Yesterday Canopy announced it was going to acquire Hiku Brands (TSXV:HIKU / US OTC:DJACF) for C$1.91 a share.
The total deal is valued at right around US$200 million and represents a 30% premium over the closing price of Hiku shares.
It’s a big deal for Hiku shareholders…
It’s an even bigger deal for Seed Investors.
This acquisition was a major step into recreational use marijuana for Canopy Growth.
Hiku Brands is one of the newest breed of marijuana companies which are exclusively focused on the soon-to-be-legal recreational-use marijuana market in Canada.
Hiku acquired the Tokyo Smoke brand of marijuana stores and was in the process of building out a chain of coffee shop-style stores for marijuana consumers before this takeover.
The acquisition gives Canopy a direct stake in the legal recreational marijuana market when it opens up in Canada later this year.
This news also confirms the Seed Investor’s thesis that investors looking for the big gains in marijuana need to be focused on companies in the recreational use market.
There are two major factors which are going to keep these recreational use marijuana stocks on the climb.
The first factor is the recreational use marijuana market is so much bigger than the medicinal use market.
When you see forecasts of the potential marijuana market reaching $50 billion in the US and $7 billion in Canada, that’s that recreational use market. The medicinal use marijuana is a fraction of that.
The second factor is a big problem major marijuana companies are facing.
The Seed Investor explained this problem and how it was going to drive up the value of branded, recreational use marijuana companies in How To Get In On The Next Leg Of The Marijuana Bull Market Today.
“The lack of recreational use market focus is a major and growing problem for legal marijuana companies in Canada.”
It is a big problem and the major marijuana companies are going to have to pay up big to solve it.
The Hiku acquisition at a 30% premium over market price is just further evidence of this problem and the big gains investors can make by getting in on the companies with the solution.
Expect more news like this in the weeks and months ahead.
Recreational use marijuana will start rolling out across Canada in October and you’ll want to be positioned for it before it comes.
After all, the world’s largest legal marijuana company is aggressively getting positioned.
The Seed Investor