MedReleaf (TSE:LEAF), with an estimated market capitalization of C$859 million, will likely trail only Canopy Growth Corporation (TSE:WEED)
SmallCapPower | June 6, 2017: When MedReleaf Corp. (TSX: LEAF) begins trading following its Initial Public Offering (IPO) on Wednesday, June 7, 2017, it is expected to become Canada’s second-largest publicly-traded marijuana company, with an estimated market capitalization of C$859 million, trailing only Canopy Growth Corporation (TSX: WEED), which is currently Canada’s biggest marijuana stock by market cap.
The initial public offering and secondary offering of MedReleaf will total 10.6 million shares priced at C$9.50 per share for gross proceeds of C$100.7 million, $80.7 million of which will come from the Company’s treasury and another C$20 million from current shareholders. MedReleaf, a Licensed Producer of cannabis-based pharmaceutical products based in Markham, Ontario, said it plans to use $40 million to build out its second facility in Bradford, Ontario, $15 million to expand its current facility in Markham, Ontario, which is presently able to produce 7,000 kilograms of cannabis each year, and $2 million to fund clinical research and product development.
For the nine months ending December 31, 2016, MedReleaf recorded revenue of $30.0 million, an increase of 141% from a year earlier, while Adjusted EBITDA for the period surged 358% to $12.2 million.
MedReleaf believes its competitive advantage comes from its quality assurance, patient-centric approach, analytically-driven operations, ongoing innovation, and through the production of premium cannabis. MedReleaf has a seed bank of over 200 different genetic varieties of cannabis and over 15,000 seeds originating from around the world, and asserts it will differentiate itself by breeding new varieties of cannabis plants to meet the needs of specific patient populations.
Earlier this year, MedReleaf announced that it would provide same-day delivery to patients in the Greater Toronto Area. Patients who order by phone or online before 1pm will receive their medication the same day for a $15 flat fee.
MedReleaf won Lift Cannabis awards, which included 1st Place for Top Sativa (Luminarium); 1st Place for Top High-CBD (Avidekel); and 3rd Place for Top Hybrid (Midnight). During 2015 and 2016, MedReleaf said it had a quarterly market share of between 16% and 20% of total reported Canadian volume.
Expect investor interest to be high when MedReleaf stock starts trading on Wednesday, but if recent history is any indication its share price could slowly drift lower during the months ahead. Shares of Canopy Growth, for example, have sank 48% from its 2017 high of $13, reached on February 13, 2017, to its current price of $6.82.
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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