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.