The formation of a holding company located in the U.S. has investors flocking to this cannabis stock

WAN CHAI, Hong Kong - Dec. 5, 2022 - PRLog -- What caused this uprising? CGC said ahead of the opening bell that it will establish Canopy USA, a U.S.-based holding company, to execute the proposed acquisitions of the multi-state operator (MSO) Acreage Holdings, the Colorado-based edibles firm Wana, and the California-based cannabis extraction company Jetty. This move is said to hasten CGC's long-planned entry into the high-value cannabis market in the United States.

Since the government authorized recreational marijuana use among adults around four years ago, Canada has not been a particularly productive market for cannabis entrepreneurs. CGC revealed a startling 2.1 billion Canadian dollar financial loss in its 2023 fiscal first-quarter earnings earlier this year, underscoring this argument. As a result, CGC has been slowly liquidating its brick-and-mortar cannabis retail businesses in Canada while stepping up its efforts to enter the massive cannabis market in the United States.

To cut a long story short, the Canadian cannabis industry is just too tiny to support multiple huge, publicly traded producers. On the other hand, the cannabis industry in the United States is expected to exceed $50 billion in annual sales by 2026, which should be more than enough to support multiple cash-flow-positive cannabis enterprises in the second half of the decade. With this knowledge, it's hardly surprising that CGC is moving through with its U.S. growth ambitions.

Is CGC's stock a good purchase with this news? It's critical to note that this strategic decision will not suddenly transform CGC into a top-tier cannabis firm in the United States. Acreage is a lower-tier MSO in terms of yearly sales, and industry titans like Green Thumb Industries, Cresco Labs, and Trulieve Cannabis aren't going down without a fight. While this is generally good news, CGC still has a long way to go before it can be considered an industry leader.

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