Since the October launch of the National Institute for Cannabis Investors – and for months before through some other lofty financial media outlets – I’ve been harping on how mergers & acquisitions and other types of partnerships were a big – if not the most important – trend to watch.
In fact, one of my most memorable conversations from this year was in June when I met up again with Cronos Group CEO Michael Gorenstein. Constellation Brands, parent company of Corona Beer, had recently made an investment into Canopy Growth Corp. And Gorenstein, with all the confidence in the world, said more deals were coming and hinted that they’d be a lot bigger.
It made all the sense in the world to me at the time, yet so many were still skeptical. Yesterday, again proved how wrong the skeptics and those who called the cannabis industry a passing fad were.
Now, yesterday, pretty much all stocks were down, cannabis ones included. Most of the decline happened after about 2 p.m. It’s essentially because – and I’m not making this up – the Federal Reserve didn’t word a press release just right about its latest decision on rates, and market-moving analysts (as well as many traders) threw a fit.
Tilray Inc., one of the great success stories of 2018 with its July IPO and an 832% gain at its peak price, was down over 7%, for example.
That kind of disappointment won’t be on tap today for Tilray or most good cannabis stocks, not after what we saw just after the close of trading yesterday.
That’s because Tilray and the world’s biggest beer company are now in business together after their shock announcement.
Here’s what’s happening and what it means to cannabis investors like yourself…
Budweiser’s Parent Company Joins the Race to Develop the Market’s First Dominant Cannabis Beverage
Our Cannabis Profits Daily update yesterday even focused at length on M&As – but, admittedly, I had no idea how great our timing was in talking about the deal-heavy nature of the industry while working on that piece early in the day. Nobody did – that was, until the close of markets.
Anheuser-Busch InBev, owner of Budweiser among its large fleet of top-selling beer brands, and Tilray confirmed that they have entered into a joint venture. The partnership will focus on the research and development of non-alcoholic beverages infused with cannabis, both THC- and CBD- varieties. Each party committed to investing up to $50 million in the partnership, with InBev investing through its Labatt Brewing Company subsidiary that focuses largely on the Canadian market.
Even though $50 million is nothing for a beer behemouth that generates $56 billion a year in revenues, a giant like this can’t dip its toe into a pool without causing a huge splash. And AB InBev isn’t buying a stake in the Canadian cannabis company like Constellation Brands or Molson Coors Canada did.
But it is yet another massive signal of big players wanting to move into the cannabis space and acting on it quickly. And remember, Constellation’s mega-investment was its second deal with Canopy Growth – just months after it got in, the beverage giant wanted a lot more than a toe in the water. It now owns more than one-third of one of Canada’s two biggest marijuana producers.
The AB InBev-Tilray deal is also great for both parties because it doesn’t tie either’s hands when it comes to forging other investment deals – including with other companies – in the future.
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You can be sure they will – and at a furious pace – through the end of 2019.
One particularly interesting thing about this deal is that the press release specifically addressed CBD beverages. I’ve written before about CBD and how interesting it is even to many consumer companies which have no interest in THC. That AB InBev will be researching CBD-only beverages in Canada is very interesting because the terms of the Tiray deal do not extend to the United States. And with the U.S. Congress passing the Farm Bill and its industrial hemp legalization provisions this month, you can bet that AB InBev is eyeing the west’s largest consumer market for CBD products, too.
Never Panic-Sell a Good Cannabis Stock
Yesterday serves as a great teaching moment for new cannabis investors and an important refresher for more experienced ones.
Think about this: Earlier on the very day that the world’s largest brewing company made a deal with Tilray, people representing over four million shares of the cannabis company got scared and sold off their shares. And it’s almost solely because Federal Reserve Chair Jerome Powell and his press team didn’t satisfy a bunch of stock traders sitting in some New York City skyrise.
It happens all the time – and I don’t want it to happen to you.
Take, for example, trading on December 6. Nearly 12 million shares of Gorenstein’s Cronos sold off to a closing price of $14. The very next day, tobacco giant Altria Group bought in at $16.25 per share (a total of $2.4 million for a 45% stake in the company) with the right to buy more at $19.
Investors who didn’t know sold shares during the prior week, which was admittedly sluggish for cannabis stocks, for under $11 per share.
It says a lot that big investors, people who see the threat to their multi-billion dollar brands, are tripping over themselves to buy into cannabis companies at prices well above what individual investors are selling at. And individual investors weren’t even selling because of any kind of bad news about the company or the industry – prospects for both are outstanding. They were selling because the stocks were down for a brief period of time.
All of those sellers will have interesting, but sad, stories to tell their friends.
Those investors who see through the noise and accumulate stocks in the fastest-growing industry on the planet, especially when share prices are at a massive discount relative to their real value, will tell happier stories on the deck of their yachts. And soon enough, they could be telling them while holding a cannabis-infused beverage made by InBev/Tilray or Constellation/Canopy.
And the Institute is here to arm you with all the information and tools you’d need to help you get there.
Thanks for being an important part of the National Institute for Cannabis Investors,
Executive Director, National Institute for Cannabis Investors
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4 responses to “The ‘King of Beers’ Taps Tilray for Its Grand Entrance into Cannabis”
December 20 2018