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Canadian cannabis stocks have been trending higher over the last week and we continue monitor trading activity closely.
The Canadian cannabis sector has recently benefited from a recreational marijuana supply agreement between the province of New Brunswick and licensed medical marijuana producers, Canopy Growth Corp (WEED.TO) (TWMJF) and Organigram Holdings (OGI.V) (OGRMF).
This agreement was a catalyst for the Canadian cannabis sector and we expect to see more deals like this inked in the coming months. The start date for Canada’s recreational marijuana market is not too far away and we remain bullish on this sub-sector of the cannabis sector.
We want to highlight some of the recent developments to provide insight into some of the opportunities in Canada’s cannabis market.
TGOD: An Exclusive Opportunity with Massive Interest
Last week, The Green Organic Dutchman Holdings (TGOD) announced its final pre-IPO non-brokered private placement and from what we can tell, the offering has generated significant interest.
The last quarter has been significant for TGOD as it further differentiated itself from the competition by adding key executives to its management team, by securing a $5 million credit line, and by expanding its reach through the acquisition of a 75-acre property in Quebec.
One of the most important recent developments for TGOD though, pertains to the company receiving its sales license from Health Canada. This is a major milestone for the licensed medical marijuana producer and will allow them to capitalize on a multi-billion-dollar market opportunity.
TGOD announced its final pre-IPO non-brokered private placement at $1.65 per unit. This offering is slightly different from the prior two and in our eyes, it is just as attractive. The shares will have a 6 month hold period from the day of the IPO (planned for January 2018) and the warrants have a $3 exercise price for a 3-year period.
While we don’t really know where the IPO will be priced at or how big it will be, the track record of the team behind TGOD and the recent developments leave us very bullish on the long-term opportunity.
For information on this offering please email: financing@tgod.ca
Organigram and Canopy Growth Set the Bar High
Last week, Canopy Growth Corporation (WEED.TO) (TWMJF) and Organigram Holdings (OGI.V) (OGRMF) announced a memorandum of understanding (MOU) with the Province of New Brunswick to supply recreational cannabis products to retail stores.
These agreements are significant and provide the licensed marijuana producers with somewhat of a stamp of approval. Under the agreements, Canopy Growth and Organigram will provide up to 4 million and 5 million grams of recreational marijuana per year, respectively.
Organigram’s agreement is expected to have a retail value of $40 to $60 million per year, while Canopy’s agreement is expected to have a retail value of $40 million in its first year.
Licensed Producer Sells Non-Core Asset for $7 Million
Last week, Canopy Growth Corporation (WEED.TO) (TWMJF) completed a previously announced agreement with Cannabis Care Canada (CCC) to sell its wholly-owned subsidiary Mettrum (Bennett North) Ltd.
Under the terms of the agreement, CCC has paid Canopy $7.0 million in cash to acquire Bennett Road North and entered a three-year “take or pay” supply agreement for high quality dried flowers and refined cannabis resin.
As part of the transaction, CCC will assume all outstanding obligations associated with Bennett Road North. The main Mettrum Bowmanville facility, also on Bennett Road, is unaffected by this transaction. Bennett Road North will be renamed Starseed Medicinal and will be a wholly-owned subsidiary of CCC.
This was a significant development from Canopy Growth and the company continues to improved its fundamental story. We are favorable on the recent developments and continue to view the licensed medical marijuana producer as one of the best long-term cannabis investment opportunities.
We will continue to monitor Canopy Growth and believe that every cannabis investor needs to monitoring this company.
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