Although it is trading flat now, the MMJ Group Holdings Ltd (ASX: MMJ) share price was up almost 2% earlier today following the release of an announcement.
This left the cannabis company's shares trading within touching distance of their 52-week high.
What did MMJ announce?
This afternoon MMJ announced that it has agreed to invest C$2.5 million in privately-held Sequoya Cannabis Limited.
This investment consists of a C$2.5m convertible note which may be converted into approximately 34% of Sequoya's issued capital within two years.
Sequoya is a Poland-based cannabis extraction company which is focused on becoming a significant GMP-certified hemp cannabidiol supplier. It also has longer term plans to expand into the legal medical marijuana market across Europe.
According to the release, cannabidiol production from hemp is legal across Europe with no cross-border tariffs within the European Union. Additionally, no specific permits are required for producing hemp-derived cannabidiol in Poland.
Management appears confident that the investment will provide an excellent return on investment for a number of reasons.
It explained: "Sequoya is focusing on extraction, which is the highest value opportunity, within the cannabis ecosystem and it is building a large-scale production plant in a low-cost jurisdiction which has easy no-tariff access to high value markets (eg Germany and Northern Europe)."
It also believes that the company's ability to produce GMP certified product at a lower cost in Europe will be a strategic advantage.
And finally, Poland provides access to world class technicians and engineers at a substantially lower cost than available elsewhere. Some of which are already working with the company.
MMJ's chairman, Mr Peter Wall, appeared to be very pleased with the investment.
He said: "This is another example of MMJ's strong market and financial discipline identifying opportunities and bottlenecks in the cannabis value-chain in markets and acting quickly. "The investment demonstrates MMJ's capacity to secure investments in private cannabis businesses which are not generally available to Australian retail and institutional investors."
Elsewhere in the industry today, the Althea Group Holdings Ltd (ASX: AGH) share price remains in its trading halt whilst it prepares a capital raising for an acquisition and the Auscann Group Holdings Ltd (ASX: AC8) share price is trading flat.
