The cannabis sector has been in rally mode as the summer season comes to a close and the month of September gets started.
The recent rally has been nothing short of impressive and we have be closely watching these price movements. Today, we want to highlight 3 companies that have been executing on the global cannabis opportunity and provide an update on these firms.
Aurora and TGOD: A Relationship to Monitor
Earlier this year, Aurora Cannabis (ACB.TO) (ACBFF) announced a major investment in The Green Organic Dutchman (TGOD.TO) (TGODF) and the market responded very favorably to this. Yesterday, TGOD extended Aurora’s option to acquire an additional 8% by 30 days after Aurora closed a $200 million debt financing with BMO.
This was a significant announcement and the market respond very favorably to the extension. There are enormous synergies that can be created between the two businesses and this is a step in the right direction. We are monitoring how the teams continue to execute and consider this to be an important aspect of the story.
We are favorable on the relationship between Aurora and TGOD and view this as a major value driver for both companies in 2019 and beyond. Next week, investors will have the opportunity to meet with executives from Aurora Cannabis and TGOD at the MoneyShow Toronto’s Cannabis Investing Event.
The MoneyShow Toronto Cannabis Investing Event is a FREE event and will allow investors to ask questions to these leading Canadian cannabis producers and learn more about their plans to capitalize on a global opportunity.
Aphria: A Global Cannabis Opportunity
2018 has been a major year for Aphria (APH.TO) (APHQF) and the company has emerged as one of the leading global cannabis opportunities.
Through the acquisition of companies like Broken Coast Cannabis, Nuuvera and strategic assets in Latin America, the Canadian cannabis producer has been able to significant increase its reach and this is a company that is worth watching.
Yesterday, Aphria jumped higher after announcing a strategic partnership with Schroll Medical, a subsidiary of prominent European flower producer, Schroll Flowers. The partnership will pursue the cultivation and worldwide distribution of organic, EU GMP-certified medical cannabis, and will be managed by the company’s wholly-owned subsidiary Aphria Deutschland GmbH. The deal accelerates Aphria’s global expansion and the first product is expected to be available by early 2019.
In exchange for a 15% interest, Aphria is providing some capital, its leadership in cannabis greenhouse cultivation, and experience in processing and worldwide distribution. Aphria will also handle the worldwide distribution of medical cannabis produced, which is anticipated to be made available in Germany, Luxembourg, Switzerland and other developing medical cannabis markets. Aphria has the option to increase its ownership interest to 50%.
The focus on the organic cannabis market is significant and we are monitoring how the team executes on this. The partnership will not be producing a significant amount of cannabis initially and we will monitor how the partnership plans to expand over time.
Cronos: A Burgeoning Opportunity
Last week, Cronos Group (CRON.TO) (CRON) was under considerable pressure after Citron’s Andrew Left announced that he was shorting the Canadian cannabis producer. Although the shares recorded a significant decline, Cronos has been able to bounce back and the shares have come well off its recent lows.
Yesterday, Cronos jumped higher after announcing a partnership with Ginkgo Bioworks to produce cultured cannabinoids. Using its platform technology for organism design and development, Ginkgo will complement Cronos Group’s technologies for producing a full spectrum of cannabinoids.
The partnership will focus on the production of a wide range of cannabinoids, including THC, CBD and a variety of other lesser known and rarer products. These cultured cannabinoid molecules are identical to those extracted from the plants grown with traditional methods, but are created by leveraging the power of biological manufacturing via fermentation.
Ginkgo will work with Cronos on research and development of microorganisms capable of producing certain target cannabinoids in a scalable and highly efficient manner. Cronos will have the exclusive right to use and commercialize the key patented intellectual property related to the production of the target cannabinoids globally.
This is a major announcement and the market responded very favorably. Cronos surged higher on very strong volume and we remain favorable on the Canadian cannabis producer. We are monitoring how the company continues to execute and how the shares trade from here. This is a company that investors need to keep an eye on.