The Apple Store For Weed Partners With Nasdaq's First Pot Stock
BILL PETERS 3/19/2018 Investors Business Daily
Canadian marijuana company Cronos Group (CRON) and MedMen, a large U.S. cannabis retail chain, said Monday that the two companies had agreed to form a cross-border joint venture — the first of its kind between two companies in the rapidly growing marijuana industry.
The 50/50 partnership, called MedMen Canada, would bring branded products and new stores to Canada, potentially by the end of the year, according to a release. The deal also would combine the retail knowledge of MedMen and Cronos' 350,000 square feet of production facilities. MedMen Canada will also be focused on research and development, the release said.
The joint venture's research and development efforts would go toward developing new products, Daniel Yi, a MedMen spokesman, told IBD.
As derivatives of the cannabis plant – from infused pretzels to vaping concentrates to bath products – become more widely available and draw new customers or bring back old ones, they have made up a greater share of cannabis products overall.
"People still prefer flower, because that's what they know," Yi said, referring to the term often used in the industry to describe loose, dry buds. "But they're also discovering new products – the edibles and the concentrates – and the trajectory shows that pretty soon, if it hasn't happened already, the non-flower products will constitute a majority of the market sector."
MedMen, a Los Angeles-based company, has 18 facilities across the U.S. and employs nearly 700 people. The company's stores — whose display tablets and clean, minimalist layout resemble an Apple (AAPL) Store for marijuana — are located in California, Nevada and New York. MedMen hopes to go public in Canada during this year's second quarter.
"MedMen stores have been integral to mainstreaming cannabis, and they have become one of the most well-known and respected cannabis platforms in the U.S.," Cronos CEO Mike Gorenstein said in a statement.
Cronos Group became the first pure-play cannabis company to trade on the Nasdaq late last month. Gorenstein, in an interview on Friday, said the move was intended in part to destigmatize cannabis for investors — by showing that a company could meet the standards required to trade on a major U.S. exchange.
"It's something that we wanted to push ourselves to do, to make sure we have something that's investable, and let Americans know that this is a real industry and it's OK to invest in," he said.
Shares jumped 12% to 8.75 in the stock market today on the announcement of the joint venture.
Constellation Brands (STZ) last year took a stake in Canopy Growth, another Canadian medical marijuana company. Canopy and Aurora Cannabis, which is also based in Canada, have both expressed interest in listing on the Nasdaq.
Constellation Brands fell 1% on Monday. ETFMG Alternative Harvest (MJ), an exchange-traded fund that follows companies with exposure to marijuana, rose 1.3%. AdvisorShares Vice ETF (ACT), another such fund, eased 0.4%.
For MedMen, the deal gives it entry into Canada and broader exposure, MedMen CEO Adam Bierman said in a statement.
"Cronos has been a leader in the Canadian medical cannabis space, and their international track record makes them the perfect partner," he said. "They have the right infrastructure and expertise to successfully execute this venture."
Cronos has also expanded, in one way or another, to Germany, Israel and Australia.
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