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Why Village Farms International Is Jumping Today

By Keith Speights - Apr 24, 2019 at 12:30PM

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Good news for the company's cannabis joint venture made investors happy.

What happened

Shares of Village Farms International (VFF 0.97%) were jumping 12.7% higher as of 11:30 a.m. EDT on Wednesday. The company announced on Tuesday evening that the entire growing area at the Delta 3 greenhouse in British Columbia operated by Pure Sunfarms was now in production. Pure Sunfarms is a joint venture formed by Village Farms and Emerald Health Therapeutics to produce cannabis.

So what

It was only eight days ago that short-seller Citron Research published a scathing online report about Village Farms, causing the stock to plunge. Citron stated that Village Farms is "nothing more than a stock promotion" and called for an investigation of the company by the U.S. Securities and Exchange Commission.

Marijuana growing in a greenhouse.

Image source: Getty Images.

The news that the Pure Sunfarms Delta 3 greenhouse now has more than 1 million square feet of growing space in production appears to have reassured some investors that Village Farms is a legitimate player in the Canadian cannabis market. Importantly, Pure Sunfarms got its facility up and running on schedule.

With the Delta 3 facility fully operational, Pure Sunfarms should be able to deliver an annualized production capacity of 75,000 kilograms by the middle of this year. Village Farms owns 50% of the joint venture. The company could clearly demonstrate in the near future that it's not a "pretender" as Citron Research alleged.

Now what

Even more capacity should be on the way. Village Farms CEO Michael DeGiglio said that Pure Sunfarms plans to "replicate the success" of the Delta 3 greenhouse with an identical Delta 2 sister facility. This should double Pure Sunfarms' annual production capacity to 150,000 kilograms. The first harvest at the Delta 2 facility is anticipated by mid-2020, with full operations expected in the fourth quarter of next year.

You can expect that DeGiglio and other Village Farms executives will have plenty to say about Pure Sunfarms' progress in the company's next quarterly conference call. That call is scheduled for Friday, May 10, 2019.

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