On Monday morning, Canadian cannabis firm Cronos Group Inc. (Nasdaq: CRON) was up an astounding 25% in mere hours.
At open Tuesday morning, Cronos was trading around $9.25. By noon, it had reached $11.63.
So why the sudden pop?
Well, the rumor mill has been swirling lately, and sources say that Altria Group Inc. (NYSE: MO), maker of Marlboro cigarettes, is looking to make a deal to buy Cronos.
This deal – if real – is still in the very early stages, and would make Altria a major legal cannabis player.
Hence, Cronos stock's incredible 25% pop in only a few hours. Of course, it didn't stay at this high – but it was certainly still up, by about 15%.
This rally isn't unheard of, especially in the marijuana sector. When Aurora Cannabis Inc. (NYSE: ACB) was rumored to have struck a deal with The Coca-Cola Co. (NYSE: KO), prices for Aurora jumped nearly 29%.
And when Canopy Growth Corp. (NYSE: CGC) signed a $3.8 million contract with Constellation Brands Inc. (NYSE: STZ), Canopy surged 19% in one day, then exploded another 30% and brought other pot stocks with it.
So, we know that buyout rumors send these stocks skyrocketing – and that's just one more reason to own them.
Altria has expressed interest in the cannabis market before – in fact, much before it was legal, even medically, in any state. In a memo sent in 1970, Altria execs recognized marijuana as an "alternate, perhaps a superior, method of satisfying the needs that cigarette smoking satisfies."
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More recently, in 2016, Altria invested $20 million into Syqe Medical Ltd., an Israel-based company that produced 3D-printed cannabis inhalers.
Of course, this was after they announced that the company had "no plans to sell marijuana products."
Altria has also taken an interest in Juul, a tobacco company that makes e-cigarettes. There is nothing to say that these deals are or aren't connected – Altria has refused to comment.
We do know that cannabis and e-cigarette companies are growing rapidly. Counting both legal and black-market sales, the cannabis market has hit approximately $52.5 billion, according to Marijuana Business Daily. The e-cigarette market is projected to hit $6.6 billion, according to Wells Fargo, partly in thanks to the rising popularity of Juul's products.
So it's no surprise that Altria is looking to get into these markets. Since the 1970s, the tobacco industry's bottom line has been hit hard by public health laws and anti-tobacco campaigns. The laws restrict and heavily tax cigarette use, and campaigns such as D.A.R.E. have been introduced in schools to educate students on the dangers of cigarettes.
As a result, the industry's stocks have fallen precipitously. Altria specifically is down more than 20% in 2018 alone. However, with the rumors of Juul and now Cronos, Altria's stock has rallied about 5% in the past week.
Cronos, Aurora, and Canopy are only three of the pot stocks that have made waves recently. There are so many players on the field, so to speak, that it can be hard to make a sound investment.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
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This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
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