Aurora Cannabis Inc (ACB)

[Lloyd Cannabinoid]

Aurora Cannabis Stock Is Up Because It's Betting Big on the CBD Craze -- Barrons.com
Today 11:42 AM ET (Dow Jones)Print
By Connor Smith

Aurora Cannabis stock was up Tuesday after the company said it agreed to buy the remaining shares of Hempco Food and Fiber.

Canada-based Hempco produces hemp-based foods, hemp fiber and hemp nutraceuticals. The move helps Aurora capitalize on the CBD trend, which has shown no signs of slowing down.

The back story. Congress legalized hemp last December, opening the floodgates for companies to sell creams and sprays that advertise CBD, which is said to have a calming effect that lacks the high of THC.

CVS and Walgreens both have already announced they're on board the hemp hype train. They've announced plans to sell CBD products in select states.

Still, the U.S. Food and Drug Administration says its rules don't yet allow CBD to be added to food, but it will soon hear from experts and evaluate the it going forward.

Aurora Cannabis (ticker: ACB), one of the biggest Canada-based growers, already owned a stake in Hempco Food and Fiber. The stock had gained 72.7% in 2019, through Monday's close.

Aurora lacks an equity investment from a large Fortune 500 company, but hired activist Nelson Peltz as a strategic adviser to help change that.

What's new. Aurora announced a deal Tuesday to purchase the remaining 48% of Hempco Food and Fiber's shares for 1.04 Canadian dollars per share. That values Hempco at 63.4 million Canadian dollars, or $47.4 million.

"Hempco provides Aurora with low-cost, high-volume access to raw material (hemp) for the extraction of CBD, which has been increasingly recognized for its therapeutic benefits across a wide range of medical indications and wellness applications," the company said in a statement.

Aurora stock was up 3.4% to $8.80 Tuesday morning.

Looking ahead. The move puts Aurora in a better position to capitalize on the continuing hemp craze. Still, as Barron's Bill Alpert wrote earlier this month, there are no bargains among hemp stocks. Investors should steer clear of this craze.