OrganiGram (NASDAQ:OGI) shares are seriously on the move Thursday, with OGI stock posting gains of nearly 40% in pre-market trading. It turns out that one big piece of news is moving the cannabis company.
So what is that piece of news? Today, OrganiGram announced that it received 221 million CAD from a subsidiary of British American Tobacco (NYSE:BTI). Additionally, the tobacco company has subscribed for roughly 58.3 million shares of OGI stock, which translates to a nearly 20% stake in the company.
Importantly, this deal goes beyond finances for OrganiGram. The two companies will work together on a product development collaboration agreement. As a result of this, they will create a Center of Excellence with the intent of developing next-generation cannabis products, including CBD products. Each company will contribute scientists and product developers to the Center of Excellence. Additionally, the companies will share intellectual property, and British American Tobacco will be able to appoint 20% of the OrganiGram board.
So what does this deal really mean for OrganiGram? And why does it make sense for British American Tobacco?
According to the company, two of the biggest takeaways for OrganiGram revolve around the balance sheet and research pipeline. The company thinks the cash influx will help it shore up its financial position and accelerate research. Right now, OrganiGram is still working to ramp up, along with many of its cannabis peers. This level of financial backing can give it a kick in the right direction.
Additionally, for British American Tobacco, it is a step toward a more cannabis-filled future. As the company puts it, it wants to commit to safer alternatives. Backing cannabis and CBD products can give it a hand as some consumers shift away from smoking tobacco products.
What Else to Know About OGI Stock Today
So what else should you know about OrganiGram and OGI stock today? One thing to note is that, like other players in the Canadian cannabis market, OrganiGram is hoping to ramp up its business. Through this deal, the company says it could reach new markets outside of Canada.
However, the state of cannabis legalization around the world has weighed on expansion plans. While many investors continue to eye the United States, Mexico could have just given the sector a big boost. On Wednesday night, lawmakers in Mexico City approved a bill that would legalize recreational marijuana. Of note is the fact that experts already say the country could become the largest marijuana market in the entire world.
Keep a close eye on OGI stock and its cannabis stocks peers today.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.