What happened
Cronos Group (CRON 3.82%) stock jumped 13.6% in December, according to data from S&P Global Market Intelligence. That brought the Canadian marijuana grower stock's 2018 gain to 34.4%.
(As for 2019, Cronos stock started the year on a strong note, as it popped 13.1% during last week's holiday-shortened trading week.)
For context, last month shares of Cronos' main peers -- Canopy Growth, Tilray, Aurora Cannabis, and Aphria -- posted double-digit losses.
Image source: Getty Images.
So what
The catalyst for Cronos stock's rise last month was the company's announcement before the market open on Friday, Dec. 7, that tobacco giant Altria (MO +1.32%) is buying a 45% stake in Cronos for approximately $1.8 billion (about 2.4 billion Canadian dollars). The agreement also provides an opportunity for Altria to increase its ownership stake to up to 55% over the next four years.
The deal didn't come as much of a surprise, as Cronos had announced earlier in that week that it was in preliminary talks with Altria about an investment, and rumors about such a deal had been swirling for some time.
Notably, this deal is the second-biggest ever in the legal cannabis industry, behind alcoholic beverage giant Constellation Brands' $4.0 billion investment in Canopy Growth.
Altria paid a 33% premium over Cronos stock's closing price on Nov. 30 and a 41.5% premium over the stock's 10-day volume-weighted average price through that same date. (Nov. 30 was "the last unaffected trading day prior to when Cronos Group announced it was in preliminary discussions with Altria regarding a possible investment," Cronos said in its press release about the deal.)
Following the announcement, shares of Cronos gained 21.7% on Dec. 7. Through that date, they were up a whopping 39% in the month, before pulling back sharply, along with other marijuana stocks and, to a lesser degree, the market in general.
Now what
Cronos' prospects improved significantly last month. An infusion of cash to the tune of $1.8 billion will go a long way in enabling the company to rapidly expand its business and otherwise compete in the fast-growing global legal cannabis market.
Moreover, the company's partnership with Altria should prove invaluable, as the tobacco leader has immense experience in selling products in highly regulated markets along with a vast distribution network.
Check out the latest Cronos Group earnings call transcript.
