This is a copy of the July 29th edition of our weekly Newsletter, which we have been publishing since October, 2015.
Just four weeks ago, we reflected on the first half of the year and were optimistic about the second half, suggesting that we expect to see friendly capital markets open the door to more high-quality U.S cannabis operators going public, mainly through the Canadian Securities Exchange.
July has been a most exciting month, with many well-known cannabis companies that are scaling their multi-state operations quickly opting to go public in Canada. We reported several this week, and there have been others this month, like Trulieve in Florida and two of the larger Nevada operators. Leading hemp-based CBD provider Charlotte’s Web’s Canadian IPO has been well received, with the deal expected to price this week and begin trading the following week. We interviewed 4Front CEO Josh Rosen earlier this month, who discussed the company’s plans to list on the CSE after closing a $13.4 million capital raise. New York private equity fund Gotham Green Partners made a $15 million investment in Flow Kana as well, while Green Thumb Industries was able to raise C$80 million in a bought deal shortly after going public at a price that exceeded its pre-public equity raise by 42%.
The demand from investors has picked up since April, when the tone at the federal level moved from negative to somewhat positive. While the path through Canada is not new, we think that some of the successful early stories, like CannaRoyalty, iAnthus and MPX Bioceutical, all of which have been trading in excess of a year with large gains subsequently, have paved the way for investors in the U.S. to be more confident with the structure of U.S. operators listing on the CSE while also supporting OTC listings. This confidence helped the debuts of both GTI and MedMen, which bounced back from initial weakness to post a new high. Many U.S. investors missed out on the impressive gains in Canada and see this as an opportunity to get in at an early stage in an even larger market.
One reason to invest in the U.S multi-state operators is their ability to consolidate a highly-fragmented market. In Canada, we continue to see consolidation, but, for the most part, the buyer is a relatively new company buying a private or perhaps public licensed producer that is also relatively new. In many cases, the acquisition targets haven’t been producing substantial revenue. In contrast, the multi-state operators in the U.S. have the ability to develop new licenses as states open or to acquire operators that are relatively advanced, with market share, revenue and even positive EBITDA. SLANG, for example, is acquiring one of the largest companies in the U.S. in terms of revenue, Organa Brands (formerly O.penVAPE), a story that wasn’t widely reported but is one of the most exciting M&A deals in the U.S. cannabis industry to date.
While we are always cautious that the optimism about the federal government not interfering with the industry could be unwarranted, we are encouraged by the sea-change in sentiment over the past few years and advise our readers to buckle up! Get ready for more higher quality companies listing in Canada over the balance of the year.
MPX Bioceutical will be reporting its Fiscal 2018 results on Monday and hosting a conference call on Tuesday. The company is expected to report Q4 sales of C$6.9 million, an increase of 54% from Q3. To learn more about MPX, visit the company’s Investor Dashboard that we maintain on its behalf, click the blue Follow Company 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:
- 10-State Cannabis Operator PalliaTech Plans Public Listing in Canada
- Acreage Holdings Raises $119 Million Ahead Of Fall CSE Listing
- Aphria Amends Liberty Divestment Agreement and Invests in Cannabis Retailer
- Aurora Cannabis and MedReleaf Complete Merger
- Colorado Cannabis Company Dixie Brands to Go Public in Canada
- CV Sciences Triples CBD Sales in Q2 to $12 .3 Million
- Emblem to Acquire Ontario Cannabis Greenhouse Grower for $76 Million in Cash and Stock
- Growth Slows at Namaste Technologies in Q3 as Gross Margins Decline from Q2
- LivWell Enters Canada As ACMPR Applicant Invests $20 Million in Denver Cannabis Branding Company GCH Inc.
- Exclusive: MedReleaf Co-Founder Targets Canadian Market with New Licensed Producer
- Exclusive: Meet the Leading Public and Private Cannabis Companies at Benzinga’s Toronto Conference
- SLANG Cross-Border Cannabis Conglomeration Moves Closer to Trading Publicly
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Alan & Joel