Cannabis investors have had a rough go of it this year. Indeed, any company that’s even affiliated with this sector appears to be seeing bearish momentum. For GrowGeneration (NASDAQ:GRWG) and GRWG stock, this is certainly the case today.
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Currently, GRWG stock is down more than 12% at the time of writing. This move accelerates a rather bearish trajectory for GrowGeneration. The company’s stock price is now 70% off its all-time high, which it set following the recent win of President Joe Biden.
Indeed, with a Democrat House and Senate, expectations began to run high that we’d see something materialize on federal cannabis legalization. In the absence of a key catalyst in this regard, investors appear to be losing interest in cannabis stocks right now.
However, as if GrowGeneration needed another negative catalyst, today investors are pricing in additional negative news. Let’s dive into what’s going on with this hydroponics supply company today.
GRWG Stock Down on Termination of Acquisition
Generally, when a company announces they’re terminating an acquisition, for whatever reason, it’s a good thing for shareholders. That’s because typically acquisitions come with premia that shareholders have to pay. In the case of GrowGeneration, the opposite is happening today.
Shares of GRWG stock are selling off on heavy volume following the company’s announced move to cancel its asset purchase agreement from HGS Hydro.
The cancellation of this acquisition is expected to shave $20 million off the company’s revenue run rate for this fiscal year.
However, GrowGeneration had some other news that hasn’t seemed to placate investors. In this same announcement, the company unveiled plans to acquire All Seasons Gardening. This indoor-outdoor garden-supplies company appears to fit better with GrowGeneration’s business model. The acquisition also appears to be smaller in scale, an intriguing move for GrowGeneration investors.
Indeed, it is unclear why the market views this news negatively. GrowGeneration appears to be focusing on growing in its core niche. However, investors in a wide range of cannabis-related stocks are down today. Therefore, this news appears to simply be amplifying negative momentum in this sector right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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