Why Those Marijuana Stocks Exploded Higher Today


What happened

Many marijuana stocks posted overwhelming gains in the market on Thursday.

These included Aphria (NASDAQ: APHA), with a jump of 12%, HEXO (NASDAQ: HEXO) climbs by 11%, and Aurora Cannabis (NASDAQ: ACB) and cannabidiol (CBD) specialist Charlotte Web Holdings (OTC: CWBHF) both pulling almost 8% skyward. Big news from a peer inspired these pops.

Image source: Getty Images.

So what

Relatively small Organizational chart (NASDAQ: OGI) announced that a tobacco subsidiary British American Tobacco bought a nearly 20% of the capital in its equity for approximately 221 million Canadian dollars (175 million dollars).

It reminds the maker of Marlboro Altriais approximately $ 1.8 billion purchase a slice of 45% of Cronos Group in 2018.

While the British American / Organigram deal comes long after the heady days of the multi-billion dollar cannabis deals, it is encouraging nonetheless. Here are two reasons why:

First, British American’s investment involves a premium of almost 40% over Organigram’s closing price the day before. Maybe this sets some sort of standard for buy-ins – or even potential. redemptions – in an industry that has been lively on the mergers and acquisitions (M&A) front recently.

Second, it shows that well-capitalized companies outside of the weed business remain keenly interested in marijuana, reinforcing the optimistic view that the cannabis industry has a bright future.

Now what

Considering all of the above, if I were a marijuana stock investor, I would keep an eye out for companies like Organigram which have relatively low market caps. HEXO, for its part, is still under $ 1 billion, while Charlotte’s Web could be an attractive and affordable dance partner at around $ 667 million.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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