Why the Cann (ASX:CAN) share price has backflipped today

The Cann Group Ltd (ASX: CAN) share price has backflipped this morning after the company reported a strategic investment. Here’s why.

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The Cann Group Ltd (ASX: CAN) share price has backflipped this morning after the company reported a strategic investment. At market open, the Cann share price fell to an intraday low of 59.5 cents. However, following release of the announcement during morning trade, Cann shares then stormed more than 9% higher to 65 cents.

At the time of writing, the company’s shares have partially retreated to currently trade at 61.5 cents.

What’s driving the Cann share price?

The Cann share price jumped higher today following news of the company’s latest investment.

According to this morning’s release, Cann Group has invested CAD$1 million into a CAD$5 million capital raise from Iuvo Therapeutics Limited.

Based in Germany, Iuvo is a leading cannabinoid therapy importer and distributor, holding GMP certification licences. The company orders medicinal cannabis products and delivers them to over 20,000 pharmacies across Europe.

The investment will translate into Cann holding roughly 2% of Iuvo’s issued ordinary shares. Once the capital raise is complete, Iuvo will use the funds to expand its sales and marketing channels, and help build a new manufacturing and formulation facility in Malta.

In return for the strategic investment made, Cann will have exclusive rights to supply Iuvo with its external medicinal cannabis extracts. However, from 31 December 2021, the existing agreement will transfer over to preferred, non-exclusive supplier status.

Supply order

As a result of the partnership, Iuvo placed an initial order with Cann Group for 19,000 units of the company’s 30ml extract products. Shipment to Germany is due to be completed some time next month, pending regulatory clearances.

In addition, Cann stated that being compliant with the German monograph for cannabis extracts, it will be one of the first products of its type to market.

Management commentary

Cann Group CEO Mr Peter Crock highlighted the importance of the supply agreement by saying:

We believe this initial order represents the largest shipment of product produced in Australia for export markets and is a tangible sign of Iuvo’s commitment to servicing its growing customer base with safe, quality GMP standard medicinal cannabis.

Adding to Mr Crock’s comments, Iuvo managing director Mr Daniel Seidl said:

This strategic investment will enable Iuvo to expand its patient reach throughout Germany and Europe. Cann Group’s extracts are manufactured from Australian GMP Cannabis flower, providing regulatory, investment and supply security in a market with superior pharmaceutical standards.

Cann share price snapshot

The Cann share price is down 35% since this time last year, reflecting a disappointing result for long-term shareholders.

By late October last year, the company’s shares had fallen to a 52-week low of 29 cents. Since then, the Cann share price has only partially recovered. In contrast, last January, its shares were swapping hands for as much as $1.84 a piece.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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