What happened

Shares of Innovative Industrial Properties (NYSE:IIPR), a cannabis sector-focused real estate investment trust (REIT), jumped 18% last month, according to data from S&P Global Market Intelligence. That's a great start to 2020 for a stock that returned 72.5% last year.

For context, the S&P 500 index was essentially flat in January, while shares of the three largest cannabis growers by market cap, Canopy Growth, Cronos Group, and Aurora Cannabis, rose 6.9%, declined 6.4%, and fell 12.5%, respectively.

Interior of a large cannabis greenhouse

Image source: Innovative Industrial Properties.

So what

We can probably attribute the stock's robust January performance in part to two catalysts: its secondary stock offering and strength in the cannabis group following an analyst upgrade of Canopy stock.

On January 23, IIP announced a secondary offering of 2 million shares of its common stock to the public. The next day, it announced that it had priced the offering and had considerably increased the size of its sale. This was followed by news on Jan. 28 that the company had sold nearly 3 million shares to the public. Shares popped 8.7% that day.

Typically, a company's stock will decline on news of a secondary offering because such an offering dilutes existing investors' ownership. My colleague Keith Speights has opined that a main reason for investors' positive reaction here was that "they're confident that the company will put the $250 million that it's raising to good use." That seems a reasonable explanation, as IIP is scooping up properties at a fast pace and is quite profitable. In the third quarter, its revenue soared 201% year over year, earnings per share surged 162%, and adjusted funds from operations (FFO) per share jumped 126%. (FFO is a closely watched metric for REITs, as it's the driver of dividend changes.).

It's likely, however, that there was also another catalyst behind IIP stock's Jan. 28 move. On that date, Canadian banker BMO raised its rating on Canopy Growth stock from "market perform" to "outperform." Not only did Canopy stock get a boost -- to the tune of 11% -- but other cannabis stocks rose that day as well, with Cronos and Aurora tacking on 6.3% and 4.2%, respectively. (The S&P 500 gained 1%.) Canopy is often considered the bellwether in the cannabis space because it has the largest market cap, so positive news relating to it will frequently lift other stocks in the group. So it seems probable that IIP stock owes a portion of its nearly 9% gain on Jan. 28 to the Canopy stock upgrade. 

Now what

IIP hasn't yet announced a date for the release of its fourth-quarter and full-year 2019 results.

The company doesn't provide guidance. For the fourth quarter, Wall Street expects EPS of $0.57 on revenue of $14.4 million, representing growth of 138% and 200%, respectively, year over year.