Cronos Group Inc. (TSX: CRON) (NASDAQ: CRON) announced on December 3rd that the company is in fact engaged in discussions with Altria Group Inc. (NYSE: MO). Now, Altria Group has officially agreed to take 45% stake in CRON via the purchase of stock at C$16.25/share.
The value of CRON shares peaked at a 30.42% increase from $8.58 to $11.19 in one hour due to the confirmation announcement on December 3rd. CRON decreased from $11.19 on the 3rd and closed to $10.17 per share. The company’s stock value re-gained an approximate 5.60% in value after market close on December 4th to an overall gain of 25.17%.
Altria Group is likely to be one of several tobacco companies that, in order to compete with falling cigarette usage, could heavily invest into cannabis within the near future. 2017 held the worst year ever recorded for cigarette usage and the total demand for cannabis within the United States is estimated to be at $52.5 billion.
Risk of Prosecution for Marijuana-Related Companies. If you are considering investing in a company that is connected to the marijuana industry, be aware that marijuana-related companies may be at risk of federal, and perhaps state, criminal prosecution. The Department of Treasury recently issued guidance noting: “[T]he Controlled Substances Act (“CSA”) makes it illegal under federal law to manufacture, distribute, or dispense marijuana. Many states impose and enforce similar prohibitions. Notwithstanding the federal ban, as of the date of this guidance, 20 states and the District of Columbia have legalized certain marijuana-related activity.”