Is this ASX cannabis stock a buy after acquisition news?

ASX cannabis stock Althea Group Holdings Ltd (ASX: AGH) has announced a capital raising. Is this a buying opportunity?

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The Althea Group Holdings Ltd (ASX: AGH) share price soared 15% to an all-time high of $1.44 last week on the back of two significant announcements – its June quarterly update and capital raising/acquisition news. The share price has since returned to earth, currently trading for $1.08 at the time of writing, but these announcements continue to demonstrate why Althea is one of the most formidable ASX growth stocks.

What did Althea announce last week?

The quarterly update highlighted the company's continued growth in patents, healthcare professional prescriptions and sales. The most notable figure was its unaudited sales for the June quarter at $411,663, which represents a 226% increase on the prior quarter. Althea's CEO Josh Fegan closed the quarterly update stating that the company is confident in replicating its Australian milestone of 1,000 patients "in the UK by the end of the year."

Althea also announced the exciting acquisition of Canadian extraction and contract manufacturing company Peak Processing Solutions. Peak is an early-stage business set up to leverage new Canadian cannabis regulations and to specialise in extraction, toll processing and contract manufacturing of cannabis-infused products. This acquisition places Althea within a key geographical jurisdiction, enables further manufacturing capabilities while introducing them to Peak's market-leading expertise.

To fund this acquisition, Althea raised $30 million at $1.00 per new share in a heavily oversubscribed capital raising. When the trading halt was lifted last week, the Althea share price soared 15% to an all time high of $1.44 but has since returned to earth. 

Is this a buying opportunity?

Capital raisings for growth are typically well received but also require time to stabilise around the raise price. There is an inherent risk in entering a stock immediately after it raises capital, and Althea's counterpart Elixinol Global Limited (ASX: EXL) is a key example of a stock that has struggled to make new highs after a $50 million raise to accelerate its United States expansion.

However, I believe Althea will not be subject to the same share price headwinds. Althea is making great strides in its entry into the UK market while further elevating its Australian success. With the new acquisition under belt, it enables greater production capabilities, taps into a new geographical position and leadership expertise. This further solidifies the company's explosive growth prospects and ability to address the potentially massive markets for cannabis products.

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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