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Why Altria Stock Price Was Unmoved on Chronos Stake Reduction

Simon Mugo trader
Updated 20 Dec 2022

The Altria Group Inc (NYSE: MO) stock price barely moved after revealing that it had “irrevocably abandoned” its option to acquire a much larger stake in Chronos as set out in the deal that saw it acquire a 45% stake in the cannabis company for $1.8 billion.

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At the time of closing the deal on March 8, 2019, Altria agreed to purchase a further 10% stake in Chronos for $1 billion by exercising its stock warrants at C$13.18 per share. However, Chronos shares were trading at $2.72 at the end of Monday’s trading session.

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Altria would have incurred a massive loss if it had exercised its warrants and acquired the additional stake in Chronos at C$13.18 per share. However, Altria still incurred a $483 million capital loss, which will reflect its full-year results. 

The cannabis industry has proven to be very different to the tobacco and liquor businesses operated by Altria. The company owns the Phillip Morris tobacco brand and other alcohol businesses, with significant pricing power.

However, the cannabis industry is highly fragmented and comprises millions of small players, which denies any single business the chance to become a monopoly and wield significant pricing power. 

The cannabis industry has shuttered the dreams of investors who bought cannabis stocks when trading at significant premiums. Many equated the industry to the tobacco and alcohol industries, but this has proven incorrect over time. 

Altria confirmed that it still holds a 41% stake in Chronos and would review its business and prospects to determine if it and its subsidiaries should acquire additional shares. 

Despite its botched investment in Chronos, Altria stock is extremely popular among income investors primarily due to its 7.9% dividend yield and mid-single-digit EPs growth. The company continues growing despite the bad reputation associated with cigarette smoking.

Altria has diversified its business to remain competitive and adopts modern trends as the number of cigarette smokers falls globally. However, other products, such as vapes, have become popular, and the firm is focused on growing these product lines. 

*This is not investment advice. 

The Altria stock price.

The Altria stock price was trading up 0.26% at $46.50, rising from Monday’s closing price of $46.38.


YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading