Please ensure Javascript is enabled for purposes of website accessibility

Why Green Thumb Industries Stock Is Jumping Today

By Keith Speights - Feb 9, 2021 at 11:42AM

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

Investors are giving a thumbs-up to the cannabis operator's stock offering.

What happened

Shares of Green Thumb Industries (GTBIF 0.59%) were jumping 8.7% as of 11:11 a.m. EST on Tuesday. The big gain came after the multistate cannabis operator announced the U.S. sale of up to 10 million shares. Green Thumb already received and accepted an offer from an institutional investor to buy around 3.1 million shares. This sale, which will close today, will provide $100 million to the company.

So what

In most cases, stock offerings cause a company's share price to fall rather than rise. That's because the value of existing shares is diluted by the new shares. So why didn't Green Thumb follow this typical pattern?

Cannabis leaf on a pile of $100 bills

Image source: Getty Images.

It's probably partially because investors realize that the additional $100 million the company will receive will enable Green Thumb to expand even more in the rapidly growing U.S. cannabis market. Also, this is Green Thumb's first public stock offering registered with the U.S. Securities and Exchange Commission (SEC). For a single institutional investor to so quickly buy a large stake in the company speaks volumes about the expectations for Green Thumb.

As CEO Ben Kovler stated in the press release announcing the transaction, "Institutional investors are waking up to the great American cannabis growth story. This investment reflects the very real interest, understanding, and momentum behind the potential $100 billion U.S. cannabis opportunity that is happening now."

Now what

This is without question an exciting time for U.S.-based marijuana stocks like Green Thumb. However, that excitement could build.

There's a pretty good chance that the U.S. will decriminalize marijuana at the federal level in the not-too-distant future. This would pave the way for Green Thumb to list its shares on a major U.S. stock exchange. 

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

Green Thumb Industries Stock Quote
Green Thumb Industries
GTBIF
$8.52 (0.59%) $0.05

*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
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

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.