Since pricing its shares at $17 on July 18, Tilray’s stock is up over 350%.
Throughout the first half of 2018, marijuana stocks turned in a dismal performance. But over the past couple of weeks, they’ve been all the buzz, once again. The North American Marijuana Index, which is comprised of a few dozen of the largest and most influential cannabis names in the industry throughout North America, has risen by close to 50% in just three weeks.
What’s causing all of this hoopla, you ask?
Part of it could be the expected launch of recreational cannabis in our neighbor to the north in just six weeks. On Oct. 17, Canada is set to become the first industrialized country in the world to open the floodgates to adult-use marijuana. There’s an expected influx of up to $5 billion in annual sales once Canada’s legal weed industry is fully ramped up, so there could be some obvious excitement among investors for this big event…
Deal-making pushes pot stocks into the stratosphere
But perhaps even more than the actual legalization of recreational weed has been the amount of deal-making ongoing in the cannabis space.
Before the opening bell on Aug. 15, Constellation Brands (NYSE:STZ), the alcohol giant behind the popular Corona and Modelo beer brands, announced that it would be taking a $3.8 billion equity stake in Canopy Growth Corp. (NYSE:CGC) for what was a 51% premium at the time of the announcement. This actually turned out to be Constellation’s third such equity investment in the largest marijuana stock in the world (by market cap), with Constellation gobbling up a 9.9% equity stake in Canopy last October, and a third of its 600 million Canadian dollar convertible note offering in June.
Prior to even the Constellation Brands megainvestment, Molson Coors Brewing (NYSE:TAP)announced its intent to form a 57.5%-42.5% joint venture with the Hydropothecary Corporation. Molson Coors has seen declining market share and sales of beer in Canada and is hoping that a partnership with Hydropothecary could yield new products, such as cannabis-infused beverages, that reignite its top line. It’s worth pointing out that cannabis-infused beverages, along with edibles, and vaporized cartridges, won’t be legal in Canada on Oct. 17, although Congress is expected to touch on and expand the legal forms of consumable cannabis in 2019. Thus, the Molson Coors-Hydropothecary tie-up is about staying ahead of the curve.
Then, just this Monday, Cronos Group (NASDAQ:CRON) announced a $122 million deal with Boston-based Ginkgo Bioworks to extract rare cannabinoids from the cannabis plant at commercial scale. Extracts have a generally high price point with little risk of commoditization, so it’s generally viewed as a high-reward, low-risk venture for Cronos Group. Ginkgo will receive $22 million in cash from Cronos to fund research and development, with $100 million in common stock “being issued in tranches as it achieves certain production milestone,” per Bloomberg.
Marijuana stock Tilray has tripled in three weeks
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