What Are Australis Capital and Canopy Rivers?
As the marijuana market continues to expand, the options available to investors grow in kind. Whereas before Canadian stocks were the only way to gain exposure to the burgeoning industry, investors now have a myriad of options to buy into marijuana.
One such option is via marijuana investment firms like Australis Capital ORD (CNSX:AUSA) and Canopy Rivers (OTCMKTS:CNPOF, CVE:RIV). This leads us to the all-important question: In the battle between Australis Capital vs. Canopy Rivers, which one comes out on top?
First, a little background information is in order.
Australis Capital is the investment arm of Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB) that invests in the U.S. cannabis market and in cannabis real estate (check here for a more in-depth exploration of what Australis is all about).
The short version is that due to the restrictions made on the Toronto Stock Exchange (TSE), marijuana companies were forced to shed American assets or face delisting.
Australis was initially designed as a way to enter the U.S. market, but these restrictions axed that idea.
Australis was then spun out on the Canadian Securities Exchange, allowing it to once more engage with U.S. assets, which brings us to where it is today.
“Recent changes in U.S. federal positioning with respect to cannabis have positively impacted the perception of risk to invest in U.S. cannabis assets,” the company said in a statement.
“This has further incentivized capital market participants to seek opportunities to fund U.S. based operations.” (Source: “Aurora Cannabis Provides Update on Australis Capital Public Listing,” Australis Capital, September 14, 2018.)
The Australis Capital IPO followed. The company issued 75 million shares at $0.20 each through a private placement for gross proceeds of $15.0 million. Australis also received $500,000 from Aurora, for warrants to buy Australis stock for up to 10 years. And thus, AUSA stock was born.
Canopy Rivers, meanwhile, is connected to Canopy Growth Corp (NYSE:CGC). The Canopy Rivers IPO was via the TSX Venture Exchange and began trading via reverse takeover.
“We’re really trying to make this smart money that goes global,” said Bruce Linton, acting CEO of Canopy Rivers. “The scouting has been pretty active.” (Source: “Canopy Venture Gyrates in Trading Debut as Cannabis Shares Churn,” Bloomberg, September 19, 2018.)
Canopy Rivers will work with firms looking for financial or operating support.
Of the 11 companies added to the Canopy Rivers investment portfolio in past year—running the gamut from licensed pot producers to media businesses—10 were in Canada and one in Italy.
Australis Capital vs. Canopy Rivers
With the background on these two companies complete, we can now pick and pry in order to find the better one of the two.
Canopy Rivers has been in the news lately as it struck a deal with TerrAscend Corp (OTCMKTS:TRSSF, CNSX:TER).
The Canopy Rivers-TerrAscend deal sent TRSSF stock soaring by over 17%, while Canopy Rivers stock remained rather muted, gaining under one point.
The deal will see TerrAscend restructure its share capital.
The idea here is that TerrAscend is looking to pursue international transactions in the cannabis sector, including in the U.S. This deal with Canopy Rivers grants an avenue to make those investments.
This is what CEO Linton had to say about the partnership:
We are excited for our partners at TerrAscend to extend their investment and operating strategy into new global markets. As TerrAscend pursues international growth, beginning in what is anticipated to be the largest cannabis economy in the world, we believe their team is well-positioned to take advantage of opportunities in regulated jurisdictions, and we are confident in their ability to leverage their pharmaceutical resources and strategic relationship networks to identify and execute compelling transactions.
(Source: “Canopy Rivers Announces Proposed Restructuring of Investment in TerrAscend,” Globe Newswire, October 9, 2018.)
The overall impact in the Australis Capital vs. Canopy Rivers fight from this investment remains to be seen.
Chart courtesy of StockCharts.com
Both stocks have performed almost identically to each other over the past 10 days, as evidenced by the chart above.
But overall, I like the direction of Canopy Rivers over Australis Capital.
First of all, I prefer the management team at Canopy compared to Aurora. This is a strong foundation to build upon, and one which gives Canopy Rivers a huge leg up.
You don’t need to look too far back to see that Canopy generally has a more stable and focused strategy, whereas Aurora has been swinging for the fences lately.
The benefit of that strong management team in place cannot be overstated.
Furthermore, while both are looking to make investments in the U.S. market, it appears that Canopy is more globally focused compared to Australis.
While the U.S. market is extremely lucrative, the problem is that we are still several years away from federal legalization. While investments could pay off down the line, most U.S. pot producers right now are relatively small.
Meanwhile, the world is rapidly headed toward more and more legalization laws being passed, making an international focus a must for marijuana companies looking to remain competitive in the long term.
As such, I give the edge to Canopy Rivers when comparing the two in globally-positioned strategy.
Though neither company has yet to yield strong returns since entering the market, there is a lot of potential for both investment firms to be very successful as the cannabis industry continues to grow.
But with its focus on the U.S., Australis is making a riskier play as it could see that money stagnate for years depending on how fast the U.S. approaches legalization.
Meanwhile, Canopy has positioned itself more globally and therefore seems better suited to make short-term gains without exposing itself to the risky U.S. market.