Altria-Backed Cannabis Producer Cronos Group Considers Sale, Stock Waivers Amid Takeover Interest

Cronos Group Inc CRON is exploring options that could include a potential sale after attracting acquisition interest, Reuters reported Thursday, citing people familiar with the matter. 

The Canadian cannabis producer backed by cigarette maker Altria Group Inc. MO, which has a market value of CA$972 million ($727.54 million), is purportedly working with a financial adviser to handle expressions of interest in a deal from other companies, including Curaleaf Holdings Inc CURLF, the report said. 

Per Reuters, sources requested anonymity as the discussions underway are confidential; they cautioned that no transaction is certain.

No Comments All Around

Cronos and Curaleaf also declined to comment. Spokespeople for Altria did not immediately respond to a request for comment.

The sale talks involving Cronos, highlighted by the outlet, come at a time of uncertainty for the cannabis industry, “as more favorable regulatory regimes in North America have fueled fierce competition among a growing field of companies.”

Lack Of Fed Weed Legality In US: Constant Obstacle

With adult-use cannabis legal in 23 U.S. states and medical marijuana pushing 40, marijuana remains federally illegal under the Controlled Substance Act. Pressure on the Biden administration to decriminalize weed mounts as primaries heat up. Meanwhile, lawmakers on both sides of the aisle are pushing for cannabis banking reform, which would give the booming weed industry access to banking services, which it sorely lacks.

The Secure and Fair Enforcement Banking Act (SAFE), initially proposed in 2013 and introduced several times again since then, would also protect cannabis businesses from having much cash on hand, leaving them vulnerable to robberies or worse. 

Cannabis Shares Plummet, Nearly Across The Board

Prior to Thursday’s speculation, Cronos shares had lost a quarter of their value year-to-date. 

For the first quarter, Cronos posted a net loss of $19.3 million, compared with a loss of $32.7 million a year ago. Net revenue declined 20% to $20.1 million. Cronos has total cash, including short-term investments, of about $836.43 million, according to its first-quarter report.

Altria, which currently holds a 41% stake in Cronos, invested $1.8 billion in the company in 2019.

CRON Price Action: Cronos shares lost 4.08% in Thursday's session, closing at $1.88.