Marijuana News Today
The marijuana news today has us looking at the long-term effects of a major cross-border pot deal, including how it could help push legalization.
The deal in question, of course, is the acquisition of Acreage Holdings Inc (OTCMKTS:ACRGF, CNSX:ACRG.U) by Canopy Growth Corp (NYSE:CGC).
Announced late last week, the move will see CGC stock gain the option to purchase Acreage for $3.4 billion, with a mandate to exercise that right when cannabis production and sale becomes federally legal in the United States. (Source: “Canopy Growth Announces Plan To Acquire Leading U.S. Multi-State Cannabis Operator, Acreage Holdings,” Canopy Growth Corp, April 18, 2019.)
Following the approval of shareholders from both companies and the Supreme Court of British Columbia, Canopy will pay $300.0 million immediately.
“Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists,” said Chairperson and co-CEO Bruce Linton. (Source: Ibid.)
The deal would grant Canopy access to Acreage’s presence in 20 states.
The acquisition will also require an amendment to the Constellation Brands, Inc. (NYSE:STZ) deal that Canopy struck in 2018.
But one analyst believes that it’s the board members that are the most important part of this transaction.
Acreage has former Canadian Prime Minister Brian Mulroney and former U.S. Speaker of the House of Representatives John Boehner on its board of directors, giving the company quite the political gateway.
Vivien Azer, a Cowen and Co. analyst who has been covering the marijuana industry for some time now, believes that this powerful political backing alongside the deal could very well help spur marijuana legalization in the U.S. (Source: “Canopy Kicks Off Cross-Border Cannabis Consolidation,” Bloomberg, April 21, 2019.)
And that makes sense when you consider the terms of the deal. After all, Canopy would unlikely be willing to sign a deal unless there was some anticipation that marijuana would soon be legal in the U.S.; otherwise, it would potentially be waiting years and years to see this thing through.
Considering the political access of Acreage, it’s very likely that some consultation was done between the two companies on the legalization timeline.
This deal is monumental in its own right as it is among the first cross-border agreements to take place and sees one of the first entries into the American cannabis market by a major marijuana stock. But if it could also have the knock-on effect of speeding along legalization, this would then unequivocally be the biggest deal in marijuana stock history.
With so much buzz surrounding Canopy in the marijuana news today, it would impossible not to look at both the near- and long-term outlooks for CGC stock.
Canopy jumped three percent in early-morning trading to start the week and finds itself up nine percent over the past five days.
Those gains are, naturally, being supported by the massive Acreage deal.
After all, the deal almost certainly foreshadows Canopy’s entry into the American marijuana market in a big way.
The fact is that marijuana stocks have all been slavering over the idea of the huge U.S. pot market but have been unable to take advantage of it due to federal restrictions.
I’m always quick to remind readers that California alone is both richer and more populous than Canada. Canada, in other words, is just an appetizer; the main meal is the U.S. market.
While this deal may very well not come to fruition for years yet, Canopy is clearly excited for the boost that marijuana legalization in the U.S. has received over the past year.
It speaks to an ambitious and strong vision for the future that only further reinforces my support of the company.
Canopy, with its latest play to enter the U.S. market, reminds us all once more why it is the industry leader.
Acreage, meanwhile, has seen its stock fall since the deal, down nearly four percent in early-morning trading today but up over five percent in the past week.
Expect Acreage to bounce back when/if the deal is eventually completed in the wake of U.S. marijuana legalization.
The marijuana market has been up and down today in early-morning trading, with some stocks faltering while others have excelled. Cronos Group Inc (NASDAQ:CRON) is among the latter.
CRON stock is up about nearly three percent in early-morning trading, but finds itself down about five percent over the past five days.
The reason for today’s jump isn’t tied directly to a CRON stock move, as the company has been rather quiet for a few weeks now.
But I believe the excitement building over the Canopy deal has boosted CRON stock, helped along by the fact that Cronos is one of the only pot stocks on the Nasdaq.
Considering that the other Nasdaq option, Tilray Inc (NASDAQ:TLRY), has had a very weak start to 2019, it makes sense that investors are flocking to CRON stock in the wake of the good news for U.S. marijuana legalization.
The next major event for Cronos Group Inc stock will be an earnings report release in May.
Until then, barring any major news, I expect Cronos will see no major fluctuations, with the upcoming quarterly report obviously going to be a huge influence on the movement of CRON stock.
CGC, ACRGF, and CRON Stock Performances
The performances of CGC stock (black line), ACRGF stock (blue line), and CRON stock (red line) over the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today could very well be the precursor to the biggest story in the industry ever.
If the Acreage deal will see the company use its potent political sway to help move along marijuana legalization in the U.S. (or at least signals that legalization may be on the way in the near future), then we’re going to see an explosion in marijuana stock value across the board.
More specifically, Canopy Growth Corp will be among the main beneficiaries as it now has a clear path to enter the U.S. marijuana market the second legalization hits.
It’s a strong move that bodes well for pot stocks everywhere. The next step involves us waiting on legalization news.