In July 2018, Canada will legalize recreational marijuana. This will directly impact marijuana stocks. Investing in pot stocks is not for every investor. It involves a great deal of tolerance for risk, as well as–at least in America–dealing with the federal government trying to ignore state-level laws that might impact marijuana companies and weed stocks.
Intriguing business developments in Canada are likely to impact cannabis stocks.
Canadian marijuana company Aurora Cannabis announced its plans for an unsolicited acquisition of CanniMed Therapeutics a few months ago, signaling a potential uptick in MMJ stocks and marijuana stocks.
According to reports, CanniMed Therapeutics was not thrilled with this plan. However, this did not deter CanniMed Therapeutics from making its own acquisition of Newstrike Resources, another medical marijuana grower. Aurora Cannabis publicly criticized CanniMed Therapeutics’ potential deal with Newstrike Resources deeming CanniMed Therapeutics’ proposed purchase price “hard to fathom.”
However, according to a Reuters report, Aurora Cannabis is currently in discussions to buy both CanniMed Therapeutics and Newstrike Resources.
This three-way mega-merger could positively impact marijuana stocks as a whole.
Aurora Cannabis’ interest in CanniMed Therapeutics makes a great deal of sense. Canadian marijuana growers are selling all that they can produce as Canada’s domestic medical marijuana market is growing. Aurora Cannabis also bought Pedanios GmbH to gain a stronger presence in the German medical marijuana market. However, the biggest opportunity arguably still has yet to occur, but, will later this year–when recreational marijuana use is legalized in Canada.
Thus, the fact that marijuana growers want to increase to meet anticipated heavy demand for recreational marijuana in Canada makes a great deal of sense. One way to increase growing capacity is to build more facilities as Aurora Cannabis is doing. Aurora Cannabis is also acquiring other marijuana growers as a secondary way to increase growing capacity.
CanniMed Therapeutics makes for an appealing acquisition for Aurora Cannabis. CanniMed Therapeutics currently has two production facilities, one in Saskatchewan and another in Michigan. The Saskatchewan facility alone has annual growing capacity of 7,000 kg (approximately 15,432 pounds) of cannabis.
The competitive weed stocks associated with CanniMed Therapeutics can only improve when combined with Aurora Cannabis pot stocks.
CanniMed Therapeutics’ reservations regarding this potential acquisition was grounded in a number of perceived issues with Aurora Cannabis. For example, CanniMed Therapeutics’ management had several objections, but, the primary issue was money. CanniMed Therapeutics executives thought that their company should be worth more than the estimate. This is not just CanniMed Therapeutics’ opinion of its own worth; the market seems to agree, and drove CanniMed Therapeutics marijuana stock much higher than when Aurora Cannabis made its initial offer.
Now, Aurora Cannabis is reportedly willing to pay a higher price to acquire CanniMed Therapeutics and Newstrike Resources.
For individuals owning shares in CanniMed Therapeutics and NewStrike Resources pot stocks, this merger could produce tremendous gains.
Individuals who own stock in CanniMed Therapeutics and NewStrike Resources could also wind up owning stock in Aurora Cannabis which can only increase profits. In short, now seems to be a great time for investors who want to buy cannabis stocks. The value of these pot stocks seems likely to continue to increase after Canada legalizes recreational marijuana.
Other cannabis based companies and holders of their associated cannabis stocks could be affected by this merger.
Canopy Growth has been buying smaller marijuana growers, developing partnerships to add capacity. In the wake of a Aurora Cannabis-CanniMed Therapeutics-NewStrike Resources merger, it seems likely that Canopy Growth could accelerate these efforts to forge new partnerships. This could lead to (comparatively) smaller next-tier marijuana growers considering mergers to position themselves better against Canopy Growth and a larger post-merger Aurora Cannabis.
Smaller marijuana stocks could benefit considerably from a Aurora Cannabis- CanniMed Therapeutics-NewStrike Resources merger.
The Aurora Cannabis-CanniMed Therapeutics-NewStrike Resources merger seems likely. However, in the event that it would not happen, it is likely that CanniMed Therapeutics’ stock would fall. Likewise, NewStrike Resources’ stock would fall, and perhaps by even more than CanniMed Therapeutics’ stock. Additionally, Aurora Cannabis’ stock could also plummet, but this would likely be only temporary.
For investors of Canadian weed stocks, an Aurora Cannabis-CanniMed Therapeutics-NewStrike Resources merger could be a great deal. If the merger does not go through, 2018 still promises to be perhaps the biggest year yet for marijuana stocks. Canada’s scheduled July 2018 legalization of recreational marijuana also promises to further push cannabis stocks higher. Investors who select the correct pot stocks, and whose investments perform well in the market, will likely see their accounts grow quicker than a well-tended plant.
(To learn more about the potential future of pot stocks, read Should You Invest in Marijuana Stocks in 2018?)