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As of 10.30am this morning, the biggest gaining ASX stock with news was pot stock ECS Botanics (ASX:ECS), all thanks to a $24m offtake deal.
Is this pot stock coming alive again?
The fortune of pot stocks rise and fall with changes in global regulations that investors anticipate will lead to the market being unlocked. They rise when changes are announced but then fall when investors realise that either it isn’t unlocked or even when it is, the company they thought would be in for a windfall is just a little fish in a big pond.
So it has been for ECS Botanics, a company that claims to be Australia’s largest B2B medicinal cannabis cultivator & manufacturer. But, today’s news was nothing to be snuffed at.
ECS told its shareholders it secured a five year offtake deal with MediCann Health. This binding deal will see ECS supply MediCann with $24m of medicinal cannabis dried flower, starting in January 2024. This builds on an existing deals it has with MediCann that is worth $11.9m.
Is this pot stock for real?
ECS is certainly better poised than a company that has a non-binding MoU. But investors should remember that the medicinal cannabis industry is still relatively nascent and highly regulated, both in Australia and globally.
There is potential for long-term investors to make money if they back the right company, are prepared to deal with short-term volatility and wait for a few years. But not for short-term day traders trying to profit off the next regulatory change.
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