Why is the Cronos (ASX:CAU) share price soaring 45% today?

We check the latest on the ASX medical cannabis company.

| More on:
a medical person in white coat, gloves and protective eyewear uses tools and a test tube to put cannabis buds into the tube for research purposes.

Image source: Getty Images

The Cronos Australia Ltd (ASX: CAU) share price is up in orbit today, leaping 45% at one stage.

At the time of writing, the medical cannabis company’s shares had settled at 30.5 cents apiece, up 32.61%, after peaking at 33.5 cents in early afternoon trade.

Cronos shares have spiked over the past few days, leaping from just 20 cents on 30 December.

As well, Cronos shares are trading at 534% of their 4-week average volume today as investors pile into the company to close the session.

Why is the Cronos share price charging higher today?

Before today, the last we heard from the company was on 16 December. Back then, the company announced it had completed its merger with CDA Health Pty Ltd after all conditions were satisfied.

As a result, Cronos Australia now owns CDA Health and the former shareholders of CDA Health collectively own approximately 73.6% of the undiluted capital of Cronos Australia.

Although there’s been no remarkable information from Cronos these past few sessions, today the company was asked to respond to an ASX ‘please explain’ letter.

The ASX wanted Cronos to offer a reason for the change in its share price from 23 cents at yesterday’s close to its high of 33.5 cents today.

Cronos confirmed it is not aware of any information that has not been announced for the recent attention to its shares.

However, it acknowledged the CDA merger in its response. Cronos believes the merger will provide a material increase in both size and scale of its operations and a route to early profitability for the integrated group.

With this in mind, the company says the “the potential benefits to the Company from completing the Merger may have contributed to the recent increase in the Company’s share price and trading volumes”.

It’s not an unreasonable explanation. Equity and derivatives traders often ‘trade the news’, as they say in finance, resulting in short-term volatility that can compound with retail trading activity.

Regardless, the market appears to have viewed the company’s most recent advancements in a positive light.

Cronos share price snapshot

In the last 12 months, the Cronos share price has gained more than 145% and it is already up 52% in the first 2 sessions this year.

Over the past month, it has gained 44%. However, prior to its most recent gains, the company was trading fairly poorly, staying within a sideways channel until mid-September 2021.

Nonetheless, it seems Cronos is off to a good start in 2022.

Should you invest $1,000 in Cronos Australia right now?

Before you consider Cronos Australia, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Cronos Australia wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

The author has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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.

More on Share Gainers

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

These were the best performing ASX 200 shares last week

These ASX 200 shares were on fire last week...

Read more »

A female coal miner wearing a white hardhat and orange high-vis vest holds a lump of coal and smiles as the Whitehaven Coal share price rises today
Share Gainers

Why are ASX coal shares charging higher again today?

The global energy crisis has pushed coal prices to all-time highs.

Read more »

A man leaps from a stack of gold coins to the next, each one higher than the last.
Technology Shares

Why is the Block share price leaping 9% on Friday?

Block shares are storming ahead on a good day for the ASX tech sector.

Read more »

A man wearing glasses and a white t-shirt pumps his fists in the air looking excited and happy about the rising OBX share price
Share Gainers

Why BHP, Chalice Mining, IGO, and Life360 shares are storming higher

These ASX shares are ending the week strongly...

Read more »

A male ASX investor sits cross-legged with a laptop computer in his lap with a slightly crazed, happy, excited look on his face while next to him a graphic of a rocket shoots upwards with graphics of stars scattered around it
BNPL shares

The Zip share price is rocketing 6% today. Here’s why

The buy now, pay later company is enjoying a change of fortunes today, along with its fellow ASX tech shares

Read more »

Woman attached to rocket flies into air
Share Gainers

2 ASX All Ordinaries shares having a cracking day, despite the carnage

A biotech and a mining share are enjoying big gains on a tough day for the ASX.

Read more »

Share Gainers

3 ASX 200 shares defying today’s carnage to climb higher

Here's what's boosting these ASX 200 stocks upwards today.

Read more »

Share Gainers

Why Aristocrat, Arafura, Calix, and Strike Energy shares are charging higher

These ASX shares are avoiding the market selloff...

Read more »