A cannabis plant grows inside the Organigram facility in Moncton on Oct. 12, 2019.John Morris/The Globe and Mail
Organigram Holding Inc.’sOGI-T shares surged 30 per cent Monday morning after the company announced a $124-million investment from a British tobacco giant, which it will use in part to create a new strategic innovation fund.
BT DE Investments Inc., a subsidiary of British American Tobacco BATFF, will be issued 38 million shares at a price of $3.22 per share in three tranches, about double the $1.59 that shares were trading at the end of the previous close on Friday.
The investment brings BAT’s common voting share ownership to 30 per cent and overall equity interest to 45 per cent (including preferred shares), the company said in a press release Monday morning. BAT has made a number of investments in Organigram since 2021, when it acquired 20 per cent of the company’s equity.
Of the total investment, Organigram will use $83-million to create “Jupiter,” a strategic fund designed to expand its geographic footprint outside of Canada.
In an interview, Organigram chief executive officer Beena Goldenberg said the company will take advantage of current markets globally, where many cannabis companies are undervalued.
“The whole cannabis market has continued to decline pretty consistently since highs of 2021,” Ms. Goldenberg said. “Most cannabis companies are trading at all-time lows.”
She said the company is particularly focused on advancing its non-combustible products, which includes edibles, beverages and vapes.
The company will also consider any Canadian businesses that complement its existing portfolio, though this would not fall under Jupiter, Ms. Goldenberg said.
“There will be a shake-out in Canada. There are too many players with not enough cash runway, and very little available cash to raise today in the market. If there’s the right opportunity in Canada, we’ll look at it.”
The rest of BAT’s investment will be used for general corporate purposes.
Royal Bank of Canada analyst Douglas Miehm called the transaction a positive for the cannabis company.
“In our view, this partnership strengthens OGI’s strategic and financial positioning for product development and geographical expansion,” Mr. Miehm in a note to investors Monday morning.
BAT’s investment is the latest in a number of major plays made by tobacco companies aiming to diversify into pot products and find efficiencies in manufacturing and distribution.
In 2018, U.S. cigarette maker Altria Group, Inc. bought a 45-per-cent stake in Cronos Group for $2.4-billion, with the option to invest an additional $1.4-billion for a further 10 per cent. But last year, Altria let its warrants expire, and in July the company said it was exploring options to sell its Cronos stake.
In 2019, British tobacco manufacturer Imperial Brands PLC invested $123-million in Auxly Cannabis Group Inc. XLY-T, giving the Vancouver pot company licences to its vaping technology. In July, the companies agreed to extend the debenture by two years to 2026.
Five years after federal legalization, the Canadian pot sector continues to struggle. Organigram’s stock started Monday down 66 per cent from the beginning of the year. In its latest quarter reported in July, the company posted a $120-million net loss, most of which it attributed to a $191-million writedown of its goodwill, property, plants and equipment.
Tilray Brands Inc. TLRY-T and Canopy Growth Corp. WEED-T, two other large cannabis producers, were down 31 per cent and 73 per cent from the beginning of the year, respectively, as of Monday morning.
More broadly, the Horizons Marijuana Life Sciences ETF, which includes a basket of North American cannabis stocks, is down about 30 per cent since the beginning of 2023, and by nearly 67 per cent since the start of last year, according to Alberta-based financial services company ATB Financial.
In a survey of 23 Canadian and U.S. institutions conducted in October, ATB found that the majority were bearish on Canadian cannabis retailers and producers, and have either reduced or kept their net exposure unchanged over the past six months.
However, ATB found that investors are more positive about the U.S. pot market, given hopes that cannabis will be reclassified from Schedule I to Schedule III in the next 18 months. Doing so would mean the drug is still federally illegal, but would be a step toward full legalization.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
