Pubdate: Fri, 12 Jan 2018
Source: Globe and Mail (Canada)
Copyright: 2018 The Globe and Mail Company
Contact:  http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Author: Jeffrey Jones and Christina Pellegrini
Page: B1

WEED KINGS: HOW THE TRAGICALLY HIP BECAME MARIJUANA MILLIONAIRES

Rob Baker, lead guitarist for the Tragically Hip, is chatting about
the surging market for cannabis-company stocks.

It's high dough - some might say too high. The short-term gains make
things all the more interesting for Mr. Baker, king of the northern
power chord, and now a stakeholder in the weed sector.

But he's more focused on the long-term prospects for Canada's new
recreational cannabis industry, and two companies in particular:
Newstrike Resources Ltd., a consumer-focused producer in which he and
his band mates have a significant ownership stake, and CanniMed
Therapeutics Inc., a medical-marijuana grower and distributor that has
launched a friendly bid for Newstrike. He's a firm supporter of the
transaction, which is not yet a sure thing.

Lately, weed stocks have soared to ear-popping heights as new
investors have piled in.

"No one's really earning any money and there are crazy valuations on
companies. I watch the stock price with great interest and amusement,
and I do figuring in my head. But my wife and I, we buy into these
things because they are things we believe in. We're not into day
trading and trying to make a quick buck," said Mr. Baker, whose
Kingston-based band did its last concert in 2016, a little more than a
year before the death of lead singer, Gord Downie.

"I really think that this is a good deal, because I think it builds a
strong base."

A quick buck is exactly what The Tragically Hip and its management
have earned with their 5.4 per cent stake in Newstrike. Though the
company has yet to generate any revenue, it nevertheless had a market
capitalization of more than $1.1-billion earlier this week.

The sector is incredibly volatile - Newstrike's shares dropped 27 per
cent on Wednesday and another 14 per cent on Thursday, pulling the
company's value back down to $721-million. Even so, that means the
Hip's interest is worth about $39-million.

The band aims to lend its unique rock vibe - one that, for many fans,
evokes summers in Canadian Shield cottage country - to the marijuana
brand.

How that plays out in practice is still being worked out, although Mr.
Baker, 55, is adamant the band will not morph into the "Joe Camel" of
the weed industry.

The Hip signed on with Newstrike in early 2017.

The Hip join other ganja-friendly artists in partnering with marijuana
ventures, such as rapper Snoop Dogg and the family of reggae legend
Bob Marley. Interestingly, Mr. Baker's interest comes several years
after he gave up smoking weed himself. "I felt like I hit my lifetime
quota," he said.

He sees the entry into the fastexpanding marijuana business as an
extension of the band's branding, which already includes some wine
labels. Some ideas being kicked around include using song titles on
weed brands or other products, such as vaporizer pens.

"There's responsible use. We sell wine. There is Tragically Hip wine.
And friends get together and have a meal and you share a bottle of
wine and it's a social time. It's something relaxing and enjoying your
life with friends. Music is really no different. It's a social event.
It's a social emollient, a social lubricant. That's how I see it
fitting in," he said. "It's not like we're going out on a crazy limb.
It's something that has been part of our world for a long time."

For CanniMed, the country's oldest medical-marijuana company, it's
very serious business indeed. It wants Newstrike and its consumer
brand, Up Cannabis, as a launch pad for what is expected to be a
multibillion-dollar recreational pot industry as legalization takes
effect in Canada later this year.

For months, the world of weed stocks has been as freewheeling as that
of rock 'n' roll, with companies able to raise hundreds of millions of
dollars by selling stock. In the past few days alone, Newstrike shares
have whipsawed - surging more than 30 per cent on Tuesday and losing
all that and more over the next two sessions. Some investors worry
that CanniMed's all-share bid may no longer make sense. At times,
Newstrike has been worth more than twice the value of the company
planning to take it over.

Further complicating the plans of Mr. Baker and Jay Wilgar,
Newstrike's chief executive officer: The much larger Aurora Cannabis
Inc. launched an unsolicited bid for CanniMed that is conditional on
it abandoning the Newstrike deal. The battle has generated some harsh
words back and forth, as befits a hostile-takeover battle.

Mr. Wilgar acknowledges that he's fielded some questions from
investors worried about the fate of the takeover as shareholders
prepare to vote on the deal on Jan. 17.

"I've had a very few number of phone calls about it," he said. "We
don't make serious, long-term business decisions based on two or three
days of activity. We can't operate that way. It would be irresponsible
for us to do that. We certainly believe what we're doing is creating a
lot of value here over the long term."

The cut and thrust of corporate deal-making seems worlds away from
Canada's adoration for the Tragically Hip, which for many provided a
soundtrack for their youth starting in the 1980s. It became a national
outpouring in 2016, when the band, which also includes guitarist Paul
Langlois, bassist Gord Sinclair and drummer Johnny Fay, embarked on
its farewell tour following Mr. Downie's diagnosis of glioblastoma, a
form of brain cancer. He died on Oct. 17, 2017.

So how does a Canadian Music Hall of Fame inductee such as Mr. Baker
become a cannabis capitalist? Indeed, he is also an investor in other
producers, including Canopy Growth Corp. and Aphria Inc.

He witnessed his father, a judge, incarcerate people for drug offences
in the 1960s and 70s, before undergoing a philosophical shift on the
bench in the eighties, deciding that all drugs should be legalized as
a way to shut down the black market. It became a topic of conversation
among the band members.

"It's the kind of thing that the guys in the band discussed many
times, often over a joint. It just seemed a natural thing to get into
this. We all knew legalization was coming. Not only was it inevitable,
but it's desirable, and it seemed like we should find someone to pair
up with," he said during an interview at a cannabis conference in
Toronto this week.

"We weren't just looking to slap our name on something and make a
quick buck. We were looking to get into something that we could be
into for a long time. I'm semi-retired now. I need things to keep me
busy."

NEWSTRIKE RESOURCES (HIP) CLOSE: $1.85, DOWN 30c CANNIMED THERAPEUTICS 
(CMED) CLOSE: $25.14, DOWN $1.57
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MAP posted-by: Matt