Further expanding its global footprint, cannabis giant Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) has moved into Africa with the acquisition Wednesday of Daddy Cann Lesotho PTY Ltd., trading as Highlands, in an all-stock transaction.
Headquartered in the Kingdom of Lesotho, which last year became the first African nation to legalize medical marijuana, Highlands holds a license to cultivate, manufacture, supply, hold, import, export and transport cannabis and its resin.
The Smith Falls, Ontario-based company is paying 666,362 shares of its common stock upfront and committed to paying another 333,281 upon certain milestones being met for a total of 999,643 shares. Based upon a 30-day volume-weighted average price of $28.763, the value of the deal is about $28.8 million.
Canopy Growth will now have operations on five of seven continents, less only Asia and Antarctica.
The climate of Lesotho is optimal for year-round greenhouse cannabis production, with sunshine 300 days per year and optimal humidity. Furthermore, operating and resource costs (water is a primary natural resource of Lesotho) are minimized in the enclaved southern African country, positioning Canopy Growth to grow large quantities of high-quality medical cannabis at a low cost.
Lesotho is surrounded by South Africa, a country of 55 million people that is reported to presently be developing medical cannabis legislation. In March 2017, the Western Cape High Court ruled that people can possess, grow and use cannabis, called "dagga" regionally, in their private homes. However, this ruling needs to be confirmed by the Constitutional Court and enacted into law by Parliament, meaning dagga is still illegal in the country at this time.
Apropos, the culture could be changing with South Africa's first medical cannabis dispensary opening in Durban earlier this month. The facility uses legal medical cannabis products from the U.S. to treat patients, keeping everything 100% "above board," according the the Holistic Relief Wellness and Pain Management Centre in Durban.
Last week, Canopy Growth, once considered an over-hyped penny stock doomed to fail by nearly all Wall Street analysts, made history by becoming the first all-cannabis company to list on the New York Stock Exchange. Shares of Toronto-listed WEED closed Tuesday at C$36.56, while U.S.-listed shares ended the day at $28.12. Indeed once a penny stock that we wrote frequently about, Canopy Growth is now a global behemoth with a market cap in excess of C$7.3 billion.
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