Pot stocks are, well, getting higher in Wednesday trading.
Merger and acquisition activity is what has the stocks moving. Pot producers Tilray and Aphria announced an all-stock business combination creating what the pair calls the largest cannabis company in the world, with annual sales of roughly $675 million.
Tilray stock was up about 30% in premarket trading. Aphria stock was up about 13%.
Premarket gains add to Aphria stock’s strong run. Shares are up 55% this year as of Tuesday’s closing price. The premarket gains cut this year’s losses in Tilray stock. Those shares are down about 54% year to date as of Tuesday’s closing price.
The diverging performance shouldn’t surprise marijuana investors who by now are used to volatility. The industry, after all, is still new. Marijuana stocks hit sky-high levels around the time Canada legalized marijuana in 2018. Aphria stock is down about 60% from peak 2018 levels. Tilray stock is down 97% from its high, also set in 2018.
After the initial investor euphoria and proliferation of publicly traded pot companies, the industry appears to be maturing. Business combinations in a new industry can create benefits from scale as well as higher market share.
Scale, lower costs, and higher market share is what the industry needs. Neither company has produced full-year profits.
—Al Root
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Stimulus Negotiations Heat Up as Funding Deadline Approaches
The clock is ticking for Congress to pass a funding measure to avoid a government shutdown. Congressional leaders met throughout the day Tuesday to discuss that measure as well as a coronavirus relief package that they’ve agreed would be included in the funding bill.
- The meetings included House Speaker Nancy Pelosi, Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer and House Minority Leader Kevin McCarthy. “We’re making significant progress,” McConnell said late Tuesday, according to the New York Times.
- McConnell said the Senate would not go on leave until a deal was reached. He also called for the bill to not include liability shields for businesses and state and local aid, two measures that have been sticking points in negotiations.
- McConnell, who on Monday acknowledged President-elect Joe Biden’s win for the first time, pointed to Joe Biden’s administration as an opportunity to pass another bill with those measures included. “We all know the new administration’s going to be asking for yet another package,” he said.
- Meanwhile, the president-elect is filling out his cabinet. Multiple outlets reported Biden plans to tap former South Bend, Ind., Mayor Pete Buttigieg and former Michigan Gov. Jennifer Granholm for the roles of transportation secretary and energy secretary, respectively.
What’s Next: Congress must pass a funding measure by Dec. 18 to avoid a shutdown. Pelosi said talks would continue early Wednesday morning and that “we’ll be on schedule to get the job done.”
—Connor Smith and Ben Walsh
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U.S. Hospitalizations Hit Record, Moderna Vaccine Set for Green Light
Even as a second vaccine looks poised for approval in the U.S., a sharp rise in hospitalizations shows just how bad the country’s winter surge has become.
- Moderna’s Covid-19 vaccine is highly effective, the Food and Drug Administration said in an analysis released Tuesday, setting up expected emergency authorization later this week. Between Moderna’s vaccine and Pfizer’s, U.S. officials hope to give about 25 million Americans their first dose of a vaccine this month.
- More than 110,000 Americans are hospitalized with Covid-19, about 50,000 more people than during both the spring and summer spikes.
- New York Gov. Andrew Cuomo has said rising hospitalizations “could overwhelm some regions if nothing changes by January” and New York City Mayor Bill de Blasio said Tuesday that residents should be prepared for the city to shut down after Christmas.
What’s Next: The FDA has already said it is inclined to authorize the Moderna vaccine, a move that could come as soon as this Friday.
—Ben Walsh
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Apple Is Reportedly Boosting 5G iPhone Production
Apple shares rose 5% Tuesday after a report that the company is increasing the number of 5G iPhones it plans to produce in the first half of next year. Ramped-up production is a sign that the economic slowdown caused by the coronavirus pandemic hasn’t dented demand for Apple’s high-end phones.
- Nikkei Asia reported that Apple will produce as many as 96 million iPhones in the first half of 2021, up nearly 30% from the same period this year. Over the course of the next year, the company will make 230 million iPhones.
- One executive at an Apple supplier told Nikkei that demand has been stronger than anticipated for the iPhone 12 Pro and iPhone 12 Pro Max, but that demand for the smaller iPhone 12 Mini is a “bit sluggish.” Apple did not comment.
- Wall Street currently expects Apple to produce 215 million iPhones in 2021, Wedbush analyst Dan Ives said. Ives has the equivalent of a Buy rating on the company and expects “an unprecedented upgrade cycle for Apple with a major holiday season on the horizon over the coming weeks.”
What’s Next: While Apple and other tech giants are cruising financially, they face increasingly robust pushback from regulators, and not just in the U.S. Two bills proposed by the European Union on Tuesday would allow fines of up to 10% of global revenue to be levied for anticompetitive behavior and illegal content.
