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Aurora Cannabis (TSX:ACB)(NYSE:ACB) announced today it would acquire a “significant stake” in Netherlands-based Growery B.V. The news sent Aurora stock climbing 8% on Monday morning, followed by several other cannabis stocks as well. Some jumped up to 20%!
What happened?
Today, on the eve of its earnings report, Aurora stock made the acquisition announcement, sending shares in a positive direction for once. The investment in Growery will allow Aurora stock to participate in the country’s “controlled cannabis supply chain experiment.”
The deal allows Aurora stock to invest and see Growery create a new facility, fund early operations, and operational help. With the deal, Aurora stock will advance its “global recreational cannabis strategy,” stated management.
“Our investment in Growery is a significant advancement for our global recreational cannabis strategy. The Netherlands is expected to be the largest federally regulated recreational market outside of Canada, and is a proof point that our medical market success in Europe is portable to recreational markets,” said Miguel Martin, chief executive officer of Aurora Cannabis. “Aurora’s global leadership is underscored by a proven track record of regulatory compliance, testing, and commitment to science. With similar values and commitment to excellence, we are pleased to be working with Growery to enter the Dutch market.”
So what?
This “experiment” will see the Dutch government supply legal cannabis to coffee shops. This could be significant for other countries to take on such an experiment, allowing for controlled consumption environments. Hence the jump in other cannabis stocks.
It also allows other cannabis stocks to see if they too can create partnerships for a similar experiment. Aurora stock already has a hold in several countries. But perhaps companies like Canopy Growth, Tilray, and HEXO won’t need to expand if they can recreate the experiment where they have a hold.
While this kind of experiment won’t be the United States quite yet, it could create an opportunity in Canada. Canopy Growth, Tilray, and HEXO, of course, all have a place in Canada; if Aurora stock’s investment pays off, perhaps they can do the same in this country.
Now what?
News of the deal sent cannabis stocks climbing on Monday. Canopy Growth, after hitting two-year lows, climbed 8%, just like Aurora stock. Tilray was up 13%, along with HEXO stock up 13% as well. Cronos stock surged just shy of 20%!
Should Motley Fool investors buy right now? I’d take a breath. Canopy Growth stock reported poor earnings last week, sending shares downwards. Further, Aurora stock will report its earnings. This could be positive, but I might want to take a wait-and-see approach.
Finally, the experiment is in 80 coffee shops that have signed on for at least four years. While that’s great for Aurora stock, other cannabis stocks will have to wait to see results before convincing governments to get on board.
That all being said, cannabis stocks will rebound eventually. And these controlled environments are just one means to get there. So, if you’re a long-term Motley Fool investor, it may be a good time to see some slow and (hopefully) steady growth for the next decade and beyond from Aurora stock and other cannabis stocks to boot.
