CannTrust Holdings Inc. (NYSE: CTST) just announced that the company has officially entered into the United States cannabidiol (CBD) market. The company signed a non-binding letter of intent with Elk Grove Farming which provides them access to more than 3,000 acres of farmland for hemp cultivation. Elk Grove is a diverse farming company based in California with experience in the low-cost cultivation of high CBD content hemp. CannTrust and Elk Grove will both have 50% ownership through JV.
Peter Aceto, Chief Executive Officer of CannTrust, stated: “This agreement represents another bold move for CannTrust. Our U.S. operation is expected to deliver a significant increase in low-cost production capacity, which will leverage our expertise in standardized CBD-based product formulation, and will give the Company a foothold in the largest international CBD market in the world with an experienced and knowledgeable partner.”
CTST closed at $4.95 per share one day before the new Joint Venture announcement on June 18th. The share value of CTST stock hit an intra-day peak increase of nearly 9.3% to $5.41 on the date of the announcement and closed at $5.36 per share.
Morgan Houchin, of Elk Grove Farming Company, stated: “We are thrilled to be partnering with CannTrust. Our knowledge of farming operations in California coupled with CannTrust’s expertise in developing award-winning formulations is the perfect match to become a trusted supplier of CBD products in the U.S.”
Both CannTrust and Elk Grove will share equal responsibility and will both provide enough capital to fund operations, capital investments, operation expenditures, and working capital. Upon the required regulatory approval, the Joint Venture is expected to commence in 2020. Profits from the Joint Venture agreement are to be split and distributed evenly between both entities as determined by the ownership percentage.
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