Debra BorchardtChicago-based Green Thumb Industries (GTI) (CSE: GTII) (OTCQX: GTBIF) lit the rumor mill on fire after it was revealed that the successful MSO might be exploring a dive into beverages.
According to The Wall Street Journal, the CEO of the multistate cannabis operator, Ben Kovler, sent a letter to The Boston Beer Company’s (NYSE: SAMS) founder and Chairman Jim Koch on Sunday, expressing interest in a “potential combination.”
Boston Beer is the maker of brands such as Sam Adams, Angry Orchard, and Truly.
Smoking letter
GTI issued a response to the market rumors Tuesday, saying it didn’t comment on rumors but also did not deny the news.
In The Wall Street Journal report, the news outlet wrote that it reviewed the letter where Kovler outlined a combination’s potential benefits. One benefit is that it would allow GTI to trade on a major U.S. exchange. GTI currently trades in the Over-the-Counter Marketplace and the Canadian Securities Exchange.
The letter also supposedly said the “beefed-up entity” would allow it to innovate in established cannabis formats and pursue acquisitions and mergers.
Boston Beer was the subject of another market rumor last week, when reports began circulating that Japan’s Suntory Holdings might be buying the alcohol company. Suntory denied those rumors.
Boston Beer also shot down the rumor, telling Barrons, “There is no fact that we are in any negotiations with Suntory. We are fully focused on our business as an independent company and our return to growth.”
The Journal wrote that Kovler said he could make a superior offer to Boston Beer and added that young people are drinking less alcohol.
Kovler is quoted in the letter saying, “As we look at a future where this consumer trend continues to gain traction, I believe we have to be proactive versus reactive.”
Trading boost
Some traders might have gotten wind of the news on Monday as the GTI stock jumped after 2 p.m. ET from selling at roughly $11.30 to $11.93 and then closed at $11.68. The stock popped again today on the rumor as its high reached $11.99.
Boston Beer stock dipped on the news of a potential deal with GTI. The company already has a presence in the cannabis industry with its THC-infused brand TeaPot.
Not the first
GTI wouldn’t be the first cannabis company to consider teaming up with an alcohol brand. Tilray’s (NASDAQ: TLRY) acquisition of craft beer brands such as Belgian-style beer brand Shock Top helped the company deliver solid revenues. The company also acquired Truss, a THC-infused drink line from Molson Coors Canada, which significantly contributed to savings and operational efficiencies.
However, Constellation Brands (NYSE: STZ) has taken a financial hit on its deal with Canopy Growth (NASDAQ: CGC). More recently, Constellation Brands has taken steps to distance itself from the $4 billion investment into cannabis. The company converted its common shares into exchangeable nonvoting shares and its three board members resigned.
