A rash of insider buying in the cannabis sector should be taken as a boost of confidence for the slumping pot sector, say analysts at Beacon Securities.
In a note to clients on Tuesday, Beacon analysts point to recent buying activity from C-Suite executives from companies such as Acreage Holdings (Acreage Holdings Stock Quote, Chart, News CSE:ACRG.U), iAnthus Capital Holdings (iAnthus Capital Holdings Stock Quote, Chart, News CSE:IAN) and Aurora Cannabis (Aurora Cannabis Stock Quote, Chart, News TSX:ACB).
Cannabis 2.0 is about to take flight but you wouldn’t know it from the sad state of affairs within the pot world, as stocks across the board continue to fall almost in lock-step with each other.
Tomorrow starts a new era in Canada’s fledgling cannabis market, as the federal government legalizes cannabis derivatives on October 17, a group that includes edibles, drinkable cannabis products, vaping products and a host of others, all of which come with the promise of more activity and higher margins for companies in the space.
But a string of bad news is combining with market impatience over continued lack of profitability to create a tonne of negative sentiment surrounding pot stocks both in Canada and the United States. Investors seem to have quick trigger fingers when it comes to companies showing signs of slower growth prospects in an industry that for years has been promising truckloads of revenue almost right out of the gate.
The latest reveal from HEXO Corp (HEXO Corp Stock Quote, Chart, News TSX:HEXO) is a case in point, with the Gatineau, Quebec-based company last week lowering its revenue projections for its upcoming quarterly report and removing guidance for the 2020 fiscal year, saying that regulatory delays and pricing pressure have hindered the company’s progress.
Insider buying in the cannabis sector is widespread of late…
As a result, HEXO’s share price has dropped more than 30 per cent in less than a week and is now trading in territory not seen since the early days of the pot explosion almost two years ago.
HEXO’s news sent pot stocks falling further last week, with the Horizons Marijuana Life Sciences Index (Horizons Marijuana Life Sciences Index TSX:HMMJ), which tracks the North American pot sector as a whole, finishing the week down 14 per cent.
Since mid-March, HMMJ is now down 55 per cent. Major industry names like Canopy Growth Corp (Canopy Growth Corp Stock Quote, Chart, News TSX:WEED) and Cronos Group (Cronos Group Stock Quote, Chart, News TSX:CRON) have also been sliding, shedding about 16 per cent and 14 per cent, respectively, in trading last week.
But depressed share prices seem to be representing a buying opportunity to some, as a number of pot company insiders have been snatching up shares at reduced rates.
As reported by Beacon Securities analyst Doug Cooper and Russell Stanley and based on data from CanadianInsider.com, last week saw Acreage Holdings CEO Kevin Murphy purchasing 100,000 shares of ACRG.U at an average price of $6.75 per share, iAnthus Capital’s Chief Strategy Officer Beth Stavola buying 10,000 shares at an average price of $1.72 per share and Aurora Cannabis CFO Glen Ibbott buying 900 shares of ACB at an undisclosed purchase price.
“We believe this buying bodes well, as it demonstrates insider confidence in their respective business outlooks,” write Cooper and Stanley.
The insider buying follows from the previous week which saw executives from Curaleaf, Cresco Labs, 4Front Ventures, Trulieve Cananbis and Organigram Holdings buying stock.