Althea Share Price Up on German Deal: Are Cannabis Stocks Going to Consolidate?
At time of writing, the share price of Althea Group Holdings Ltd [ASX:AGH] is up 2.3%, trading at 44.5 cents.
The Althea share price appears to have found support around a price that dates back to April:
It will be interesting to see if the AGH share price can break past the downtrend line at around 50 cents. We examine the details of their latest deal in Germany and discuss the possibility that global cannabis stocks may start to consolidate after the end of an initial phase of hype.
Althea share price gets small boost from German deal
With the news released prior to the ASX opening, the AGH share price got up as high as 46.5 cents.
It is now possible that the Althea shares have found a bottom.
Here are the details of Althea’s German deal:
- Memorandum of Understanding with nimbus health GmbH for sale and distribution of Althea products
- German version of Althea Concierge to be set up
- 60,000 patients (of which nimbus serves around 25%) in Germany which is set to rise to one million by 2024
Germany is expected to become a major force in Europe’s tilt towards medicinal cannabis.
CEO Josh Fegan said of the country, ‘The regulatory and social acceptance of medicinal cannabis use in Germany is favourable and we are expecting immediate patient growth in what is one of Europe’s largest and most affluent countries.’
The medicinal cannabis market there is set to be worth over $1 billion by 2022, according to the announcement.
So despite the recent news that major shareholder Aphria would be 15.7% of its shares at a 25% discount, Althea continues to progress its strategy.
Money flowing out of cannabis stocks, consolidation could occur
We recently discussed the fact that cannabis ETF, ETFMG Alternative Harvest ETF [MJ], is in a sustained downtrend as evidence that money is drying up for the sector.
This could mean that after an initial hype phase, larger cannabis companies will start looking to acquire smaller, more vulnerable companies.
Compared to Canadian and US companies then, Althea is a relative minnow.
With strong patient growth and a foothold in Europe, at some point down the track it could become a takeover target.
For Money Morning