The Marijuana Industry Is So Bad Right Now They Can’t Even Bum a Light Off Big Tobacco
They were supposed to fear us.
It was the end of their lung-cancer reign.
They had better “get on board or get runover”, was the boisterous talk 5 years ago.
Now, Altria, one of the world’s largest tobacco companies is cutting their losses at close to half a billion dollars and walking away from their Cronos investment, and cannabis in general. Walking away may be a stretch since they will keep a 45% stake in the cannabis company, but according to their press release, they will not be exercising anymore warrants to buy stocks, hence, not moving forward with a 52% share of the company. As their website says:
Altria Group, Inc (NYSE:MO) today announced that its wholly owned subsidiary, Altria Summit LLC, has notified Cronos Group Inc. (Cronos) of its irrevocable abandonment of (i) its warrant to purchase additional common shares of Cronos (the Warrant) and (ii) all rights that it may have held in the Warrant or any common shares underlying the Warrant for no consideration…
As a result of the Warrant abandonment, Altria expects to claim a capital loss of $483 million on its U.S federal consolidated income tax return for 2022. Altria continues to own 156,573,537 common shares of Cronos.
While this is not the final bell in the “cannabis vs. tobacco war”, it is certainly disheartening to see your opponent walk away with a smirk and say, “Yeah, you just aren’t that interesting as a business model, we will cut our losses at $500 million and just walk away, thank you very much”.
Even cigarette companies are protected by federal laws, licensing, and international distribution channels, something the cannabis industry sorely needs to compete on the global scale.
Arguably the most disturbing part of this action is Altria does not see the upside or the “future benefits” of owning more shares or getting their money back. With hundreds of analysts crunching numbers and looking at how to salvage this cannabis investment for the future, they came to conclusion, “Nope, cut bait, walk away is our best bet, stop the bleeding where it is at right now”. That means a company said it is better to lose $500 million now then wait for upside in the future, hence, they don’t see much chance of a profit on this investment in the future.
Big Tobacco is not worried about legal cannabis right now, sorry.