Tilray Inc. and Cronos Group Inc. shares catapulted to double-digit percentage gains Monday, as a recent surge from marijuana-related companies extended for another session.
A report that Smirnoff- and Johnnie Walker-maker Diageo PLC
was in talks with at least three Canadian pot companies with the intent to purchase a stake or initiate a collaboration in one of them seemed to set off the buying frenzy Friday, and Monday’s trading saw Tilray Inc.
gain more than 20% to $53.44, and Cronos Group Inc.
stock rose 21%. Aurora Cannabis
a Canada-based pot producer that doesn’t have a U.S. exchange listing, saw shares close 7.7% higher Monday.
Tilray went public at $17 in July, and Cronos listed on the Nasdaq exchange earlier this year and has rallied more than 50% year to date. The benchmark S&P 500 index
has gained 8.4% this year.
“This is like Bitcoin
levels, the kind of move Tilray is making,” said Jason Spatafora, a cannabis investor who runs Marijuanastocks.com. “The market is completely irrational. [Tilray’s] market capitalization is over $4.5 billion. That’s insane. They don’t have as much cash as Canopy or Aurora. It shouldn’t trade at half that valuation.”
Also Monday, the Canadian province of Nova Scotia — population 950,000 — announced its first legal pot order of 3.75 million grams and indicated that it expects to buy 15 million grams over the next year. The order, through the government-owned liquor corporation, included companies such as Cronos and Tilray, among others. According to Nova Scotia Liquor Corporation estimates, cannabis will add roughly $87 million to its top line in fiscal 2018-’19. Recreational marijuana will become legal in Canada starting Oct. 17. In the U.S., it is still illegal under federal law.
The report of a potential Diageo deal involving an investment or partnership in a Canadian pot firm arrived amid a wave of interest from the alcohol sector. Earlier this month, Constellation Brands Inc.