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Canadian cannabis companies continue to raise capital and report new financing agreements. This trend looks similar to what we saw last year and are monitoring how this trend continues.

Last year, the Canadian licensed marijuana producers were under pressure after a few product recalls, resulting from the use of prohibited pesticides during the cultivation process. Although this was a setback for the Canadian cannabis industry, a lot has changed since then.

2018 Is Starting to Look Like 2017

We are favorable on Canadian marijuana producers that continue to execute on previously announced initiatives and offer a differentiated opportunity. Investors need to make sure to be focused on higher-quality names and avoid companies trading at valuations that cannot be justified.

In the first quarter of 2017, several Canadian cannabis producers were raising capital at high valuations and we are noticing a more pronounced trend this year. These marijuana producers are taking advantage of the high valuations and raising capital through bought deals.

We are monitoring this trend closely and continue to prefer companies that are using this capital for specific growth initiatives. Last year, the influx of bought deal financings should have been a sign that the market was reaching a top and we will monitor how this trend continues.

Investors Need to Focus on Quality

One of the biggest differences from this time last year is the focus on international opportunities, especially Germany. Canadian licensed marijuana producers are also very focused on increasing production through construction initiatives or mergers and acquisitions.