Why OrganiGram Holdings Stock Was on Fire Today

What happened

Fortunate OrganiGram Holdings (NASDAQ: OGI) shareholders caught quite the buzz from their investment on Tuesday. The Canadian marijuana company’s stock zoomed 6.5% higher, thanks to the announcement of a promising new acquisition, plus some noise on the U.S. legalization front.

So what

As has been typical for marijuana companies since the start of the modern pot industry, OrganiGram’s latest move is an attempt to grow by acquisition. It said Tuesday that it has acquired Quebec’s Laurentian Organic, a producer of higher-end marijuana and hashish goods.

Image source: Getty Images.

The total price for the privately held Laurentian is 36 million Canadian dollars ($27.9 million), CA$10 million ($7.7 million) of which is to be transacted in cash, and the remainder with just under 10.9 million newly issued shares of OrganiGram’s common stock.

Laurentian’s shareholders will also be eligible for two “earnout considerations” if they meet certain milestones for earnings before interest, taxes, depreciation, and amortization (EBITDA). These will be paid in stock.

In its press release trumpeting the deal, OrganiGram quoted its chief strategy officer Paolo De Luca as saying, “In Laurentian, we found a company that is not only accretive immediately on both a revenue and EBITDA basis, but a company with great brands, a passionate Quebecois employee base and significant opportunity for growth in new segments.”

Now what

Meanwhile, south of the Canadian border, a prominent politician was turning up the heat on President Joe Biden regarding marijuana legalization, among other pressing legislative matters.

Democratic Rep. Alexandria Ocasio-Cortez of New York tweeted Monday morning that Biden “needs to lean on his executive authority now. … There is an enormous amount he can do on climate, student debt, immigration, cannabis, healthcare, and more.”

Marijuana stock investors are worried now that legislators are not doing enough to effect changes in current drug law — changes that would benefit pot companies. Ocasio-Cortez’s admonition is only a tweet, but it’s a faintly positive sign that some lawmakers are determined to push through U.S. soft drug reform.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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