Marijuana News Today
It’s a tale of two stocks in the marijuana news today: Cronos Group Inc (NASDAQ:CRON) and Aphria Inc (NYSE:APHA). These two companies are capturing all the headlines at the moment for very different reasons.
Let’s start with the good news: CRON stock.
The company is reported to be in talks with Altria Group Inc (NYSE:MO), the makers of “Marlboro” cigarettes. (Source: “Altria in deal talks with cannabis company Cronos Group,” Reuters, December 3, 2018.)
Altria has long been rumored to be looking into the marijuana industry, for much the same reason that Big Alcohol has been keen on making deals with pot producers: if you can’t beat them, join them.
Altria knows full well that legalization of marijuana is continuing to spread and that, similar to the situation with booze, some people are likely to swap cigarettes for marijuana.
The threat to the already flagging tobacco industry (at least in North America) is significant enough that Altria, like other companies, has been looking to gain a foothold in pot to help ward off the loss of sales—and maybe even boost its sales overall.
It stands to reason that a company that has spent years in the tobacco industry, managing one of the most famous cigarette brands, would know a thing or two about selling folks on smoking in general.
Details about the deal are sparse, with reports only mentioning that the two companies are in talks, but this is still a huge development for the legal cannabis industry.
In fact, depending on the size of the investment, this could be exactly what the marijuana stock market needs to rescue it from the current correction.
Much like Constellation Brands, Inc. (NYSE:STZ) did with its $4.0-billion marijuana investment in August, a massive purchase by Altria could potentially reinvigorate the entire marijuana stock market.
Right now, the significant stock gains are localized to Cronos. But as details of the investment deal emerge—provided it does indeed take place—expect to see the market reaction spread beyond Cronos stock.
Furthermore, much like Constellation Brands opened the door for alcohol companies to enter the game, there’s a good chance that Altria—provided the deal goes well—won’t be the last tobacco company to search out a marijuana business to absorb or support via investment.
In almost any circumstance, this is fantastic news for the marijuana industry, and it will likely see CRON stock soar in the near term if the investment comes to fruition.
Cronos stock has, as you would expect, been soaring lately following the news of Altria’s interest in purchasing the marijuana company.
CRON stock climbed about seven percent in early-morning trading today, following a gain of about 13% yesterday. Over the past five days, the stock has seen its value skyrocket 35%.
While I will not claim to be prophetic, my tune about Cronos stock has changed in recent weeks as it outperformed many other marijuana stocks during the current pullback.
While I had been skeptical of CRON stock for much of 2018, I had since revised my position some weeks ago (faithful readers of mine will have noticed the change).
Whether by luck or by intuition—or both—I appear to have been validated in my switch much sooner than I would have thought. In any case, Cronos stock is almost certain to explode in the next few days.
Given that the Altria-Cronos deal is very early in, it could still collapse (which would be disastrous for CRON stock). But if the deal is delivered in the near future, or at least announced, then we’re going to see a massive run of value.
On the opposite end of the spectrum in the marijuana news today is Aphria.
The company is in hot water after being accused of buying Latin American assets that benefited insiders and a private equity investor to the detriment of other shareholders.
The accusation is that Aphria bought Latin American assets that were essentially worthless in order to benefit Andy DeFrancesco, the chairman and chief investment officer of SOL Global Investments Corp (OTCMKTS:SOLCF, CNSX:SOL).
A report by Quintessential Capital Management (QCM) and Hindenburg Research alleged, among other things, that the assets Aphria had acquired from SOL for $280.0 million in September were essentially worthless.
“The majority of this report is inaccurate. The numbers in this report are also completely inaccurate,” said DeFrancesco. (Source: “Deal maker with Aphria ties refutes short-seller allegations that hit stock,” Financial Post, December 4, 2018.)
At a short-selling conference in New York, Gabriel Grego of QCM called Aphria a “black hole for shareholders’ money.”
Accusations also surfaced that DeFrancesco created the Latin American scheme to funnel money away from shareholders toward key company insiders that held a stake in those assets. One of the accused beneficiaries of the alleged ruse is Aphria CEO Vic Neufeld.
The complaints were backed up by research. A search of several of the Latin American assets came up with strange results, like one building in Jamaica that was supposed to be a registered office but was instead an abandoned building that was owned under the name of an executive.
The whole thing, true or false, stinks, and Aphria stock has taken a beating as a result.
APHA stock collapsed by 20% in early-morning trading today and has been hemorrhaging value over the past five days, down about 35%.
This stock used to be one of my favorite picks but had fallen from my favor over the course of 2018.
I’ve been on record for the past few months as saying that it is time to reconsider one’s position in the stock. It seems that again I was proven right.
In this case, I didn’t necessarily foresee the collapse, but Aphria stock had long troubled me due to its inability to regain value over the course of the year while many other pot stocks outperformed it.
Regardless, if this accusation has any merit, APHA stock is going to be toxic. If not, there will still be a long climb toward vindication and stock recovery.
Either way, the Aphria stock forecast is bleak.
CRON and APHA Stock Performances
The CRON stock (black line) and APHA stock (blue line) performances from the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today has massive developments taking place on the marijuana stock market.
On the one hand, you have Cronos stock soaring after Altria’s interest was made public. On the other, you have Aphria stock essentially accused of misleading investors.
If both prove to be true, then expect CRON stock to soar while APHA stock plummets to the ground.