Arcadia Biosciences Inc.’s share price surged 61 percent while trading on the Nasdaq Thursday after the agricultural biotech firm announced plans to dive into the hemp industry.
The company’s core business area is producing food ingredients made from wheat and soybeans. The company is jumping into the cannabis space as “with an initial focus on the hemp market,” according to a news release published Thursday. “Now, the company will apply its expertise to the burgeoning cannabis industry,” the announcement stated.
Raj Ketkar, chief executive office at Arcadia Biosciences, said:
“We see enormous opportunity in – and demand for – improved plant quality, productivity, consistency, and resilience … With this new operating unit, Arcadia Specialty Genomics, we are uniquely qualified as a proven crop improvement company equipped to address the legacy challenges facing a plant that until recently was largely grown unlawfully.”
Hemp Legalization Boosts Pot Stocks
A legal change enabled the creation of the new business unit. The company cites the 2018 Farm Bill, also dubbed the Agricultural Improvement Act of 2018. US President Donald Trump signed the bill into law on December 20, 2018.
Through that bill, Congress and President Trump basically legalized hemp production on the federal level, even though cannabis remains a Class 1 drug in the country. (Other Schedule 1 drugs include heroin, MDMA/ecstasy, and peyote.)
The Farm Bill further legalized hemp’s cultivation, transportation, and commercial sales — stomping out a ban that extended back more than 75 years.
Arcadia Biosciences will keep its business operations confined to federal and state markets where the cannabis activities are legal.
Most of the percentage gain in the pot stock were recorded during pre-market trading. Arcadia’s stock was up 28 percent over the past three months leading up to Wednesday.
H.C. Wainwright analyst Ram Selvaraju, a fair price target for Arcadia is $20. The company has a one-year peak of $66.56 and a 52-week low of $2.65.
In the long-run, investment bank Cowen & Co. has said that the value of the legal weed market may reach $75 billion by the end of the 2020s. This year, KushCo Holdings (KSHB), Innovative Industrial Properties (IIPR), and Canopy Growth (CGC) are other top pot stocks poised for a strong year in 2019, investment analysts say.
Like with pumps in the crypto space, there is some risk that the top may blow off if Arcadia’s announcement does not pan out. But it’s encouraging to see private enterprises develop back-end agricultural products in the cannabis industry.