What happened

Canadian marijuana grower OrganiGram Holdings (OGI -5.79%) has had an eventful month, as the stock rose about 15% in March. But some investors are taking profits today after the company announced a new acquisition has been funded with the sale of about 5 million shares of common stock. As of 10:45 a.m. EDT on Tuesday, shares were down about 5%.

So what

OrganiGram said today that it has acquired The Edibles & Infusions Corporation (EIC), a maker of "highly customizable, precise, and scalable cannabis-infused products, including edibles." The acquisition gives OrganiGram a second operating facility, and a footprint in Western Canada. EIC's manufacturing site is in Winnipeg, Manitoba, while OrganiGram's lone manufacturing facility is in New Brunswick.

marijuana edibles including gummies and brownies, along with flower buds

Images source: Getty Images.

The company is purchasing EIC with stock sold at Monday's closing price of $3.47 per share in U.S. currency, for a total of about $17.5 million. And there could be up to another approximately $10 million in milestone payments that would also be funded through additional common-stock sales, OrganiGram said. 

Now what

OrganiGram expects to begin sales of EIC soft chews in its fiscal fourth quarter 2021. The acquisition brings exposure to a growing segment of Canada's cannabis market. It said edibles currently make up about 4.4% of the country's recreational cannabis market, mostly in the form of soft chews. OrganiGram expects the category to potentially grow to the 15% level that edibles have in the U.S. market. 

Last month, the company announced that British American Tobacco (BTI -1.38%) will invest about $175 million for an approximately 20% stake in OrganiGram. Investors who are selling today may be wondering why the company didn't pay for the transaction in cash, rather than further diluting shareholders.