Canada Pot Stocks Rally as Ontario Plans to Open 150 Stores

Posted : 09/13/2017

Source: Bloomberg
By Jen Skerritt , Aoyon Ashraf , and Doug Alexander
September 8, 2017

Ontario to create cannabis control board for pot sales Other provinces will probably announce plans soon, Canopy says Canadian marijuana producers rose on Friday after Ontario said it will open as many as 150 government-run pot stores and allow online purchases as the country gears up for legalized recreational sales next July.

The Liquor Control Board of Ontario will reach the 150-store target by 2020 and manage the sale and distribution of marijuana, Ontario Finance Minister Charles Sousa said Friday. The stores won't be housed inside government-owned liquor stores, and there will be as many as 80 stores operational in the first year, he said.

Shares of Canopy Growth Corp., the first marijuana company with a market value of C$1 billion ($825 million), rose as much as 5 percent intraday in Toronto, the most since July 26. MedReleaf Corp. rose as much as 5.1 percent, Aurora Cannabis Inc. gained 1.6 percent and Aphria Inc. increased 2.5 percent.

"The LCBO model works," Sousa told reporters in Toronto. "It's proven and we feel strongly it's the right way to go."

Ontario is the first province to announce how it will regulate and distribute sales of marijuana when Canada moves to legalize recreational sales by next July. The plan also includes online sales and will ensure safe and controlled sales of marijuana and allow the province to shrink illicit sales and shut down illegal dispensaries, Sousa said. Buyers must be at least 19 years old, matching the minimum age for alcohol in Canada's most-populous province.

The announcement is not a surprise as Ontario Premier Kathleen Wynne has mused for months about how the province's liquor board or equivalent could be used to distribute cannabis, Beacon Securities analyst Vahan Ajamian said Friday in a note. The idea of using crown corporations for cannabis is gaining traction in the eastern part of the country, although provinces in western Canada may take a different approach, he said.

It's likely that other provinces will announce their plans in the coming weeks and most will be a mix of retail stores and e-commerce, said Canopy Growth Chief Executive Officer Bruce Linton.

"I think it's kind of what they've been saying they're going to do for a long time," Linton said by phone. "It's happening and it's clear and it's remarkable there's no question that it's going to happen."

The added certainty in the recreational marijuana market, which Canaccord Genuity Group Inc. said in November could reach sales of C$6 billion by 2021, is positive and it's important to see some clarity coming forward from Ontario, said Greg Engel, chief executive officer of licensed producer Organigram Holdings Inc.

"It's a positive announcement in terms of we continue to see a province committed to the space, committed to adult recreational distribution," Engel said.

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