If you’re wondering why the whole cannabis patch launched higher on Friday, it’s probably mostly because we saw our third major strategic investment in the pot space by Fortune 500 companies when Altria jammed some fat stacks into Cronos Group Inc (NASDAQ:CRON). Specifically, CRON just announced that it has entered into a subscription agreement with Altria Group, Inc. (MO) pursuant to which Altria has agreed to make an approximately C$2.4 billion equity investment in Cronos Group on a private placement basis in exchange for common shares in the capital of the Company.
According to the release, “Altria will also receive Warrants of Cronos Group, that if fully exercised, would provide the Company with an additional approximately C$1.4 billion of proceeds. The Shares issuable to Altria pursuant to the Subscription Agreement will result in Altria holding an approximately 45% ownership interest in Cronos Group (calculated on a non-diluted basis), exercise of the Warrants would result in incremental ownership of 10% for a total potential ownership position of 55%. This strategic partnership provides Cronos Group with additional financial resources, product development, and commercialization capabilities, and deep regulatory expertise to better position the Company to compete, scale and lead the rapidly growing global cannabis industry.”
Cronos Group Inc (NASDAQ:CRON) casts itself as an investment firm in the biopharmaceutical space, with a strong emphasis on medical marijuana and cannabis-related research and products. In short, the company seeks to invest in other companies, either licensed or actively seeking a license, to produce medical marijuana pursuant to Canada’s Marijuana for Medical Purposes Regulations (MMPR).
The firm typically invests in companies based in Canada. The firm is primarily an equity investor, may also advance debt as appropriate. It seeks to make minority investments with appropriate governance and shareholder rights. The firm seeks board representation consistent with the size of the investment but does not need control.
Cronos Group Inc. was incorporated in January 2013 and is based in Toronto, Canada with an additional office in in Toronto, Canada.
According to company materials, “Cronos Group is a globally diversified and vertically integrated cannabis company with a presence across four continents. The Company operates two wholly-owned Canadian licensed producers regulated under Health Canada’s Access to Cannabis for Medical Purposes Regulations: Peace Naturals Project Inc., which was the first non-incumbent medical cannabis license granted by Health Canada, and Original BC Ltd., which is based in the Okanagan Valley, British Columbia. The Company has multiple international production and distribution platforms including in Germany, Poland, Israel, and Australia. The Company intends to continue to rapidly expand its global footprint as it focuses on building an international iconic brand portfolio and develop disruptive intellectual property. Cronos Group is committed to building industry-leading companies that transform the perception of cannabis and responsibly elevate the consumer experience.”
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As noted above, CRON just announced that it has entered into a subscription agreement with Altria Group, Inc. (MO) pursuant to which Altria has agreed to make an approximately C$2.4 billion equity investment in Cronos Group on a private placement basis in exchange for common shares in the capital of the Company.
We’ve witnessed 39% piled on for shareholders of the name during the trailing week. Moreover, the company has witnessed a pop in interest, as transaction volume levels have recently pushed above 130% beyond what we have been seeing over the larger time frame.
“Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” said Cronos Group’s Mike Gorenstein, Chairman, President, and Chief Executive Officer.
“The proceeds from Altria’s investment will enable us to more quickly expand our global infrastructure and distribution footprint, while also increasing investments in R&D and brands that resonate with our consumers. Importantly, Altria shares our vision of driving long-term value through innovation, and we look forward to continuing to differentiate in this area. As one of the largest holding companies in the adult consumer products sector, Altria has decades of experience in regulatory, government affairs, compliance, product development, and brand management that we expect to leverage, particularly as new markets for cannabis open around the world.”
Earning a current market cap value of $2.29B, CRON has a significant war chest ($41.5M) of cash on the books, which stands against virtually no total current liabilities. CRON is pulling in trailing 12-month revenues of $7.6M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 71.1%. We will update the story again as soon as developments transpire. Sign-up for continuing coverage on shares of $CRON stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $CRON, either long or short, and we have not been compensated for this article.