CanniMed (CMED) Stock: Best Small-Cap Marijuana Stock for 2018
Man is a strange creature. From rare earth metals to electric cars to crypto coins, his inherent profit-seeking nature has found him overnight riches in the oddest of investments. His latest obsession is green grass with psychotherapeutic properties. If you haven’t guessed it already, I’m talking about cannabis—or marijuana stocks, to be precise. And today, I’m pitching a potential multi-bagger—CanniMed Therapeutics Inc (OTCMKTS: CMMDF) (TSE: CMED) —which has nearly doubled in price in just over a month.
Marijuana stocks have been the most sought-after investments of 2017. That’s because soon after the U.S. presidential elections of 2016, a number of states that took the legalization matter to vote legalized the drug for either recreational or medicinal purposes.
But the real “green revolution” is taking place right across the 49th parallel, where Canada is about to legalize pot for recreation. Enthusiasts have already marked their calendars for Canada Day (July 1, 2018) when they’ll be lighting their reefers to celebrate the win.
Ahead of the big day, Canadian marijuana companies are setting themselves up in the local industry. The big news is already being priced in Canadian marijuana stocks, just as investors stock up their pot investments.
Just take a look at the prices of the three most valuable marijuana stocks with market caps in excess of $2.0 billion. All of them have soared by triple digits year-to-date.
We have the bellwether marijuana stock Canopy Growth Corporation (OTCMKTS: TWMJF, TSE: WEED) which is up over 158% this year. Another Ontario-based marijuana player Aphria Inc (OTCMKTS: APHQF; TSE: APH) has returned 175% gains to investors this year. Beating the two is Aurora Cannabis (OTCMKTS: ACBFF, TSE: ACB), which has shot up nearly 200%.
So cutting to the chase, I go back to my marijuana pick—CanniMed Therapeutics Inc—a little-known marijuana company based in Canada’s Saskatchewan province, which has quietly left its small pond to enjoy a swim with the big fish.
Here’s why CanniMed stock could turn out to be the best small-cap marijuana stock in 2018.
CanniMed-Aurora Fight Dramatically Unfolds
About six months ago, I made three wild marijuana stock predictions for 2018. The first of these was that we would see at least one major case of a merger or acquisition within the marijuana industry in 2018. That prediction has already turned out to be true.
Two interesting developments have taken place in the past one month, which have pushed CanniMed from the shadows to under the spotlight.
CanniMed has not only received but also placed one major acquisition offer—side by side. Here’s a quick overview of what’s been happening lately.
- On November 15, Aurora Cannabis offers to buy CanniMed in an all-stock bid.
- CanniMed rejects Aurora’s offer.
- Two days later, CanniMed reveals it’s acquiring another smaller Ontario-based Cannabis producer Newstrike Resources Ltd (CVE: HIP).
- Aurora Cannabis goes for a hostile takeover attempt, asking CanniMed to do away with the acquisition of Newstrike.
- CanniMed adopts a poison pill to forestall the takeover attempt.
- The matter lands with the regulatory authorities as they seek a solution.
Where Will CMED Stock Prices Go Next?
Sounds like a lot of drama. So, why exactly would you want to get embroiled in it? Simply because it’s worth it.
All this drama has added nearly 50% to CanniMed stock gains in the past one month.
Now there are two scenarios that can play out in the coming days. Either way, CanniMed stock investors could potentially turn out to be winners.
Scenario 1: Aurora succeeds in its takeover attempt. Aurora will be paying CanniMed shareholders a maximum of 4.52 Aurora shares for every CanniMed share. At the current prices, that’s about $31.00 for each CanniMed share, which is currently trading at about $20.00.
Scenario 2: Aurora’s takeover attempt falls through. CanniMed closes the acquisition of Newstrike to create a bigger company with a broader product portfolio and a much larger footprint across the country.
In the first scenario, CanniMed stockholders have an opportunity to get into Aurora for cheap and multiply their investments in the latter. Aurora is a much bigger marijuana company that has challenged the industry leader—Canopy Growth—as it builds the world’s biggest marijuana production facility “Aurora Sky” and swiftly expands internationally.
In the second scenario, CanniMed stockholders get to enter the recreational marijuana market just in time for the big celebration.
CanniMed’s 15-year-old experience in the industry has been focused on selling medicinal marijuana. The company lacks the branding expertise needed for selling recreational pot. This is where Newstrike comes in. The latter is better known for its “Up Cannabis” brand that primarily serves the recreational market.
The CanniMed-Newstrike merger would create an all-rounder, which may be better positioned to cater to the broader marijuana market. The merger is also expected to increase the company’s annual cannabis production capacity to 45,000 kilograms by 2019. That’s a huge jump from the current capacity, which is about a third of that.
Either way, CanniMed stockholders have a chance to multiply their marijuana investment through 2018.
It’s true that marijuana stocks seem like extremely lucrative investments ahead of Canada’s legalization day. But here’s a word of caution. Investing in small-cap stocks is fraught with risk. And small-cap marijuana stocks trading in another country just multiply that risk twofold. So tread with care.
Nonetheless, the consolidation happening within the industry with all these prominent mergers and acquisitions, have us excited as we see some key players take the center stage ahead of the big day.
My advice is that investors must not ignore these key developments taking place around CanniMed (CMED) stock. It is hands down my top pick for the best small-cap marijuana stock in 2018.