Huge shakeup expected as British American Tobacco makes a move on Canadian cannabis
Health & Biotech
Health & Biotech
Link copied to
The North American cannabis market received a huge shakeup this week, after British American Tobacco (LON: BATS) announced that it would be purchasing a 19.9% stake in the Canadian cannabis producer, Organigram (TSE: OGI), for $175 million.
Although some viewed this agreement as a positive sign for the Canadian market, industry experts claim that the deal—which will function as strategic collaboration with a focus on product R&D—is part of a broader move by the British multinational to gain a foothold in the global cannabis market.
In an interview with Marijuana Business Daily, Vantage Asset Management Senior Analyst Max Mausner explained that the global alcohol and tobacco giants are moving to invest in Canadian LPs so they can, “understand cannabis markets and generate IP to deploy into US markets, which is likely to manifest in similar investments into US MSOs.”
“I don’t think the market appreciates this British American Tobacco deal. BAT is an $85 billion market cap company – this $170 million deal for 20% of Organigram isn’t about Canada,” Mausner said.
However, this should hardly be surprising, as most Canadian pot stocks have high valuations but still possess relatively poor balance sheets. Conversely, US MSOs already generate billions in sales, while states such as California and Oregon have seen monthly cannabis sales exceed $100 million.
Illinois also experienced this phenomenon in 2020, after the addition of adult-use recreational sales caused the state’s cannabis market to grow by approximately $784 million in a single year.
As a result, the ‘Horizons Marijuana Life Sciences Index ETF’ (HMMJ) has been riding high this week, after enjoying an impressive rebound which has pushed the index’s six-month gain to 113%.
Both the Australia’s All Ordinaries and the S&P 500 remained stable this week, while waning investor enthusiasm caused the Australian Cannabis Index to record a loss of -0.27.
In the Australian market, biotech producer MGC Pharmaceuticals (ASX:MXC) proved to be the standout again, after the stock climbed to 0.084—which represents over 300% year-to-date share price growth—following the announcement that Swiss PharmaCan had made an 85% increase to its original purchase order of ArtemiC Rescue.
“We are pleased to have extended our agreement with Swiss PharmaCan AG for ArtemiC Rescue. This further agreement will provide more people access to the natural therapeutic benefits of the supplement and ease suffering following the successful Phase II trial results in December,” MGC Pharma Managing Director Roby Zomer said.
The Green Fund’s Australian Cannabis Index allows investors to benchmark top players in the Aussie cannabis space against the S&P500, the AORD, and HMMJ, giving them an overview of the health of the industry Down Under.