Hydroponics Company Ltd shares are smoking the market today

The Hydroponics Company Ltd (ASX: THC) share price has returned to trade this morning with a bang.

In late morning trade the diversified cannabis company’s shares are up 15% to 70 cents.

Why are Hydroponics Company’s shares smoking the market today?

The Hydroponics Company’s shares had been suspended for almost a week as it sought to complete a material acquisition.

This morning the company revealed that it has acquired the Queensland-based production facilities of international pharmaceutical company, LEO Pharma, and the freehold land and buildings housing the facilities.

The facilities are one of the largest pharmaceutical botanicals extraction and refinement plants in the Southern Hemisphere. According to the release, the total consideration paid for the land and facility is $2,550,000.

The market appears to have responded positively to the news due to the company’s belief that it provides it with game changing manufacturing capabilities which position it as a leader in the Australian medicinal cannabis industry.

Should you invest?

While it is still very early days for the medicinal cannabis industry, I believe there is a huge opportunity for it to replace opiates in the chronic pain market. This market alone is worth billions in Australia each year.

But whether Hydroponics Company will ever be able to win a decent share of that future market is an unknown. And despite today’s announcement I still feel it is still a long way behind market leaders such as Auscann Group Holdings Ltd (ASX: AC8) and Cann Group Ltd (ASX: CAN).

In light of this, as I said earlier this week, I think investors looking to gain exposure to the industry ought to consider AusCann ahead of its peers. Though it is worth remembering that even as a market leader it is still a reasonably high risk investment.

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Motley Fool contributor James Mickleboro has no position in any of the 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 Scott Phillips.

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