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Why Auscann Group Holdings Ltd shares rocketed 27% higher

Rocket soaring through sky

The Auscann Group Holdings Ltd (ASX: AC8) share price had a day to remember on Tuesday.

At one stage the medicinal cannabis company’s shares were up as much as 27% before finishing the day 23.5% higher at 52.5 cents.

What happened?

Investors have been fighting to get hold of shares in the pot stock after Bloomberg reported that global alcoholic beverage giant Constellation Brands has agreed to pay approximately C$245 million for a 9.9% stake in Canada-based cannabis company Canopy Growth Corp.

Canopy Growth Corp is a major shareholder in AusCann and provides the company with royalty-free shared expertise.

Constellation Brands is not the only company with an eye on the cannabis industry.

According to Bloomberg, fellow alcoholic beverage company Molson Coors has stated that it continues to monitor marijuana developments in the U.S. and Canada.

It appears as though these companies see the cannabis industry as having the potential to be complementary to their existing businesses. Especially with the loosening of laws and the upcoming legalisation of recreational use in Canada.

Time will tell how this impacts Australian pot stocks such as AusCann and Cann Group Ltd (ASX: CAN).

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Returns as of 6th October 2020

Motley Fool contributor Motley Fool Staff 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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