What happened
The stocks of many companies in the cannabis sector jumped Thursday thanks to a deal announced this morning. One popular name, Sundial Growers (SNDL), rose 8.4% on the day.
Even after a retrenchment from February highs, shares in Sundial Growers are up almost 200% year to date. Today's news has investors hoping there's more to come.
So what
The big news today was that tobacco giant British American Tobacco (BTI 0.80%) is making an investment in Canadian pot grower Organigram Holdings (OGI 2.19%). BAT will take a 19.9% stake in Organigram for an investment equivalent to about $175 million.
Image source: Getty Images.
Now what
Sundial Growers is a popular pot stock with investors. Over the last six months, average daily trading volume on the stock has rocketed more than 3,000%. And the share price hasn't been that far behind, rising 366%.
Today's news includes plans for research and development collaboration between BAT and Organigram. The collaboration will "focus on developing the next generation of cannabis products with an initial focus on CBD," the companies said in a joint statement.
This news is good for the sector in general, assuming BAT will use its leverage to help move the entire sector forward. Sundial has shored up its balance sheet with recent capital raises, but the company isn't profitable at this point. Growing interest in the marijuana sector from larger companies has investors thinking that perhaps there could be a deal in Sundial's future too.
Sundial reports its fourth-quarter and full-year 2020 results on March 17, and investors are hoping there is a solid plan for profitability coming soon.
