Marijuana sales is no longer the domain of hippies or jay & Silent Bob types in the 7-11 parking lot. Legalization in several states pushed cannabis sales into the realm of big business and the alcohol industry wants in on the deal. Following Constellation’s buy-in, rival Diageo is reportedly eyeing an acquisition of their own.
Earlier this week, BNN Bloomberg TV broke the news that Diageo is in talks with three Canadian cannabis companies about a partnership or acquisition.
In a followup, Diageo kept their cards close. “We never comment on speculation,” a Diageo spokeswoman told AdAge in an email. “As we’ve said before, we are monitoring this space closely.”
However, investors are not buying the company line; to the contrary, they’re buying cannabis stocks. Most publicly traded companies in the marijuana sector are based out of Canada where medical marijuana is now legal and recreational marijuana will be legal on October 17. The nation’s five largest THC companies, Aphria (NASDAQOTH:APHQF), Tilray (NASDAQ:TLRY), Aurora Cannabis (NASDAQOTH:ACBFF), Organigram Holdings (NASDAQOTH:OGRMF), and Cronos Group (NASDAQ:CRON), all saw stock prices following the Bloomberg report. In the last week, share prices increased an average of about 17% for the five companies followed by adjustments in Monday’s trading.
The uptick may be temporary given as the timeline on a deal is unknown. One source told Bloomberg that ink would be on paper within weeks while another told the news outlet that closing a deal could take months.
Diageo is not alone. A few weeks ago, Constellation spent $4 billion (US) to increase their share of Canadian cannabis giant, Canopy Growth from 9.9% to 38%. Likewise, Molson recently announced a partnership with Hydropothecary Corp. to develop cannabis infused drinks.