As Charlotte's Web becomes the latest cannabis company to file for a C$100 million IPO, the question begs whether the market can digest the tsunami of cannabis stocks going public over a short period this fall.
This comes on the heels of a strong spring calendar that brought MedMen (MMNFF) to market, followed by the Green Organic Dutchman's (TGODF) and Tilray (TLRY) . While MedMen's stock stumbled out of the gate, it has slowly begun building its way back up the chart. The Green Organic Dutchman followed a different course, coming out strong but then losing steam as the stock price slid. However, in the last few days, TGOD has picked up strength again.
Tilray has been a winner, with its second-quarter sales, announced Tuesday, jumping 95% from the prior year. In the short time that this Canadian medical marijuana pioneer has been trading publicly on the NASDAQ, it has shot from $20.10 to close Tuesday at $51.50. Tilray shares rose over 10% in after-hours trading Tuesday after the company reported earnings.
Nic Easley, Managing Partner and CEO of Multiverse Capital, voiced his concerns over the numerous cannabis IPOs that have already come to the market. "It reminds me of when all the cannabis companies went public back in 2013. Now most of them are penny stocks." Easley thinks the cannabis market is going to be a repeat of the dot-com bubble bursting.
His main concern though is that the smaller companies that aren't prepared to go public may hurt the larger companies that are coming from a more solid foundation. Because there is so much investment interest in cannabis stocks, companies that should probably be doing a Series B financing round are just opting to head to the public markets. Easley raises money for his investment funds that only focus on private companies in the cannabis industry. He is a firm believer that companies should stay private for as long as possible.
The lineup for the next couple of months is a combination of steady players with established foundations and smaller upstarts.
Acreage Holdings
The cannabis IPO receiving the most attention is Acreage Holdings, which is expected to go public at the end of September. The company made a big splash when it named former U.S. House Speaker John Boehner and former Massachusetts Governor Bill Weld to its board. That certainly got everyone's attention. Acreage recently raised $119 million and plans on taking the company public on the Canadian Stock Exchange.
It is one of the largest cannabis companies in the U.S. with a presence in 13 states -- soon to be 15. With the money that it has raised, Acreage will be able to acquire additional licenses, brands and other properties. This is a highly anticipated launch and considering the amount of buzz that is building, this one should be a hot one.
"We are planning on listing on the CSE for many reasons, including the positive reception that the Canadian institutional investment community has shown to the U.S. cannabis industry and to Acreage in particular. Additionally, the CSE has become the exchange of choice for U.S. companies like ours," CEO Kevin Murphy said. "The liquidity on the CSE is incredibly attractive to Acreage, and we know that retail investors in the U.S. have become comfortable with that exchange. We expect to see a tremendous response to our offering this fall.
Curaleaf
Curaleaf, formerly known as PalliaTech, is expected to go public via a reverse takeover (RTO). Curaleaf is a holding company specializing in the medical cannabis industry with operations in 10 U.S. states on both the East and West coasts. It operates 26 dispensaries with 10 cultivation sites and nine processing sites. Curaleaf is known for preferring to operate in states with fewer licenses and less competition.
The Flowr Group
The Flowr Group (Okanagan) Inc. is planning an RTO that could come in the first couple of weeks in September and the company intends to list its shares on the TSX Ventures Exchange. The Flowr Group brings to the table Tom Flow, a founder and former COO of MedReleaf, as its president. Flowr builds and operates large-scale, GMP compliant cultivation facilities utilizing its own patented growing systems.
The company recently signed a Memorandum of Understanding to supply premium cannabis to the British Columbia Liquor Distribution Board which will be the sole retailer of non-medicinal cannabis in the province following the October 17 legalization of adult recreational consumption. The company announced earlier in the year that it had been selected by the Hawthorne Canada subsidiary of The Scotts Miracle-Gro Company for an exclusive strategic R&D alliance.
Canopy Rivers
Fresh from the listing of Canopy Growth (CGC) shares on the New York Stock Exchange, the company is spinning off its venture arm Canopy Rivers. It will involve a reverse takeover of AIM2 by Canopy Rivers and the proposed transaction will be an arm's length deal. Canopy Rivers has raised $104 million prior to the RTO. The company set a date of September 12, 2018, for its upcoming shareholder meeting in connection with the RTO. Shares are expected to begin trading on the TSXV under the symbol "RIV" during the week of September 17, 2018
Canopy Rivers has invested in James E. Wagner Cultivation, media company Civilized and LiveWell Foods Canada to name a few. In all, the company has made investments in 11 domestic and international companies.
Charlotte's Web
Charlotte's Web Holdings Inc is the exclusive provider of Charlotte's Web. The high-quality hemp CBD extract was created by Stanley Brothers and gained infamy as little Charlotte Figi turned to the CBD extract for relief from daily seizures. The story captured CNN's Dr. Sanjay Gupta's heart and he became a believer in medical marijuana. His turnaround caused many others to changed their minds.
The company has filed for an IPO worth C$100 million and has priced the shares at C$7.00. The gross proceeds are expected to hit C$100 million. The company had $40 million in revenue for 2017 for a 35% EBITDA margin. This is a 172% growth over 2016's revenue of $14.7 million. E-commerce sales have grown by 60% from 2016 to 2017 and it is sold in 2,700 retail locations. The product has 14% of the market share and is the number one brans by market share.
Charlotte Fiji has gone on to live a healthy, happy, and active life, and Charlotte's Web has become one of the most noted CBD-rich cannabis strains in the cannabis market.
