VGW stock is sinking on Tuesday after Valens GroWorks Corp (TSXV:VGW) (OTCQX:VGWCF) announced that it had acquired beverage firm Pommies Cider Co in order to create a platform for cannabis-infused beverages.
Valens Looks to Capitalise on 2.0 Market
Infused beverages look set to be one of the most sought-after, and highly profitable, products in the cannabis 2.0 market, and Valens has seized on this opportunity with the $7.5 million CAD stock and cash deal. The takeover will see Valens take control of Pommies' 32,000 square foot facility in the Greater Toronto Area, which is equipped with industrial-scale fermentation and mixing tanks, canning and bottling lines, and labeling equipment, as well as holding a micro-processing license. VGW stock is currently trading at $2.44.
"At Valens, we expect that extract-based cannabis products, and infused beverages in particular, could disrupt beverage alcohol sales where monthly per capita spend is roughly 16 times higher compared to legal cannabis [...] Adding the Pommies facility and team to our platform gives Valens the tools and expertise needed to bring competitive beverage alcohol substitutes to market and capitalize on this massive market opportunity." While this clearly represents a significant opportunity for Valens in the 2.0 market, VGW stock is down 7.3% on Tuesday.
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Valens GroWorks has been one of the better performing pot stocks during the first year of legalization, and VGW stock has the potential to be one of the biggest gainers in 2020 once the cannabis 2.0 market comes into effect. In September, the company became the first third-party cannabis firm to sign a deal with Shoppers Drug Mart, which will see it supply the pharmacy chain with a range of oil-based products such as gel-caps, tinctures, vape cartridges, and topicals.
Vape Crisis Hurting VGW Stock?
VGW shares took a hit last month following an announcement that it had signed a deal with BRNT Ltd to launch a range of cannabis vapes. That announcement came at a difficult time for the vape market, as injuries and fatalities from the vape crisis continue to mount. The CDC has found a correlation between vapes containing THC and the mysterious lung illness that has claimed 39 lives in the US. The escalating crisis could spell further bad news for many pot stocks that have been banking on the 2.0 market to kickstart growth in the cannabis industry.
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