“Unique” acquisitions by Cronos to boost its stock

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Cronos is purchasing four cannabis-related companies

Anyone familiar with the cannabis industry has, at one point or another, heard of the Lord Jones brand. The company, currently part of Redwood Holding Group, provides hemp-derived skincare and consumer products that contain cannabidiol (CBD), a segment that is gaining a lot of strength in North America. Lord Jones provides products that are created by four of Redwood’s subsidiaries and all four are going to be acquired by Cronos Group. This acquisition, described as a “unique” plan, is giving Cronos a boost with a long-term increase in valuation that could potentially be one of the best in the industry.

Cronos announced the acquisition last week, saying that it would pay $300 million for the deal. $225 million of this is going to be handed over in cash and $75 million will be financed by the issuance of Cronos stock. This is why the acquisition is unique – it’s the first in the cannabis industry to be transacted almost completely in cash, which means virtually no value has to be leveraged.

The deal is already finding favor with analysts. One, Sean Williams, points out, “This move by Cronos is a logical extension of the company’s long-term strategy, which is to focus on high-margin cannabinoids, rather than dried flower, as well as to push into the U.S. market.  The last we’d heard from management (in May) is that Cronos Group would outline its U.S. strategy over the next year.  Clearly, it didn’t take the company’s brass long to figure out its next step.”

Cronos is traded on NASDAQ under the ticker symbol CRON. It began the month trading at $12.73 before jumping to $13.84 on August 2. It reached $13.99 at 11:30 AM Eastern Time this morning and, as of 1 PM, was sitting at $13.83. Cronos, which has backing by cigarette giant Altria, could be ready to rally, especially given that both Canopy Growth and Aurora Cannabis, two top cannabis companies, are currently experiencing dips in their prices.