This Marijuana IPO Rises On High Sales Growth

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Recent marijuana IPO Cronos Group rallied after revealing big sales growth Monday.

Cronos Group reported Q4 sales of $1.6 million, up 274% year over year. Sales for the full year rocketed 636% to $4.1 million. The Toronto-based company did not release any earnings figures. There were no analyst estimates.

Cronos stock climbed 1.6% to 6.91 on the stock market today.

Constellation Brands and GW Pharmaceuticals, which have been trying to tap the rapidly growing but still-precarious marijuana industry, fell 0.5%  and 2.1%, respectively. Scotts Miracle-Grow, whose hydroponics business will get a boost from legalized marijuana, fell 0.9%.

Cronos Group CEO Mike Gorenstein was bullish about his company’s prospects going forward following the big bump in earnings.

“We are building Cronos Group with a focus on the long-term and 2017 set the foundation for the explosive growth we have already started realizing in 2018,” Gorenstein said in a press release. “We are extremely proud of all that our team has accomplished and look forward to a year of rapid increases in sales, commencing distribution in new markets, further developing disruptive intellectual property and launching new iconic brands.”

The Nasdaq-listed company, which started trading Feb. 27, said it had completed significant improvements to three pre-existing indoor production facilities to increase production capacity and efficiency. It also stated it had launched a strategic joint venture in Israel to produce and distribute medical cannabis.

The firm also said it had begun distributing medicinal cannabis through European pharmaceutical manufacturer and distributor Pohl-Boskamp. Under the five-year agreement, Cronos will continue to distribute its Peace Naturals branded cannabis products through Pohl-Boskamp’s network of pharmacies in Germany.

Uncertainty High

The uncertainty over the future of legal marijuana is high, as back in January the Justice Department decided to scrap an Obama-era measure that encourages states to legalize marijuana.

It said it was moving to rescind 2013’s so-called Cole Memo, which essentially said the federal government would take a lighter enforcement approach to states that legalized marijuana, provided they kept the market under control. However, other legislation limits the DOJ’s ability to aggressively enforce federal marijuana laws.

The move came just days after recreational marijuana became legal in California, making it the biggest potential market for cannabis.

Recreational marijuana is also legal in Alaska, Colorado, Massachusetts, Nevada, Oregon, Vermont and Washington.

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