3 Things to Know about this Proposed $2 Billion Marijuana Merger

If you have been watching the news or following trends, you must have noticed that the marijuana industry is growing at a fast rate. Something that started in a few states, now 29 states have legalized the use of medical marijuana. It seems like more will be legalizing the use of recreational marijuana. For most states, the use of recreational marijuana is expected to help deal with the marijuana black market. With recreational marijuana easily available in store, there will be no point to buy from your deal in a dark alley.

It is not just the states that are making money out of legalizing the use of medical marijuana. Most investors have taken note of the fast marijuana industry growth and have decided to invest in pot stocks. Those stocks that were valued at $200 million at the beginning of the year have now doubled in their value with some seen to be headed for more valuation soon.

The success of the marijuana industry is largely contributed by the perception that people have towards pot. Over the years, more Americans have been willing to try out medical marijuana than before. This is according to the latest Gallup Poll that showed 2 out of 3 Americans would love to see marijuana legalized around the country. Well, if you were worried about your pot business, there is no reason to do so anymore.

The support is even more when it comes to medical marijuana. With more benefits being shared by various clinics, more people have now welcomed the idea of using marijuana for medical purposes. Even if you were an investor, this would seem as the right product for you to invest in. This has seen an increase in the number of investors in the sector.

Things might not be slowing down anytime soon as there has been a major marijuana merger that has been announced. The merger is supposed to involve two major companies Aurora Cannabis and CanniMed Therapeutics. In the deal, Aurora Cannabis is looking to acquire the rival at $18.75 per share. The CanniMed Therapeutics is valued around $425 million, which makes the acquisition to be around $2 billion. To put it straight to you, this will be the largest marijuana merger to come to fruition. Evidently, it will be the largest in history in the world of marijuana.

As much as it seems a big deal, of which it is, many investors are looking to understand what this means for them. Here are three things you should know.

  1. CanniMed Therapeutics the biggest gainer

One thing that should be noted is that the shareholders of CanniMed are going to earn big with the merger. They will be receiving a fair stake when the deal goes through. The proposal shows that they will be getting nearly 57% premium based on the closing price of the shares on November 14.

Comparing CanniMed to the other companies in Canada, it shows that it is a relatively small fish. The big sharks are now out to acquire them as much as possible. Nevertheless, the company has grown faster than what the top companies expected.

The cannabis oil is their bestselling product. This is what has led them to make more money and attend to more than 14000 patients. The best part is cannabis oil has a higher price as compared to using dried cannabis. Having these two companies merged means that they could now take up more percentage in the Canadian cannabis market.

  1. Aurora Cannabis is looking to venture in recreational weed legalization

Currently, the legalization of weed is underway in Canada and it is definite that it will happen. This has prompted companies such as Aurora to venture into the world of recreational weed. This side is dominated by Canopy Growth Corp.

For those who might not know, Canada is looking to legalize recreational marijuana by July 2018. This means that there will be a potential increase in billions in terms of revenue. Aurora does not want to miss out on the action. It is the reason the company is building the Aurora Sky Project. It is expected to be the largest and most automated marijuana growing facility. It is completion is expected to be done by mid-2018 just in time for recreational marijuana legalization.

  1. Aurora Cannabis could dilute its existing shareholders

The merger with other companies might be seen as largely beneficial. Many see it as a way of having more products and reaching the consumers also easily. But, you also have to keep in mind how Aurora Cannabis is getting its funding for acquiring other companies. This is done through bought-deal financing.

This involves the sale of common stocks to underwriters at a fixed price. As much as it can guarantee raising capital, its effect is that there is the dilution of the existing shareholders with the increase in the amount of outstanding shares.

Well, let us wait and see how the merger will play out.

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