Please ensure Javascript is enabled for purposes of website accessibility

Why Cronos Group Stock Jumped Today

By Keith Speights – Updated Nov 6, 2018 at 4:38PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The U.S. elections appear to be generating a lot of interest for this Canadian marijuana stock in particular.

What happened

Shares of Cronos Group (CRON 2.73%) jumped 9.3% as of 3:48 p.m. EST on Tuesday and traded as much as 16.1% higher earlier in the day. Cronos didn't have any news, so why did its stock perform so well? One potential reason could be investors' anticipation of good news for the marijuana industry with the U.S. elections under way today. 

So what

Of the biggest Canadian marijuana stocks, Cronos, enjoyed the largest gain on Tuesday, followed by Canopy Growth. Why did these two stocks outperform the others? Possibly because both companies have tight connections with the U.S.

Marijuana leaf on top of $100 bills

Image source: Getty Images.

Canopy's connection is obvious -- it's partly owned by Constellation Brands. The U.S. connection for Cronos Group isn't quite as transparent. Cronos formed a joint venture with U.S.-based Ginkgo Bioworks in September to develop cultured, high-purity cannabinoids from engineered strains of yeast. It also partnered with U.S.-based MedMen Enterprises to launch retail cannabis stores in Canada.

In addition, there are some key investor ties between Cronos and U.S. marijuana companies. Gotham Green Partners owns a significant stake in Cronos Group, with the private equity fund's founder and managing partner, Jason Adler, sitting on Cronos' board of directors. Gotham Green also holds a significant position in MedMen as well as another U.S. cannabis company, iAnthus Capital Holdings

What does all of this mean? The U.S. elections could increase the likelihood that federal marijuana laws will be changed to legitimize the cannabis industry in the country. If that happens, the web of relationships involving Cronos Group and U.S. companies could conceivably help pave the way for Cronos to be a first mover in entering the huge U.S. marijuana market. 

Granted, all of this speculation didn't really justify hundreds of millions of dollars being added to Cronos Group's market cap. But these kinds of swings based on investors' hopes aren't unusual for Cronos, or any of its peers.

Now what

The more important thing for investors to watch with Cronos now is the company's performance in Canada. Cronos is scheduled to provide a quarterly update on Nov. 13. Management comments on how the launch of the recreational market in Canada has gone will be more useful than how the company performed in the last quarter.

It will be interesting to see how the U.S. elections turn out, though. They could result in improved chances for Cronos Group (and others) to enter the U.S. market. But don't expect any big changes to happen quickly.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Cronos Group Stock Quote
Cronos Group
$3.01 (2.73%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.