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Buds & Duds: Cannabis stocks on shaky ground as Hexo, MedMen reel; EuroLife Brands grows on continental strategy

Hexo revealed that it unknowingly grew unlicensed pot and MedMen announced it was trimming 20% of its workforce in two new blows to the industry

EU flag pot leaf
EuroLife raced higher after it said it would exclusively focus on the burgeoning European cannabis market

Cannabis stocks lost a bit of ground on Monday as investors look to see whether the sector can rebound after a week of earnings to forget.

The North American Marijuana Index, which tracks the top cannabis stocks in the US and Canada slipped 1.7% at 113.5 points. Elsewhere, the Horizons Marijuana Life Sciences Index ETF fell 2.2% to C$8.74, while the OTCQX Cannabis gained 0.5% at 456.8 points.

Buds

EuroLife Brands Inc (CSE:EURO) raced higher on Monday after the company put out a statement saying that it would focus exclusively on the burgeoning European cannabis market going forward.

The cannabis focused company told investors it had now migrated all of its cannabis and hemp related business to Europe away from North America.

In the last six weeks, the group has struck relationships with three important partners to bring new products to the European marketplace, namely, with The Yield Growth Corp, Champignon Brands Inc, and AgraFlora Organics International Ltd.

Shares rocketed 22.2% in Toronto at $0.06 and traded at US$0.03 on OTC markets.

Other companies seeing movement in the green included Puerto Rico-based investment company GSRX Industries Inc (OCMKTS:GSRX), which shot up 49% at US$0.15 on no new news.

Valens GroWorks Corp (CVE:VGW) (OTCMKTS:VGWCF) also inched 0.5% higher at C$3.04 and 1.6% higher on OTC markets at US$2.32 on the closing of the Pommies Cider acquisition, giving it a foothold in the high-growth beverages market.

Duds

How much unlicensed marijuana is circulating in the Canadian market? That question was on the mind of regulators and investors on Monday after news broke late Friday that another cannabis company was growing pot outside its licensed zone.

Hexo Corp (TSE:HEXO) shares fell 5.5% in Toronto and 4.2% in New York at C$2.22 and US$1.71 respectively after the cannabis company said a “limited quantity” of unlicensed pot was being cultivated in a Niagara facility that Hexo acquired as part of its deal with Newstrike Brands Inc earlier this year.

“Upon discovering that cannabis was being grown in an inadequately licensed area of the Niagara facility we immediately ceased all activities and notified Health Canada,” CEO Sebastien St-Louis said in a statement. “While we are disappointed with what we uncovered, we assume responsibility for any issues with UP products prior to the acquisition.”

MedMen Enterprises Inc (CSE:MMEN) was also hammered on Monday after announcing over the weekend its plan to cut 190 jobs and sell non-core assets as part of an overall corporate restructuring plan to return the retailer to profitability.

Investors slammed shares of the California-based company 22.3% lower in Toronto and 22.5% down on the OTC markets at C$1.02 and US$0.76 respectively by midday Monday.

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