NextGen hits new highs on pot news

Luke Johnson

01 April 2014 16:39 GMT

US-based Next Generation Energy shares traded at new highs after the oil and gas nickel bag announced plans to buy a substantial stake in a company that operates a Los Angeles medical marijuana dispensary.

Next Generation, which owns buds of royalty interests in some natural gas wells on the fringes of the Marcellus shale, said on Monday that it had signed a letter of intent to buy a 20% interest in privately held Greens R US through its subsidiary NextGen Cannabis Consulting.

The news lit up the company's penny stock, nearly doubling in value early on Monday to nine cents a share after opening at five cents on the OTC Markets Exchange.

The stock traded at an intoxicating volume, with more than 42 million units swapped. Prior to Monday, the most active trading day for the nearly year-old stock was earlier this month when it was traded more than 8 million times in the wake of a previous pot-related announcement.

The dispensary transaction is expected to close by the end of April.

Chief executive Darryl Reed said the move was hardly a smoke screen, rather it was "part of our very sophisticated business plan" to enter the medical weed business - "a very exciting new sector".

Next Generation said on 7 March that it would redirect resources to focus its core business on the "fast growing medical marijuana industry", including the acquisition of retail and cultivation licenses throughout North America and the development of a national brand.

Medical marijuana is legal in 20 US states as well as Washington DC. Several others are considering following suit.

Colorado and Washington states last year legalised marijuana for recreational use. January sales in Colorado netted the state some $2 million in taxes, as more than $14 million worth of the drug was sold.

"As more states are legalising marijuana and there is significantly more discussion on the use of marijuana for medical purposes, we are convinced that now is the time to launch our very aggressive platform," Reed said earlier this month, adding that NextGen "isn't just another company entering the medical marijuana industry".

The company plans to manage "all aspects of the supply chain from seed to sale".

"We recognise the significant growth opportunities in the medical marijuana industry and are aggressively seeking to capitalise on these opportunities as the sector continues to evolve," Reed said.