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Why the Auscann Group Holdings Ltd share price surged higher today

The Auscann Group Holdings Ltd (ASX: AC8) share price has jumped higher this morning after emerging from its trading halt.

At the time of writing the medicinal cannabis company’s shares are up 4% to 60.5 cents.

Why did the pot stock jump?

AusCann placed its shares into a trading halt on Wednesday in order to raise capital through institutional investors.

According to the release the company raised $12 million through the issue of 24 million shares at 50 cents per share. This was a 13.8% discount to the last close price.

Cornerstone investments were made by AusCann’s strategic partner Canopy Growth Corporation and also leading Australian fund manager Tribeca.

Management intends to use the funds to develop its cultivation and manufacturing activities, as well as accelerating its medical outreach programme.

That programme is key, in my opinion to its future growth prospects, as convincing doctors to prescribe medicinal cannabis products ahead of the current standard of care will not be easy.

But this programme has worked well for Canopy Growth Corporation in Canada. So by leveraging its partner’s expertise, I feel there is a good chance AusCann could succeed should clinical trials provide strong results.

Should you invest?

Investors certainly do have a lot of choice when it comes to pot stocks. As well as AusCann, there are other promising companies such as Creso Pharma Ltd (ASX: CPH), Zelda Therapeutics Ltd (ASX: ZLD), and Cann Group Ltd (ASX: CAN).

At this point in time I think AusCann is arguably the best in the industry. But having said that, it remains a touch too soon for an investment for me.

So I’ll continue to watch from the sidelines for the time being and focus on other areas of the market.

In the meantime an investment in one of these explosive growth shares could be a much better option in my opinion.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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