—Ben Walsh and Eric J. Savitz
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IPO Market Continues Its Run With More Public Debuts Coming This Week
Airbnb and DoorDash grabbed headlines last week with their blockbuster IPOs, but there’s an encore of public listings on tap this week before taking a breather until 2021.
- The biggest debut this week comes from ContextLogic, an e-commerce company that competes with Amazon and Shopify and does business as Wish. It raised $1.1 billion selling shares at $24 each and will trade under the symbol WISH.
- Upstart, a lending company founded by ex-Google executive Dave Girouarda, priced at the bottom of expectations, raising $240 million. It is expected to trade Wednesday on the Nasdaq under the symbol UPST.
- BioAtla, a pharmaceutical company that is developing cancer treatments that use antibodies, will also start trading Wednesday, followed by 908 Devices, which makes mass spectrometry equipment for pharma companies.
What’s next: Arriving on the heels of two huge IPOs is attractive, but it’s unlikely that these companies will see their shares surge as much as Airbnb and DoorDash. That may be a good thing, if it lets them pocket a larger share of the proceeds from their offerings.
—Ben Walsh and Luisa Beltran
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EU Sees “Path to Agreement” on Trade Talks With UK
European Commission president Ursula von der Leyen said on Wednesday that UK and EU negotiators had “found a way forward on most issues” that remained the major stumbling blocks in their talks about a trade deal. “The path may be very narrow but it is there,” she added.
- Von der Leyen cautioned that discussions about the right of EU fishermen in UK waters were “still very difficult,” but revealed that serious progress had been made on the question of regulatory alignment to avoid unfair competition, and the governance of the future system.
- “This is now a case of being so close and yet being so far away from each other,” she said in a speech to the European Parliament.
- Attention is now turning to the capacity of parliaments on both sides to ratify the deal before Dec. 31, the date when Britain will formally leave the European single market.
- Jacob Rees-Mogg, the leader of the House of Commons, has suggested that the British parliamentary process could be “truncated” and the deal be ratified in 24 hours. And he has not yet announced when—or whether—members of Parliament could go on a Christmas recess.
- The European Parliament, however, is unlikely to take such a swift action, and has let it be known that it would not be ready to rubber-stamp a complex deal in a hurried manner, raising the risk it might not vote on it before the legal deadline of Dec. 31.
What’s Next: If fisheries really are the last source of major differences between the two sides, EU and UK leaders would find it hard to explain a failure of the talks hinging on an activity that amounts to 0.1% of Britain’s GDP—and much less for the EU.
—Pierre Briançon
***
Dear Moneyist,
When my maternal-great-aunt died, my father wanted me to help him purchase her property. He currently owns a condo and the arrangement we made is that, once he buys my aunt’s house, I will move into his condo and pay the HOA fees.
A little more than a year ago, his longtime girlfriend, “Mary,” allowed her cousin, “Laura,” to move in with them at the condo. Laura is in her 30s and has brought along her two children, ages 20 and 10, with her.
There are now five people living in a two-bedroom condo. They arranged for Laura to stay with them rent free until she found an apartment. This made me suspicious because Laura only works part time and a New York City apartment requires a decent income. In addition, I’m not sure if Laura even holds a work visa.
Now when I speak to my father about taking over his condo, I receive equivocal answers. I suspect that his girlfriend brought Laura to live there once my father buys the house. However, the condo is solely in my father’s name and he’s paid for it entirely. New York State does not recognize common law and I know his girlfriend only pays household bills.
I am my father’s only daughter; his three sons do not talk to him. My father is financially stable while I’ve always struggled even in childhood. I’m 30 and attempting to make a better life for myself. I put myself through college and have $10,000 left in school loans. I work a 9-5, have two side jobs, and an online business. I am also saving for graduate school.
Living in the condo will help ease a tremendous financial burden as I am sometimes unable to muster two pennies to rub together. I have an acrimonious, toxic roommate and our bouts have almost gotten physical. I desperately need a place of my own and can’t afford an apartment. It would be a grotesque injustice for Laura to just “conveniently” receive a condo.
Both my parents have always been too willing to assist other people before making sure I was straight, which has often left me doing without. I’ve even offered to buy the condo from my father to ensure I had a place to live. If my dad allows Laura to stay there once he moves, I will terminate my relationship with him.
Please, tell me if I’m overreacting.
—Just Trying to Secure a Future
Read The Moneyist’s response here.
—Quentin Fottrell
***
—Newsletter edited by Anita Hamilton, Matt Bemer, Bob Rose
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