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Home / Business / Cannabis shares rally after Aurora post first earnings in December quarter

Cannabis shares rally after Aurora post first earnings in December quarter



The Cannabis shares were higher throughout Tuesday, when investors ate the first earnings reports for the season and a first glance at a bank account that the Democrats hope to pass in 2019.

Aurora Cannabis Inc.

ACB,

+ 2.93%

ACB, + 3.37%

shares reversed early losses to trade up 3.7% after the company said it almost quadrupled revenue and gained strong market share in its second financial quarter, but also had major losses due to a decline in marijuana-related shares. Aurora has invested heavily in other companies in the sector, and must follow the results as part of its revenue. These adjustments amounted to about $ 1

90 million ($ 143 million) of losses and came after sales in the sector.

The figures reflect the first full quarter since the launch of legal cannabis sales in Canada in October, the first industrialized nation to allow the drug to recreate the drug. Aurora said $ 21.6 million of its total sales of $ 54.2 million came from Canada, which has been deficient at the start of the new regime.

For more on Aurora, see: Aurora Cannabis earnings show great growth in pot sales, but worrying profits trend

Supreme Cannabis Co. Inc.

-2.05%

SPRWF, -0.70%

shares increased by 1% after the company posted earnings for its fiscal second quarter. The company had a net loss of $ 1.55 million, or 1 percent per share, in the fiscal second quarter to December 31, which is less than C $ 2.03 million, or 1 percent per share, in the previous year period. Revenue increased to $ 7.72 million from $ 1.68 million.

However, the company may have been too optimistic to value their cannabis plants before sale. Supreme said real value changes on the growth of biological assets came to C $ 10 million, but realized value changes in stocks sold or weakened were C $ 6 million. Combining $ 6 million with $ 4 million of production costs, the revenue number exceeds $ 7.72 million.

Read now: Marijuana IPOs in 2019: These companies may be the next hot pot shares

According to International Financial Reporting Standards, or IFRS, the standard used in Canada, companies must Report the value of a biological resource at various stages of development as a way to smooth earnings over time. For cannabis companies, this means that they must order the theoretical value of the crop before selling it, according to Mike Miller, CFO at Private Equity Firm White Sheep Corp. If they end up selling it for less than the value they assigned it, they must make an adjustment in the following quarter.

"The Cannabis market has seen great price volatility, making it difficult to guess what the biological assets are worth," he said. With the industry still in its infancy, there are no futures markets to help with pricing and many price estimates were based on medical cannabis prices that were higher than the prices retailers could get for recreational cannabis, he said.

"If it was 100% accurate, the revenue number should be equal to the production cost and adjustment and zero out. This will be a problem for many companies this earnings season, and the industry matures," he said.

Read more about the subject: How marijuana companies can earn without selling the pot

Preview of cannabis revenues: Cannabis income: Potential decline can drown Aurora and others in red ink [19659002] At the same time, American Democratic leaders have circulated a draft bill that allows cannabis companies to profit from banks, according to Marijuana Moment, a site dealing with activists, industry representatives, and policy makers on cannabis trends.

The lack of access to banks and capital markets – due to the federal ban on cannabis has hampered the development of the sector. The bill was published by the House Financial Services Committee before a meeting scheduled for Wednesday on the topic. Democrats are looking at other legislative measures in 2019 to promote the sector, including fiscal rights, medical access for military veterans and the removal of today's barriers to medical research, according to Marijuana Moment.

In case you missed it: Cannabis shares fall across the board when Aphria rejects bids, degradation of CBD spreads

Elsewhere in the sector, Canopy Growth Corp.

CGC, + 3.56%

WEED, + 3.38%

shares increased by 3.3%, Cronos Group Inc.

CRON, + 4.29%

CRON, + 3.79%

shares were up 3.4%

APHA, + 8.23%

APHA, + 8.63%

shares were 8% higher and Tilray Inc.

TLRY, + 1.85%

was up 2.6%.

Hexo Corp. stock

HEXO, + 5.65%

HEXO, + 4.99%

was up 4%, Aleafia Health Inc.


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