Canadian LPs Weakness
During the last month, Canadian LPs have been trending lower and we believe that this weakness is the result of two primary developments: 1) The firing of Bruce Linton as the CEO of Canopy Growth (WEED.TO) (CGC), and 2) The non-compliance notice issued by Health Canada to CannTrust Holdings (TRST.TO) (CTST).
Although the recent decline has been significant, we believe that the self-implemented suspension on CannTrust will benefit other Canadian LPs. Canadian authorities expected CannTrust to be a major supplier to the medical and recreational market on a going-forward basis. The suspension created a significant loss for the current and future production capacity needs of the Canadian market, and this will benefit other LPs.
Historical trends lead us to believe that the Canadian cannabis market will continue to be under pressure over the near-term. After the recent weakness, valuations look much more attractive and we will continue to closely monitor this vertical of the cannabis industry.