Auxly stock is down 3% despite closing a $123 million CAD investment from Imperial Brands (OTCQX:IMBBF) after the tobacco firm warned of the impact of the vape crisis.
Auxly Stock Slides Despite IMB Investment
Auxly Cannabis Group Inc (TSXV:XLY) (OTCQX:CBWTF) looks set to be one of the major beneficiaries of legalization 2.0 due to its significant investment in cannabis vaping products, with some analysts predicting it will be the fastest-growing pot stock of 2020. The company was handed a further boost in its vaping endeavors, after announcing today that it had closed a $123 million CAD investment from British tobacco giant Imperial Brands. However, Auxly stock slid over 3% following the announcement, which could be due to the ongoing vaping crisis.
Vaping has come in for intense scrutiny recently after nine deaths and 530 lung injuries in the US were linked to the use of vapes and e-cigarettes. This has led to somewhat of a crisis in the industry, which has seen the resignation of Juul CEO Kevin Burns and led Imperial Brands to issue a warning that this crisis may weigh on the company's revenues. IMB stock has dropped nearly 13% in London today, and given that the company now owns 19.9% of Auxly stock, the impact of that has been felt across the Atlantic.
>> IIPR Stock Gains on Expanded Pact with PharmaCann
Auxly Stock Set for Further Suffering?
Back in July, Auxly CEO Chuck Rifici said of the Imperial investment: "[the partnership] accelerates Auxly's plan to go heavily into the recreational market [...] Particularly, the vape category, which we think will be very large." He added that "we've seen from the market data south of the border and anecdotally across Canada in unlicensed dispensaries. People seem to disproportionately choose vape devices." While that may have bee true at the time, Auxly stock could be set for further suffering as this crisis intensifies.
Imperial Brands and Auxly Cannabis Group also face stiff competition in the field of cannabis vaping, after tobacco rivals Altria (NYSE:MO) purchased a 35% stake in Cronos Group Inc (TSX:CRON) (NASDAQ:CRON), one of Auxly's closest competitors. However, MO and Cronos shares are both down today, in line with the movement seen from Auxly shares. With legalization 2.0 arriving next month and paving the way for vape products to go to market by mid-December, only time will tell the extent to which the vaping crisis will impact on cannabis stocks.
Featured Image: Canva
