Shares of LGC Capital Ltd. (TSXV:LG) have soared nearly fourfold following the Company’s entry into the cannabis business
SmallCapPower | January 15, 2018: LGC Capital Ltd. (TSXV:LG) announced recently that it has formally launched a new joint venture company called CLV Frontier Brands Pty Ltd (CLV) to enter cannabis and hemp-derived beverages markets, pursuant to the November 2017 binding letter of intent with Creso Pharma Limited (ASX:CPH) and Baltic Beer Company Ltd (UK). Each of the JV partners will hold one-third interest in CLV.
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CLV will develop and globally commercialize a portfolio of cannabis and hemp-derived alcoholic and non-alcoholic beverages containing various ingredients, seeds, extracts and terpenes from hemp and cannabis plants. The JV is currently developing an initial four-beer range and is on target to ship the first test batch in April/May 2018, with commercial sales expected by June/July 2018. For the global sales distribution, CLV has already identified partners in Europe, Far East, Central and Latin America, Canada, Africa, Australia and New Zealand. CLV plans to expand its portfolio into other alcoholic and non-alcoholic beverages over time. Additionally, CLV plans to establish a pilot R&D brewing facility in Tallinn, Estonia, dedicated to working on innovative recipes and developing proprietary know-how and IP.
LGC Capital CEO John McMullen said, “LGC immediately recognized the potential of this joint venture, while working with Creso Pharma and Baltic Beer Company, to plan the development and commercialization of our new innovative products. We are very confident that the beverages that are developed through this joint venture will be well received. The worldwide commercialization plan is aggressive, and I fully expect it will have a positive impact on the revenue stream for all parties involved.”
An investment company with interests in diversified businesses including oil, travel, and coffee, LGC Capital is actively seeking to expand into the global medical cannabis and hemp sector. Earlier this month (Jan 8th), LGC Capital made its first investment into the Canadian cannabis sector by entering into a four-year $4.0 million secured convertible loan agreement with AAA Trichomes. While the Canadian investment will enable the Company to capture domestic medical cannabis market, the new JV will help it to enter the rapidly-growing cannabis and hemp-derived beverage market globally. The recent (Nov 2017) edits that will legalize Cannabinoid-Infused Beverages along with recreational cannabis in July 2018, would also open up domestic market for the new JV. As the global alcohol and non-alcoholic beverages market moves towards cannabinoid-infused varieties, there is tremendous pressure and threat to the traditional beverage companies. To counter this threat, alcohol giant Constellation Brands Inc. bought a 9.9% equity stake of Canopy Growth (TSX:WEED) for $245 million in October 2017.
LGC Capital stock has gained nearly 4.0x over the past three months and currently trades at a market cap of $221 million, driven primarily by news announcements related to the Company’s entry into the cannabis business. LGC Capital stock could make further gains with the overall cannabis sector that continues to witness tremendous investor interest going into the recreational market legalization in Canada in the summer of 2018.
Disclosure: Neither the author nor his/her family own shares in any of the companies mentioned above.
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