Auxly stock has been through the wars in 2019. Plenty of shareholders are wiping their hands of Auxly Cannabis Group (TSXV:XLY) (OTCQX:CBWTF) because of poor performance, questionable licensees, and concern for the company’s ability to last long enough to actually return on its streaming business model.
But the company recently received a potentially new lease of life in the form of a $123 million CAD investment from global tobacco giant Imperial Brands (OTCQX:IMBBF).
Auxly Stock and Imperial Brands
For that investment, Imperial received roughly 20% of Auxly Cannabis Group, which is a lot when you consider what the company could deliver in the future.
On the news, Auxly stock got a nice bump up the charts—a 24% bump to be more precise. Shortly after, the initial excitement died down and so did the gains, but Auxly has managed to resurge again and is selling at $0.91 CAD today.
But while the injection of cash is welcomed, there remains a palpable negative sentiment around Auxly Cannabis Group due to its underperformance of the broader market this year. Is Imperial’s investment truly enough to change that?
Auxly Stock: The Positives of this Investment
In the short-term, there’s no doubt that Imperial’s involvement might help to rescue Auxly. For one, the company will now be able to complete construction on its wholly-owned farm construction, along with a joint venture it has been working on.
Further, the additional capital will likely be pumped into the company’s derivative portfolio that is going to hit Canadian shelves later in 2019. This line of product is where the company has placed its focus because vapes and derivatives command higher prices and much wider margins comparable to dried flower.
Auxly is positioned to benefit from vapes in particular. Projected to be one of the top-selling derivatives, Auxly Cannabis Group has access to Nerudia vaping products, which gives it a healthy advantage in the vaping market. This may bring sizeable gains for Auxly stock in 2020.
Then there is the global distribution network that Auxly is provided via Imperial. The company will now have a ‘fast-track’ access to any market that Imperial Brands currently operates in. This means Auxly could leverage that opportunity and accelerate its growth.
Simply associating with a brand as big as Imperial Brands can only do positive things for Auxly. The company has a lot more to do, but it now has a chance to change the negative sentiment surrounding it. Perhaps investors have something a little more viable to trust in.
What are your thoughts on this? Is Auxly stock more appealing to you now?
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