Editor's Note: Hedgeye's Cannabis research team added Cronos Group (CRON) as a Best Idea on November 2nd. Speculation surrounding a deal with Altria Group (MO) sent CRON soaring as much as 30% yesterday, before settling for an 11% gain on the day.
This is a complimentary research note published yesterday to subscribers. For information on our institutional research email sales@hedgeye.com.
You gotta love the cannabis space….
We remain broadly short the Canadian Cannabis companies, apart from CRON.
We woke up Monday to the news flow that a short seller is attacking Aphria regarding a recent LATAM acquisition. The short pitch we saw was compelling and the pictures in the report of Andy DeFrancesco (@DeFrancesco_A) Chairman & CIO of SOL Global Investments were entertaining to see. We especially like the #Greedisgood hash tag on one of his instagram posts!
We are not surprised about the controversial news given the number of warnings we have been given about the crazy antics that appear to be part of life for Canadian Cannabis companies.
We also don’t think this is the last time we will be hearing about questionable international acquisitions by Canadian LP’s. More on this to come!
Ironically, back in early October, Aphria shares surged 13% on the news that Altria was going to invest in the company. Today, CRON is now the recipient of rumors of an Altria investment in the company and is outperforming a tough tape for cannabis stocks.
Of all the rumors surrounding CPG companies wanting to get into the cannabis space, Altria is the most logical. First, it’s a tobacco company with a long list of current and lapsed users of tobacco products.
Second, with 88% of Altria’s revenues coming from the USA an international Cannabis opportunity would not conflict with the Philip Morris International agreement. Third, there is no better suited company to enter the space other than Altria.
We have no edge on this rumor, other than we believe CRON to be one of the best positioned Canadian LP’s. We are traveling to Stayner, Ontario to meet with the CEO and COO of CRON and will have some more thoughts following the trip!
Please call or e-mail with any questions.
Shayne Laidlaw
Director
Howard Penney
Managing Director
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For more information on our institutional research email sales@hedgeye.com.
