A marijuana ETF climbed Monday after Canopy Growth (NYSE: CGC) announced it acquired U.S. hemp company, Ebbu, to expand its product line.
The ETFMG Alternative Harvest ETF (NYSEArca: MJ), first U.S.-listed ETF to target the cannabis and marijuana industry, increased 5.8% Monday.
Canopy Growth argued that its acquisition will “complement and accelerate” its ambitions to expand into new types of consumer products, CNBC reports.
CGC shares surged 9.4% Monday on the announcement. Canopy Growth makes up 9.8% of MJ’s underlying portfolio.
“Intellectual property and research and development advancements achieved by Ebbu’s team apply directly to Canopy Growth’s hemp and THC-rich cannabis genetic breeding program and its cannabis-infused beverage capabilities,” Canopy Growth said in a press release.
Ebbu is a hemp-based company that specializes in the purification and study of cannabinoids for product development, wholesale and research purposes. The researcher also incorporates patented plant genetics to maximize cannabinoid output by “boosting in-plant cannabinoid production and creating rare-cannabinoid-specific plants.”
“The deal will be complementary to Canopy’s current hemp operations in Saskatchewan, Canada. In addition, the transaction provides an opportunity for Canopy to reduce the cost of its CBD [cannabidiol]production by applying ebbu’s intellectual property,” according to Cowen analyst Vivien Azer. “We think this transaction is an important milestone to Canopy as it marks its entry into U.S.-based operations. We continue to believe that Canopy will have a first-mover advantage in expansion outside of Canada and today’s deal represents an important first step vs. its Canadian peers.”
Canopy has been expanding its product line to tap into new markets. For instance, the Canadian grower recently partnered up with Corona brewer Constellation Brands to potentially add cannabis-infused alcoholic beverages.
Canada will officially legalize recreational cannabis usage on Wednesday, October 17, but each of the country’s 10 provinces will be able to regulate the market within their own jurisdictions.
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