A new strategic deal is making waves in the cannabis sector Thursday morning, sharply moving the stock of Organigram Holdings (OGI -9.02%). As of 10 a.m. EST, Organigram shares were up slightly more than 30%.
The big news is a strategic investment British American Tobacco (BAT) (BTI -2.20%) is making in the Canadian pot grower. BAT will take a 19.9% stake in Organigram for an investment the equivalent of about $175 million. The investment was made at an Organigram stock price of about $3 per share. Shares are currently trading at about $3.80.
This isn't a huge investment for BAT relative to its size. The tobacco company currently has a market capitalization of about $85 billion. But it marks an important shift away from tobacco and nicotine products. In a statement, the company said the agreement supports "ongoing BAT activities to expand its portfolio 'beyond nicotine' and follows the pilot launch of Vuse CBD Zone in Manchester, UK earlier this year."
The investment by BAT includes plans for research and development collaboration with Organigram. The efforts will "focus on developing the next generation of cannabis products with an initial focus on CBD," the companies said in a joint statement.
Investors in Organigram are thrilled with not just the money, but the reach of its new partner. The support and global infrastructure could become crucial as the sector continues to grow.