Today, Canadian cannabis company Canopy Growth (NASDAQ:CGC) is seeing some impressive interest today. Investors are bidding up shares of CGC stock, sending this cannabis play more than 5% higher at the time of writing.
Given the rather bearish momentum in the cannabis sector of late, this move is welcome. Indeed, since trading well above $40 per share in February, CGC stock has fallen to the the $13 level of late. However, today’s rise has brought this stock back toward the $14 level.
Could more momentum be on the horizon for the cannabis sector? Time will tell. However, today’s move appears to be the result of a company-specific catalyst, with other cannabis names down. Let’s dive into what’s driving Canopy Growth stock higher right now.
CGC Stock Surges on Acquisition Announcement
Today, Canopy Growth announced the company is planning to acquire a cannabis edibles company. The $297 million dollar proposed deal is for the Wana edibles brand. The definitive agreements are between four parties (Canopy, Wana Wellness, The Cima Group and Mountain High Products), giving Canopy Growth the exclusive right to acquire 100% of Wana.
This deal is complex in nature but would result in Canopy picking up a big win for two key reasons.
First, Wana is the number-one edibles brand in North America by market share. This is a fast-growing market with high margins. Accordingly, a race to grow value-added products in the cannabis space is seeing cannabis producers shift their focus to downstream opportunities. Given the valuations in this sector today, it appears Canopy Growth could be picking up this brand at a relatively good price, compared to previous years.
Secondly, Wana Brands is a Boulder-based cannabis edibles manufacturer. Given Canopy Growth’s status as a Canadian cannabis company, this move expands the company’s interests in the U.S. Accordingly, investors banking on a bright future for Canopy in the U.S. market seem to like this deal.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
