Tuesday broke what has been a negative trend in the cannabis market as shares recovered after a lengthy downturn. At the same time, a few companies reported some pretty significant developments.
One of those was from a leading U.S. multi-state-operator Green Growth Brands (CSNX: GGB), which announced today it would be entered the highly lucrative Florida cannabis market with a $55 million acquisition. In response to the news, shares shot up dramatically, at one point increasing by almost 20 percent during the day.
Green Growth Brands has had a history of making bold acquisition offers, with the company making a highly aggressive and ambitious hostile takeover attempt on Aphria (TSE: APHA)(NYSE: APHA). Today the company announced they had broken into the Florida medical cannabis market with the acquisition of a local company, Spring Oaks Greenhouses.
The company owns medical marijuana licenses for its dispensaries and is also authorized to act as a Medical Marijuana Treatment Center in the state. So far, the company has the right to open up to 35 dispensaries in the state, with Florida currently having around 120 at the moment.
“Entering Florida through the Spring oaks acquisition will be a great addition to our existing MSO presence in Nevada and Massachusetts, as well as to our CBD business that already has a national presence. We admire several of the existing operators in the state and Florida is a special market, with favorable financials implications for the best operations. We look forward to quickly scaling our operations in the state and bringing our expertise to every patient,” said Green Growth Brands’ CEO Peter Horvath.
For multi-state-operators, the best way to gain a foothold in another state market is often through acquisitions. With regulations differing between states, often times governments prefer to give out their limited number of licenses to local businesses rather than competitors from outside the state. This also is to the benefit of the many, small acquisition targets, who understand that it’s easy to sign up with a bigger company than to compete by oneself.
As such, cannabis companies in the U.S. typically resort to acquisitions, competing among each other for best buyout opportunities. Markets like Florida are especially attractive to these companies as there remains a relatively low number of companies and dispensaries in the state, despite the market growing at a rapid pace.
In response to the news, shares of Green Growth Brands ended the day up 12.34 percent, the biggest single-day move seen in over a month. While a significant comeback for the stock, share prices have plummeted significantly over the course of the month, falling from C$5.4 per share down to its current level of C$3.55.
At one point Green Growth Brands had theorized it could achieve a C$7 stock price as a means of justifying a hypothetical hostile takeover of Aphria, which at the time had it’s reputation and share price tarnished from scandals. It appears this might have been an overestimated of their abilities, as GGB’s stock price hasn’t come close to cracking that level for the past few months.