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Cannabis Wheaton Is Changing the Game - Mushroomstocks | Mushroomstocks
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Cannabis Wheaton Is Changing the Game

May 15, 2017 • 12:55 PM EDT
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6 MIN READ  •  By Michael Berger
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The Canadian cannabis industry has seen massive growth over this last two years and it continues to attract new investors ahead of its plan to legalize recreational cannabis before July 1, 2018.

From Canada to Germany, Australia to Uruguay, cannabis companies are capitalizing on a massive global opportunity that will continue to see incremental growth for years to come.

Recently, a company has been making waves for applying the “streaming” model commonly found in mining to the cannabis industry. 

That company is Cannabis Wheaton (CBW: TSV Venture) (KWFLF: OTCQB) which has introduced this business model to disrupt the current LP landscape in Canada.

Last week at the Canaccord Genuity conference in New York City, we had the opportunity to sit down with Chuck Rifici, Chairman and CEO of Cannabis Wheaton.

Chuck, thank you very much for your time today. You have an incredible track record within the cannabis industry and have been a founder, board member, and investor in several leading firms. Can you tell us a little about your background?

  • I have been involved in the industry from the inception of the licensed producer system as the co-founder and former CEO of Canopy Growth (formerly Tweed Marijuana).  Since leaving that firm, I have been focused on improving my line of sight to distribution and retail opportunities awaiting Canada’s march towards cannabis legalization through several board focused roles including Chairman at National Access Cannabis, a national chain of patient education centres helping Canadian access the ACMPR, Director at CannaRoyalty and until recently served on the boards of both Aurora Cannabis and Supreme Pharmaceuticals, 2 of the top 5 licensed producers by market cap in Canada.  

Tell us about your new company, Cannabis Wheaton. How did you come up with it structure?

  • Taking a page from the highly successful streaming models from the mining sector, our team saw an opportunity to apply a streaming model to the cannabis industry which faces immense capex combined with a lack of traditional lending towards facility build-out and expansion.

How many deals have you done and where are they located?

  • Cannabis Wheaton’s initial cohort of streaming deals includes 16 streams with 14 streaming partners across Canada, located in 6 provinces.  [Note: the deals are listed in the deck available on our investor site – http://cannabiswheaton.co/investors/ ]

How does the streaming company benefit the most or what exactly do they look for?

  • Our streaming partners benefit from capex funds to build out their initial facility or expand production at a fraction of the dilution that they would otherwise incur from traditional equity partners and in exchange, CW receives a minority equity interest in streaming partners at a valuation that is a multiple of their current valuation and a portion of the funded facility’s cannabis output at an agreed upon price. Partners further benefit from our management and advisory team’s deep industry expertise, which help de-risk their pre and post-licensing execution whether it be design build, cultivation, branding, legal or regulatory expertise as they pursue their growth strategies.

What are the main value drivers for the company and it’s shareholder?

  • Moving into the adult use market with legalization, we foresee that demand will continue to outstrip supply as it does today.  Faced with at least a 10x increase required in currently licensed cannabis production, the value of cannabis output secured through streams is likely to increase further.

    Through our agreements, CW’s platform mitigates investor risk through Our team of experts, the first line of defense as we deploy capital and aid our partners through their growth strategy, Providing investors with a single investment     vehicle that has exposure to a wide range of geographically and license diversified cannabis production; and, The ability to assess individual partners strengths and weaknesses so that we can play to their strengths and support their weaknesses as they evolve.

     Additional, and perhaps most importantly, CW’s platform is a natural distribution point for interfacing with any type of provincial distribution model (which are yet to be announced), such that we can provide a chain of regulated     dispensaries or a provincial institutional purchase with a breadth and depth of products and skews from a large basket of licensed producers as a natural attribute from our platform.

Do you plan to expand internationally?

  • We are currently focused on Canada but our model can be applied internationally where federally legal.

What are the main pitfalls you have encountered during your tenure in the industry and how do you plan to avoid them with CW. 

  • The biggest gap is accessing accretive financing for expansion.  Building out federally licensed cannabis facilities in Canada is capex intensive and, typically, requires accessing equity capital that is both dilutive and loaded with additional capital market pressures that some licensed producers might prefer to avoid or defer until they are further along in the execution of their plans.  CW provides capital at a multiple of a streaming partner’s current valuation while being agnostic on their capital markets strategy.

As far as CWs portfolio of services when an LP engages you for consumer branding do they own the IP and copyrights or does CW retain ownership. 

  • Any branding IP we engage in developing with our streaming partners will remain with the partners themselves.  Alternatively, CW may facilitate brand licensing from 3rd parties to our streaming partners for which CW would take a more direct role in providing and managing the brand licensing relationship.

What are the main factors you look at before engaging an LP in a streaming deal. 

  • We look at the regulatory status (where are they in the continuum towards a sales license), the team and ability to scale followed by geographic location.



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Important Investor Disclosures 

Disclosure.  Compensated Affiliate.  This report was authored by and is property of StoneBridge Partners.  All information and data relied upon in drafting this report is publicly available.  The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report.  Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice.  Any projections or other information generated by StoneBridge Partners regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.  None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment.  This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation.  The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals.  It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction.  Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks.  The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission.  Please contact a Financial Advisor for professional advice regarding any and all securities investments.  This report is intended for informational purposes only.  StoneBridge Partners’s officers, directors, employees, affiliates, or subsidiaries may have positions in securities covered by StoneBridge Partners.  StoneBridge Partners may receive compensation from the company and/or has a position in the securities mentioned in this report

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Mushroomstocks.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.


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