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Is ASX cannabis company Cann Group a buy?

The Cann Group Ltd (ASX: CAN) share price is on course to finish the week with a day in the red despite the release of a positive announcement today.

At the time of writing the medicinal cannabis company’s shares are down 1.5% to $2.38.

What did Cann Group announce?

This morning Cann Group announced that it has completed a strategic investment in Pure Cann NZ Limited.

Pure Cann NZ is poised to establish a leading position in the New Zealand medicinal cannabis industry ahead of regulatory changes that will permit the cultivation and broader supply of medicinal cannabis in New Zealand.

According to the release, the New Zealand Government is expected to introduce new regulations, licensing requirements, and quality standards governing medicinal cannabis usage by the end of this calendar year.

Cann Group has made a strategic investment of NZ$6 million in Pure Cann, securing a 20% ownership stake. This investment is to be made over stages with the initial 10% to be completed on or before August 30 2019 and a further 10% upon the earlier of the new NZ regulations coming into force and Pure Cann’s board approving the construction of its commercial cultivation facility.

Cann Group also has an option to increase its position to 30%.

Cann Group CEO Peter Crock said: “The strategic investment will allow the two companies to work collaboratively to capitalise on the growing domestic demand for medicinal cannabis in New Zealand and explore potential export opportunities as Pure Cann develops its own proposed cultivation and production facilities.”

He added: “We have been extremely impressed with Pure Cann’s business plan and the calibre and expertise of the people associated with the company.“

Pure Cann’s business plan includes the development of a range of organic medicinal cannabis products to serve patient needs in New Zealand and potential export markets.

Should you invest?

Given the small size of the New Zealand market, I wouldn’t expect this to be a game-changer for the company and would suggest investors continue to hold fire on an investment.

Until medicinal cannabis companies such as Cann Group, AusCann Group Holdings Ltd (ASX: AC8), and Creso Pharma Ltd (ASX: CPH) are generating meaningful revenue, I would stay clear of their shares.

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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.