DN stock is down nearly 5% today as Delta 9 Cannabis (TSX:DN) (OTCQX:VRNDF) commits to acquiring two Alberta retail locations.
Investors Not Excited By Alberta Expansion
The company announced this morning that it had signed a binding letter of intent with Modern Leaf Group Inc to acquire two of its retail locations in the province of Alberta. The transaction marks the first time Delta 9 has expanded beyond its home province of Manitoba, with the two new stores reportedly located in Calgary and Grand Prairie. This adds to the company's portfolio of four retail locations and one cultivation facility in its home province. This announcement has failed to excite investors, however, with DN stock dropping around 5% during Friday morning trading.
DN Stock Down 37% in 2019
So far, the company's plans of establishing a chain of stores have done little to rally DN stock, which is down 37% in the year to date. Speaking on the move into the Alberta market, Delta 9 CEO John Arbuthnot said: "The proposed acquisition of these additional cannabis stores continues our strategy of establishing a chain of Delta 9 branded retail stores across Canada. Following [the] completion of this acquisition we will have a total of six operating retail stores in Western Canada and we are actively looking to increase this number as quickly as possible."
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Canada's Most Competitive Province
One reason for the decline in DN stock off the back of this announcement could be the fact that Alberta is Canada's most competitive province in terms of retail locations. The total cost of the transaction is $1.3 million CAD, which highlights the falling value of retail licenses in Alberta, where there are more storefront locations than the rest of Canada combined. The company hopes that this transaction will be completed by November 30.
Last month, DN stock made some of its biggest gains of the year after posting record second-quarter results. Revenue increased a massive 1,142% from $715,746 in Q2 2018 to $8.9 million in 2019. Meanwhile, gross profit soared 973% to 4.8 million CAD as the company took advantage of the first 12 months of cannabis legalization. Despite the declining value today, Delta 9 still looks well-positioned to add to these gains following the second wave of legalization next month.
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