Cannabis Sector Mergers Gaining Momentum Again

Cannabis Sector Mergers Gaining Momentum Again


Buzz about mergers and acquisitions in the cannabis sector is starting to catch investor attention again.

The development is being viewed as a bit of a turnaround for the industry, which has seen a major drop in headline-making corporate buyouts since the sector’s breakout in late 2017 and into 2018.

During the last month, a number of major corporate realignments have reset the momentum in the sector.

Among the major deals in May was Trulieve Cannabis’ (OTC:) $2.1-billion (C$2.54 billion) acquisition of Harvest Health & Recreation (OTC:) (CSE:). The Florida-based Trulieve bought out its state rival, extending its dominance in the market.

Also last month was Hexo Corp’s (NYSE:) (TSX:) $768-million purchase of Redecan, a private Canadian licensed cannabis grower.

But the biggest deal of them all was the $7.2-billion blockbuster acquisition of British, GW Pharmaceuticals (NASDAQ:) by Ireland-based Jazz Pharmaceuticals (NASDAQ:).

Jazz Weekly Chart

Jazz Weekly Chart

GW Pharma is regarded as a leader in the development and commercialization of cannabinoid-based prescription drugs. It is also the maker of Epidiolex, the first cannabidiol-based treatment approved by the US Food and Drug Administration for the treatment of seizures associated with epilepsy for young children.

In a statement issued by Jazz announcing the acquisition, Jazz chairman and CEO Bruce Cozadd highlighted the importance of Epidiolex:

“We are excited to welcome our GW colleagues to Jazz as we mark a transformative milestone in creating an innovative, high-growth, global biopharma leader in neuroscience with a worldwide commercial and operational footprint. The addition of GW further diversifies our commercial portfolio and innovative pipeline with therapies that are complementary to our existing business, including Epidiolex, a high-growth commercial product with near-term blockbuster potential.”

Tilray And Sundial Make Impressive Gains

Building on the wins for the sector in May, June continued to show itself as a good month in much of the cannabis sector.

Two cannabis companies in particular faired very well, posting double-digit increases in their stock valuations since the beginning of the month—Tilray (NASDAQ:) (TSX:) and Sundial Growers (NASDAQ:).

As of Monday’s close, Tilray shares were up just over 13.5% so far this month. Yesterday alone, the Canadian-based cannabis grower, that just closed its merger deal with Aphria, gained almost 5%.

Despite the latest one-day hike, it still was not the best performer in the sector on Monday. That honor went to Cronos Group (NASDAQ:) (TSX:), which saw its shares rise 5.23% on the day to close at $9.06 on a reported 34.1 million shares traded.

Over at Sundial Growers, stock gains have been even more impressive. The medicinal marijuana producer that grows a wide variety of cannabis strains has a market cap of $2.03 billion (C$2.45billion).

It has seen its stock climb throughout the month of June. In the early days of the month, its shares were up almost 25%, but some of those gains were shaved off. The stock closed yesterday at $1.16, up 10.4% for the month overall.

The sector is buoyed by a number of factors. Increasing momentum that is whittling away on regulatory hurdles in the US is certainly one. But positive headlines like the announcement last week by e-commerce giant Amazon (NASDAQ:) that it would support a US federal bill to legalize cannabis and make adjustments to its corporate drug screening policy, certainly appears to have had an effect.





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