In recent weeks, Auxly Cannabis Group's (TSXV:XLY) (OTCQX:CBWTF) head office seemed like a ghost town. There was little to no news coming from management, and with Auxly stock in decline, investors were getting nervous.
But finally, earlier today, investors received news they must have been waiting for. The company will be receiving investment from international consumer goods brand Imperial Brands PLC (OTCQX:IMBBF).
Will Auxly Stock Get a Boost from Investment?
Approximately $123 million will be invested in Auxly Cannabis Group "by way of a convertible debenture," according to the press release. The deal will also grant Auxly global licenses to Imperial's vaping technology along with "access to its vapor innovation business, Nerudia."
But of course, the investment comes with a price. For $123 million and the licensing rights to its vaping technology, Imperial Brands will receive 19.9% ownership of Auxly. This is by way of a debenture convertible at a conversion price of $0.81 per share; 11% premium to Auxly's closing share price yesterday.
Positives from This Deal
Auxly stock will likely get a nice boost from this news. The investment enhances Auxly's operational plans and as President of Auxly Hugo Alves says: "accelerates our growth initiatives to expand our portfolio of branded derivative products.”
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With a market cap of over $20 billion, Imperial Brands is a sizeable player for Auxly Cannabis Group to snare. The multinational tobacco company has a long and lucrative history of selling tobacco and manning countless brands. This type of heavyweight in Auxly's corner can only mean good things.
Strategy
The deal has been made in time for Canada's upcoming legalization of cannabis derivative products due in October this year. Sales, however, aren't expected to begin until December. Alves continued:
“The timing is ideal as we prepare to bring our portfolio of innovative cannabis products to the Canadian market following the legalization of edibles, extracts, and topicals later this year.”
Auxly Cannabis Group is focusing heavily on derivative products at present. Now, with access to Imperial's vaping technology, the company will work closely with Nerudia to create a portfolio of new and enhanced vapor products and brands suitable for cannabis consumption.
The deal should help Auxly to "rapidly innovate" its product line in time for the Canadian derivatives market, driving future growth.
Are you surprised to hear of this partnership? What will it mean for Auxly stock moving forward to have such a sizeable player on board?
Let us know your thoughts!
Featured Image: Canva
