CanniMed Acquisition Could Be Catalyst For Marijuana Stocks

According to Arcview Market Research, the estimated compound annual growth rate in the North American legal marijuana market through 2021 is at 26%, which would place a nearly $22 billion valuation on the marijuana industry in only a few short years’ time.

“The only consumer industry categories I’ve seen reach $5 billion in annual spending and then post anything like 25% compound annual growth in the next five years are cable television (19%) in the 1990s and the broadband internet (29%) in the 2000s,” Tom Adams, editor in chief of Arcview Market Research, said in a statement.

“What broadband changed for the internet was a kind of remarkable parallel to legalization for cannabis,” Adams said in an interview with Business Insider. “We saw what had been a $5 billion industry — like this one — in North America take off at that point on new growth spurts.”

Those numbers are nothing to sneeze at and a recent Gallup survey shows two-thirds of respondents favor legalizing marijuana, which is an increase from just 25% back in 1995.

Aurora Cannabis (NASDAQOTH:ACBFF) is looking to go big as they are interested in acquiring CanniMed Therapeutics (NASDAQOTH:CMMDF), even going so far to place an unsolicited bid for a maximum of $18.75 a share ($24 in Canadian dollars). Aurora Cannabis believes that the combined companies would likely claim a market cap of more than $3 billion, bumping Canopy Growth  Corporation from atop the pyramid as the largest pure-play marijuana stock on the market.

CanniMed shareholders would surely be happy by this deal but the company reported $4 million in net losses through the first half of fiscal 2017, so there is a lot of financial “baggage” to consider in any acquisition.

The acquisition is targeting  increased medical cannabis exposure. The move could also save on costs while producing in the around 130,000 kilograms of dried cannabis a year, a major boom to the marijuana stock market and industry.