Tilray and Supreme Cannabis
On September 26, Supreme Cannabis (SPRWF) announced that it signed a supply agreement to supply about 12 million Canadian dollars worth of dried cannabis to Tilray (TLRY). The company added that this is a guaranteed supply agreement to last for a 12-month term.
Following the announcement, Supreme Cannabis stock rose 2.5% on September 26, while the Horizons Marijuana Life Sciences ETF (HMMJ) fell 1.5%. On the other hand, Tilray gained about 6% during the day to end at $114.
This supply agreement shows how companies are coping with the anticipated strong demand for cannabis to begin on October 17 when recreational cannabis is slated to become legal in Canada.
Companies such as Canopy Growth (CGC) (WEED) and Aurora Cannabis (ACB) (ACBFF) have acquired companies to bring their production capacities in-house to meet the expected demand. These acquisitions are also expected to help these companies lower the cost as a result of increased operational efficiencies and a positive impact on the margins of these companies.
Supreme Cannabis stated that the dried cannabis will be supplied to Tilray through its subsidiary 7ACRES, which has primarily focused on medical cannabis.
Next, we will discuss a price target update for Aurora Cannabis.