As meme stocks continued to surge on Wednesday, one area that saw some surprising gains was the cannabis sector. Marijuana stocks have lost a lot of favor over the past couple of years, with investors getting disappointed with lacklustre growth and mediocre profitability. However, shares of cannabis companies are surging after a massive, billion-dollar acquisition was announced by one of America’s largest multi-state operators.
Cresco Labs (OTC: CRLBF) announced today it would be acquiring a rival multi-state operator called Columbia Care in a deal valued at over $2 billion, including debt. The deal would make the new company one of the largest cannabis giants in America, let alone the entire world. Although an exact date hasn’t been specified yet, the transaction is expected to close sometime in Q4 2022.
“On a pro-forma basis, the combined Company will be the largest cannabis company by revenue, the number one wholesaler of branded cannabis products, and the largest nationwide retail footprint outside of Florida,” said Cresco CEO Charles Bachtell in an official statement on Wednesday.
He added that around 80% of Cresco’s revenue came from three states. The Columbia Care acquisition would seriously help diversify the company’s income streams, including states like Colorado, where Cresco doesn’t sell any product.
Up until now, it’s been a relatively quiet period for cannabis acquisitions. Earlier in March, Tilray (NASDAQ: TLRY) announced it would invest over $211 million into acquiring more stake in Hexo (NYSE: HEXO) to help prevent it from going bankrupt. However, there hasn’t been another major acquisition in the cannabis space for a long time. Years ago, cannabis companies were getting bought up left and right. Now, the lack of dealmaking is a sign of just how much the sector has fallen from where it used to be.
As it turns out, however, there was another piece of acquisition news in the cannabis sector. Aurora Cannabis (NYSE: ACB) announced it would buy out a smaller Canadian producer called TerraFarmer for $38 million in cash and stock. While a relatively small deal compared to Cresco Labs’, the announcement was enough to send Aurora Cannabis jumping over 10% as one point on Wednesday. However, those gains quickly evaporated, and the stock’s now trading at a 1.5% loss.
Other cannabis companies, including Hexo, Canopy Growth (NYSE: CGC), and Tilray, were all up on Wednesday following the news. For the most part, there’s been a serious lack of cannabis-related developments, with social media traders all but forgetting about marijuana companies altogether.
Although federal legalization still hasn’t happened yet, industry veterans remain hopeful that 2022 could be the year that this changes in the U.S. Although cannabis sales are still growing, higher inflation is expected to weigh heavily on most marijuana producers and retailers.
Aurora Cannabis Company Profile
Aurora Cannabis Inc., headquartered in Edmonton, Canada, cultivates and sells medicinal and recreational cannabis through a portfolio of brands that include Aurora, CanniMed, MedReleaf, and San Rafael ’71. Although the company primarily operates in Canada, Aurora has expanded internationally through medical cannabis exporting agreements or cultivation facilities in more than 25 countries. – Warrior Trading News
