Friday was an unusually active day for fans of marijuana — at least on the stock market.
Tweed Marijuana Inc. became Canada’s first licensed provider of medical marijuana to go public and investors seem eager to jump on the hype surrounding the green rush.
The stock raced out of the gate at the opening bell to $4.60 per share with more than two million traded in the first 15 minutes, before settling to close at $2.59 apiece.
That gives the formerly private company a market cap of $90 million.
It was by far the most actively traded stock Friday on the TSX Venture, with nearly 10 million shares changing hands.
The opening asking price was much higher than the 85 cents Tweed chairman Bruce Linton had expected, based on the closing price of the shell company it took over and the number of shares outstanding. Stocks are often driven higher before they actually go on the exchange by large-scale investors who set automated orders to buy the second the market opens.
Linton believes the 44 per cent drop from the opening price to close has more to do with the early, rather than waning, enthusiasm. He pointed out that the first trade was nearly six times higher than the last closing price.
“It’s the first day, and it’s a phenomenal first day,” he said.
Tweed’s first day of trading was marred by a number of technical glitches that made it difficult for some traders to find the stock. Its stock symbol TWD sometimes led to an entirely different company, while at other points the company name was associated with the old ticker LWI.
In order to bypass the complex and lengthy process of an initial public offering, the company executed a reverse takeover of shell company LW Capital Pool Inc.
Tweed is one of 12 medical marijuana producers licensed so far by Health Canada and operates out of an old chocolate factory in Smiths Falls, Ont.
The market’s potential for growth has raised a huge amount of interest in the sector. Everyone from currently licensed patients to junior mining companies are looking into ways to profit from to jump on board the green rush. Health Canada has received some 600 applications from those looking for a federal license to start growing and selling the controversial medicine.
Penny-stock mining and oil companies have jumped at the chance to be associated with medical marijuana in the wake of the federal government’s commercialization of the industry. It’s a phenomenon that has sent their share prices soaring with each press release expressing interest in the industry.
But not all those getting in on the weed action partook in Tweed’s high on Friday.
Supreme Pharmaceuticals Inc., Satori Resources Inc., Maple Leaf Green World Inc., Umbral Energy Corp., Terra Firma
Resources and Thelon Capital Ltd. are all companies that have recently announced an interest in the marijuana market. They were also among the most active traders Friday, but all of those stocks dropped.
Linton believes investors may have jumped from those companies into Tweed, the only company listed on a stock exchange with a viable business plan and a license from the federal government.
“(I think they realize) that what we’re doing is creating a business” he said.
“There’s a fundamental difference when you work to create a business that is multiple years than when your intent is to be a hot trade.”
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