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Why this cannabis company’s shares smoked the market on Wednesday

James Mickleboro
Cannabis shares

The Cann Group Ltd (ASX: CAN) share price was amongst the best performers on the All Ordinaries on Wednesday.

The cannabis company’s shares climbed over 4% to $1.46. This stretched its year to date gain to an incredible 132%.

Why did the Cann Group share price smoke the market?

Investors were buying Cann Group’s shares on Wednesday following the release of an update.

This update outlined the company’s strategic reset due to the current demand-supply imbalance in the global medicinal cannabis market.

According to the release, Cann has developed an updated business plan that focuses on initially meeting Australian domestic demand while export markets continue to be developed. It will also reduce its operating expenses while the company transitions to near-term profitability and positive cash flows.

Cann will continue to develop and commercialise value-added GMP grade finished products to meet Australian domestic demand.

This includes the utilisation of its wholesale and distribution agreement with Symbion Health to deliver finished product through pharmacies and hospitals across Australia.

Cann will also continue to develop export pathways in addition to its existing pathway under the Aurora offtake agreement. Cann product will be manufactured to GMP standards, meeting European and other overseas market requirements.

Overall, the company believes this strategic reset provides a more certain and lower risk pathway to near-term profitability, positive cash flows, and a platform to expand the business as global demand continues to grow.

Mildura facility.

Cann also provided an update on the construction of its new medicinal cannabis production facility in Mildura.

It is pushing ahead with its plan to complete the construction of its new medicinal cannabis production facility in stages.

Cann plans to proceed with the first stage of the Mildura facility, which will include an annual capacity to produce 25,000 kgs of cannabis dry flower. This initial stage of the project will be commissioned in two phases.

Stage 1A will provide a capacity of 12,500 kgs per annum, with plant material expected to be in the facility by end of the fourth quarter of calendar year 2020. After which, the first harvest is being targeted for the first quarter of 2021.

The post Why this cannabis company’s shares smoked the market on Wednesday appeared first on Motley Fool Australia.

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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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020