenue guidance of C$400 million in fiscal 2020; It has plans for the U.S. market for CBD and aims to target eight states for FDA approvals by 2020; it has a pipeline of innovative products and a growing patent portfolio; and its model of maintaining intellectual property on the cannabis side, while leveraging consumer packaged goods companies for brand development and distribution is a differentiator, according to Oppenheimer.
“From here, we remain focused on the ability of industry participants to deliver on supply and longer-term develop brands and differentiated products/experiences. It still remains difficult to pick the ultimate global winners at this early juncture, especially with the rollout of more advanced products coming later this year and beyond. We continue to believe HEXO has the potential to be one of the leaders down the road on the CPG side,” the analysts wrote.
In regulatory news, New York state has not yet approved three recent cannabis deals, namely MedMen Enterprises Inc. MMNFF, +2.04% acquisition of Pharmacann, The Green Thumbs Industries acquisition of Fiorello Pharmaceuticals and the Cresco Labs Inc. CRLBF, +4.02% deal with Valley, Agriceuticals, as reported by website Green Market Report.
The former is still under review, while the latter two were initially denied and have since been resubmitted, according to Green Market, citing comments from the state health department.
New York Gov. Andrew Cuomo sought to fast-track legislation earlier this year, but funding was not included in his budget due to pushback from lawmakers who insist on provisions that guarantee minorities who were disproportionately hurt by prohibition stand to participate in a legal market. Cuomo says talks have continued.
In California, a legislative committee killed a bill that aimed to stop licensed cannabis companies delivering their product anywhere in the state, Marijuana Business Daily reported. The bill was backed by cities and counties that want to have as much control as possible of cannabis sales in their region.
“This is a great day for patients, consumers and legitimate cannabis businesses,” Elizabeth Ashford, a spokeswoman for cannabis delivery tech platform Eaze Solutions, said after the vote, according to the website.
Elsewhere in the sector, Aurora Cannabis Inc. ACB, +3.29% ACB, +3.67% was up 1.7% and Cronos Group Inc. CRON, +1.81% CRON, +2.72% was up 0.7%.
Tilray Inc. TLRY, +1.12% was up 0.8%, Aleafia Health Inc. ALEF, -2.84% ALEF, -2.84% was down 3.0%.
OrganiGram Holdings Inc. OGRMF, +0.90% was up 1.8%, MedMen Enterprises Inc. was up 1.4% and Cresco Labs CRLBF, +4.02% was up 3.0%.
The Horizons Marijuana Life Sciences ETF HMMJ, +2.05% was up 1.3%, and the ETFMG Alternative Harvest ETF MJ, +1.79% was up 0.9%.
The Dow Jones Industrial Average DJIA, +0.03% was flat and the S&P 500 index SPX, +0.35% was up 0.1%.
