It's an investment that has brought the cannabis market back to life. Today, Altria Group (NYSE:MO)—the makers of Marlboro cigarettes—confirmed a $2.4 billion investment deal with Cronos Group (TSX:CRON) (NASDAQ:CRON). CRON stock is soaring as a result, and it seems to be taking the entire market with it.
This deal is huge.
Altria is In and CRON Stock Soars
Rumors abounded during the week as the Canadian cannabis producer revealed that the two companies were "in talks." Much to investors delight, it's been confirmed that Altria has bought a 45% stake in the company.
In fact, CRON stock is soaring over 25% at the time of writing, currently selling for $12.94 USD.
The Deal
The deal will see Altria buy 146.2 million newly issued CRON shares at $16.25 per share. This is a premium of 16.2% to the stock’s Thursday close on the Toronto Stock Exchange.
Once the deal closes, Altria will be allowed to nominate four directors and one independent to the Cronos board.
Further, Altria may raise its ownership stake to 55% as the deal includes a warrant to acquire an additional ownership interest in Cronos at a price of $19 per share over the next four years.
What Does This Mean?
This is big news, and this is now an important time for CRON stock.
The deal marks the tobacco maker's first step into the cannabis industry and shows that it believes marijuana to be the next area for growth. Especially considering tobacco sales have slowed in recent years. So much so, in fact, that Altria stock has fallen nearly 25% this year.
It is time to evolve it seems.
>> Marijuana Stocks: Are You Put Off By the Market Correction?
Inspire
With this deal, the Marlboro cigarette maker is now entering a rapidly growing legal marijuana industry. Its entry is sure to inspire others in the tobacco industry to follow suit. Much like the ripple that was caused by Constellation Brands' (NYSE:STZ) massive $4 billion investment into Canopy Growth (TSX:WEED) (NYSE:CGC).
On the deal, Howard Willard, Altria CEO, said the following:
"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria."
And Cronos CEO Mike Gorenstein shares the same sentiment:
"Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth."
Having Altria in its corner is a big win for CRON stock. Altria brings with it years of global expertise, well-known global brands, and a loyal consumer base. For a relatively young industry, by comparison, it's sort of like adding Mr. Miyagi to your karate squad.
>> Green Growth Brands Awarded 7 New Retail Licenses in Nevada
Another cannabis company to get some great news today is Green Growth Brands (CSE:GGB) (OTC:XTHCF). The state of Nevada today awarded seven new dispensary licenses to GGB! The state made available a possible 31 new licenses across the state.
In September of this year, Green Growth Brands raised $65 million in its efforts to go public. The company was backed by the Schottenstein family; one of America's oldest fashion retail families. The Schottenstein's fortune, approximated at $2.7 billion, has been amassed from real estate holdings, part ownership in DSW Inc. a shoe retailer, and of huge clothing label American Eagle Outfitters. The Schottenstein family are deeply involved in Green Growth Brands with Barbara Schottenstein serving as a director at GGB.
With backing from such a retail giant, it seems that GGB is in incredibly good stead and now, the company is set for an amazing opportunity. Nevada is the US' second largest cannabis market, only falling behind California. In the first year of legalization alone, Nevada State made $530 million on recreational and medicinal cannabis sales. In August 2018, Nevada's marijuana tax revenues broke the $8 million mark.
The state previously had only 65 licensed dispensaries with Green Growth Brands running 2 flagship stores in Las Vegas, The Premier Cannabis Store, and The Source. These new licenses bring the company's potential up to 9 possible retail spaces. License holders have to be operational within 12 months which means that by the end of 2019, Green Growth Brands could be sitting on a very large revenue nest egg. If revenue is growing, it seems that GGB stocks should follow suit.
Featured Image: Depositphotos/© VadimVasenin
