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A Giant Step for OrganiGram Holdings Inc (OTCMKTS:OGRMF)?

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OrganiGram Holdings Inc (OTCMKTS:OGRMF) has been one of the more impressive growth stories, moving from a $200-300M name to a $700M market cap stock over the past year as the company moves from a small, local play way down the potential capacity list to a diversified, global cannabis powerhouse with a claim to a place in the Big Five in terms of production clout.

To keep this momentum going, the company just announced that it has, through its wholly-owned subsidiary 10870277 Canada Inc., executed an investment agreement dated as of October 10, 2018 with alpha-cannabis Pharma GmbH pursuant to which the Purchaser will acquire 8,333 common shares of ACG, representing a 25% stake in the capital of ACG, for aggregate proceeds of €1,625,000. In other words, OGRMF has started to follow in the footsteps of Aurora and Canopy in putting cash to work as a strategic investor in global cannabis, buying up a quarter control over the German producer.

OrganiGram Holdings Inc (OTCMKTS:OGRMF) is a TSX Venture Exchange listed company whose wholly owned subsidiary, OrganiGram Inc., is a licensed producer of medical marijuana in Canada.

OrganiGram is focused on producing the highest quality, condition-specific medical marijuana for patients in Canada. OGRMF’s facility is located in Moncton, New Brunswick and the Company is regulated by the Access to Cannabis for Medical Purposes Regulations.

The company’s own portrayal of its market positioning runs as follows: “From the day we started back in 2013, it’s been about making lives better – for our clients, our people, and our community. We’re based in Moncton, New Brunswick, the heart of the Maritimes, but at OrganiGram Holdings we’re committed to improving the quality of life for Canadians across the country. For us, this means working with health-care providers and industry organizations, supporting research and education, and providing a safe, effective product.”

“To be effective in that last goal, we made a decision to produce organic cannabis. Growing certified organic medical cannabis isn’t easy, in fact, most licensed producers won’t take this on. It means more care, more testing, more rules… but in the end, it means a product that we feel delivers on our goals in the best way. And improving the quality of life for Canadians is not just about getting safe, quality product to them effectively. It’s about creating jobs, being good neighbors and contributing to our community.”

OrganiGram Holdings Inc (OTCMKTS:OGRMF) generated sales of $3.7M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 1% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($155.8M against $9.1M).

 

High ROI Means “I” is Better than Cash

As noted above, OGRMF just announced that it has, through its wholly-owned subsidiary 10870277 Canada Inc., executed an investment agreement dated as of October 10, 2018 with alpha-cannabis Pharma GmbH pursuant to which the Purchaser will acquire 8,333 common shares of ACG, representing a 25% stake in the capital of ACG, for aggregate proceeds of €1,625,000

“As we continue to build the framework of our international medical business, finding the right partners in the right markets has been a priority for our company,” stated Greg Engel, CEO at Organigram.

That announcement helped to alleviate some early weakness on Wednesday that we would attribute to an inescapable “sell the news” reaction as Canada makes recreational legalization official.

“This relationship is a perfect example of two companies coming together towards a common goal, and we’re very excited to build our business in Germany through our partners at alpha-cannabis Pharma GmbH”

The move to take this big stake in the German cannabis play is a great sign and suggests Organigram has a good idea of what to do with its $155M in cash.

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