This is a copy of the May 20th edition of our weekly Newsletter, which we have been publishing since October, 2015.
2018 is shaping up to be the year that trading publicly finally became widely appealing to U.S. cannabis companies. The changing of the political winds out of Washington, D.C. (Trump-Gardner) has resulted in a major revision to how companies and investors are thinking about risk. For those who have followed the space for a while, you are likely aware of some recent improvement in the quality of the companies as a new path opened in late 2016, with companies like CannaRoyalty, iAnthus Capital, Liberty Health Sciences and MPX Bioceuticals listing on the CSE and dual listing on the OTC. These companies have been able to raise substantial capital with the support of the Canadian investment bankers. Earlier this year, MedMen announced its intent to follow this model, and it expects to be trading publicly by the end of Q2 with a market cap that is projected to be in excess of $1.65 billion based on its last round of pre-public financing at that level. Multi-state operator Acreage Holdings, formerly High Street Capital, has also announced its intent to trade publicly.
A couple of companies used the timing of last week’s Canaccord conference to reveal their plans to go public. GTI, out of Chicago, a multi-state operator, announced its reverse-merger partner. We have heard from several sources that the projected market cap will be in excess of $700 million. Another deal came out of left field: TILT Holdings. This transaction will merge software company Baker Technologies, Oregon-based ancillary company Briteside Holdings and Boston-based Sea Hunter with aspiring Canadian licensed producer Sante Veritas, which recently began trading on the CSE. The conglomeration shared a forecast of $70 million in sales in 2018 and $200 million in 2019, huge numbers that caught the attention of Canadian regulators that forced a retraction.
Even CNBC is beginning to notice what’s going on. On Thursday’s episode of Fast Money, commentator Tim Seymour discussed the “massive premium valuation” in Canada and suggested that it “makes sense to buy cheap U.S. assets”, projecting that “more liquidity is coming to cannabis” and that there should be a “bid under the U.S. assets.” This was one of the most serious observations about the U.S. cannabis industry on CNBC or any major news network to date .
We agree with Seymour, and we expect to see many more private cannabis companies go public alone or merge with existing players. While the evolution we expect to see in federal policy will take some time to work itself through the political process, the downside of asset confiscation and/or imprisonment is looking more remote as each day passes.
Simplifying the cannabis category the way Apple and Google simplified technology
Canndescent has established itself as a category thought leader and as the leader in luxury cannabis marketing. Raising it’s $5.5M seed round in 2016, the company closed 2017 as the #1-selling brand of cannabis flower in California according to BDS Analytics. Canndescent operates two cultivation facilities in Desert Hot Springs, CA and has its third facility and an extraction lab under construction. In 2018, the company plans to septuple its production from 2500 pounds to over 18,000 pounds per annum.
With both volume and price, Canndescent aims to “premiumize” the cannabis category the way Starbucks shifted coffee up market in the 1980s. At present, the company is bringing its total invested capital to $30M. To learn, visit the company’s page and click the green Get More Info button in order to stay up to date with their progress.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
- Aurora Cannabis to Acquire MedReleaf for $3.2 Billion in All-Stock Deal
- Canadian Cannabis Producer TGOD Receives Organic Certification
- Cannabis Investor Merida Capital Surpasses $50 Million in Assets
- Canopy Growth to List on NYSE Before June
- Hiku Brands Investment Extends Retail Cannabis Efforts to Eastern Canada
- Exclusive: How Cannabis Software Startup Cova Has Won Hundreds of Dispensary Clients in its First Year
- iAnthus Capital Secures $50 Million Investment from Gotham Green Partners
- Major U.S. Alcohol Distributor Enters Canadian Cannabis Market with Aphria Deal
- Exclusive: Public Cannabis Company Revenue Tracker Provides Updates through May 15, 2018
- Supreme Appoints Colin Moore, Former President of Starbucks Canada, to Board of Directors
- TILT Holdings Projects $200 Million Cannabis Related Revenue in 2019 as Public Company
- U.S. Multi-State Cannabis Operator GTI to Go Public in Canada
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Alan & Joel