Growing step-by-step, the Canadian cannabis industry still has room for production-oriented ‘outside the box thinkers’ and strategic investors
Célia Berlemont | May 24, 2017 | SmallCapPower: With a large focus on the financial strategies currently developed in the market, the cash crop sector of the industry, as well as distribution and genetics innovations were at the heart of the Cannabis Life Conference Toronto debate, with the mention of successful companies such as Aurora Cannabis Inc. (TSXV: ACB), Aphria Inc. (TSX: APH), and Canopy Growth Corporation (TSX: WEED).
On the occasion of the conference showcased in Toronto, May 13-14, a panel of industry leaders, stakeholders and game-changing speakers gathered to discuss the opportunities and worthy investments into the marijuana sector and its shifting legal regulatory framework.
Insisting on the significant high potential metrics for investors behind the business and patience required to grow in the long-term, Aaron Salz, CEO & Founder of Stoic Advisory Inc., along with Brady Fletcher, Managing Director of the TSX Venture Exchange, and Navdeep Dhaliwal, CFO of Supreme Pharmaceuticals Inc. (CSE:SL) assessed and welcomed a bright future ahead for the industry.
With patience described as the key aspect to ensure the best execution of long-term interests at their best terms, whether one chooses to go public or use venture capital and private equity funds, the overall success solely relies on the business plan and playbook selected. Faced to a slow saturation of the market, Navdeep Dhaliwal highlighted that investors want simplicity and efficiency. Although all experts agreed to warn start-up companies that an orphan position on the market never results in a good bet, the readiness for adaptation in a changing market and quick access to assets and liabilities depends mainly on the purpose and industry type.
The purchase of public shares for acquisitions or private assets in the emerging cultivation-focused industry remains a strategic decision that is to be fully focused on the business side for Brady Fletcher. “We are seeing the huge amount of appetite for both,” he argued, while Aaron Salz adds that “different types of capitals are as resourceful and numerous as the increasing number of new start-ups in the industry.”
Running the math to an updated state of affairs and an attractive streaming model for financing marijuana companies, this year results in a key milestone with an expected next round of capital raises. Successfully adopted in the mining sector, the loans from well-financed cannabis streaming companies to other growers currently benefit from the media attention. Yet, the duplication of the streaming model might not be the most optimal as mining streams and cannabis streams’ natures differ from depleting assets to non-depleting assets related to a new dynamic and other circumstantial considerations. While the lent money is being refunded with a share of the cannabis production, streaming companies expand profits with both the increase of their stock values and the income generated by the cannabis sale. In a constantly changing market, wherein technology will be no stranger to the increasing number of capital raises, cannabis streams are more than ever an alternative source of capital within an expanding financial environment.
Defined by Aaron Salz as “a steep learning curve to climb,” the expert analyst witnessed that investors are moving up fast and grow efficiently while the market is getting “ready for long-term growth.”
Characterized by the ability to innovate, be all over the map, quickly adapt to a changing market, diversify activities or even accentuate a strategic focus on one specific aspect of the industry, here are some of the most successful publicly-traded companies that might be worthy of consideration for further investments.
Canopy Growth (TSX: WEED)
With more than a $1 billion market cap, Canopy Growth Corporation climbs onto the highest step of the podium and ranks as the largest publicly-traded marijuana company in Canada.
In line with an ongoing expansion, the recent acquisitions by the Company in 2017 comprise the Canadian pioneer fully integrated medical cannabis producer, Mettrum Health in February 2017. A growth including the acquisition of the Bodystream Medical Marijuana Services clinic network and its 14 medical Ontario cannabis clinics paid with $1 million cash and 451,596 Mettrum shares issued to Bodystream shareholders.
In April 2017, the latest announcement from Canopy Growth introducing a Craft Grow program for a seed capital funding of $20 million, a new emphasis on genetics and thorough research regarding cultures infrastructure.
Aphria (TSX: APH)
The Canadian marijuana company empowered by a naturally growing safe production is having a busy year. With the legalizing progress of cannabis recreational use, in April 2017, Aphria secured to raise $100 million among which three quarters will directly go to an equity financing transaction.
Graduating from the TSX Venture Exchange to the TSX in February, the Company intends to operate a full crop rotation in the course of this month.
With a large investment project in the square footage of their greenhouse, the Company’s forecasts are to triple their annual growing capacity and production.
Aurora Cannabis (TSXV: ACB)
Aurora Cannabis managed to register nearly 8,000 active patients after only eight months of releasing its first products.
Completing the acquisition of Peloton Pharmaceuticals in April 2017, the Company became the first publicly-traded Canadian producer to enter the US OTCQX Best Market.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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