In the past month alone, it’s been very clear to everyone who the “cool kid on the block” has been. All the attention had been given to Canopy Growth Corp. (TSX:CGC), while many others have been left out in the cold. It must be a lot of fun to be the prom queen or king and be the envy of all your friends. Too often, however, there are other great catches available that are even better than the winner.
Since the company reported earnings last month, the stock has seen a dramatic increase, moving from approximately $7 to over $17 on an intraday high. The excitement was plentiful. Fast forward a few weeks, and the excitement has worn off. The stock is currently trading near the $10 mark with the 10-day moving average beginning to twist downwards. The time may have come to ditch the prom king and take up with the other guy.
Who is the other guy?
In the medical marijuana industry, the other guys are Mettrum Health Corp. (CVE:MT) and ICC International Cannabis Corp (CVE:ICC). Both are part of the same racket, offering medical marijuana to those with a prescription. The difference between these and Canopy Growth Corp. is, these two are not listed on the TSX, but instead are on the smaller Canadian Venture Exchange (CVE), which services smaller companies.
The smaller competitors have not been involved in mergers or consolidations, leading to lower market capitalizations. Looking further into each company, we learn ICC International Cannabis Corp., with a market cap. just over $100 million, is actually not a Canadian company; it’s actually based in Uruguay. Following the same medical marijuana angle with the possibility of increased business through recreational use down the road, this stock has been swept up in the euphoria in the past several weeks.
Mettrum Health Corp. has offices approximately one hour outside Toronto, Ontario, and, similar to Canopy Growth Corp., it’s still ramping up production in order to meet the demand from new patients in addition to the potential for legalization of the product down the road. There is the opportunity for huge growth if this becomes the case.
Looking at other suitors really gets to be fun when you realize they may be offering something different. In the case of Mettrum Health Corp., the market capitalization is slightly more than $300 million, making it about a quarter the size of Canopy Growth Corp.
With the hope of buying a smaller player in the industry for higher growth or takeover potential, we’ve been beat to it. Canopy Growth Corp. has already announced the purchase of Mettrum Health Corp. The cool kid wants to remain the only kid on the block!
It seems that in such a new and growing industry, the major suitor is preventing all others from the party. As an investor, when there are no other options this early in the game, I worry.
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