Cannabis stock expert Michael Berger, president of Technical420.com, highlights one of the highest-q...
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Cannabis Stock Generates Strong Interest for its Capital Raise
11/29/2016 9:10 am EST
Focus: CANNABIS INVESTMENTS
Cannabis stock expert Michael Berger, president of Technical420.com, highlights one of the highest-quality licensed medical cannabis producers in Canada that is raising capital before its 2017 planned initial public offering.
With Federally legal recreational cannabis around the corner, licensed medical cannabis producers in Canada continue to attract significant amounts of capital.
One company investor should put on their radar is The Green Organic Dutchman Holdings Ltd., the parent company of The Green Organic Dutchman Ltd., a licensed Canadian medical cannabis producer.
Last week, The Green Organic Dutchman announced the details of a proposed equity financing. Although we knew that investor interest was high, we were surprised to find out just how much demand there is.
In this early financing round, The Green Organic Dutchman plans to raise a minimum of $10,000,000. After soft marketing for only two days, the company’s order book for this proposed offering is two-times oversubscribed.
About the Proposed Offering
The Green Organic Dutchman is conducting on a best efforts basis to sell 20,000,000 common shares at $0.50 a share. This offering is unique as 60% of the shares offered will be allocated to retail shareholders. This improves overall liquidity and allows many potential patients and consumers to invest in the company.
The gross proceeds from the offering will be used to fund the company’s expansion and for working capital and general corporate purposes. Management expects the offering to close before December 15thand plans for the company to start trading on the TSX Venture exchange in the back half of 2017.
There can be no assurance that The Green Organic Dutchman Holdings Ltd. will be listed on any exchange; however, due to the track record of the management team and founders behind the company, we are confident in its ability to achieve its short and long-term goals.
Investment Thesis: The Green Organic Dutchman
The Green Organic Dutchman produces farm grown pharmaceutical grade organic cannabis. The company grows premium grade organic medical cannabis in small batches through all natural craft growing techniques and organic principles. The company is licensed under the Access to Cannabis for Medical Purposes Regulations (ACMPR) to cultivate medical cannabis.
The Green Organic is a licensed medical cannabis producer in Canada uniquely positioned within the rapidly growing medical and recreational cannabis industry. We are favorable on the company for the following reasons: 1) It recently opened a capital raise and has seen remarkably high interest from the marketplace, 2) The company received its cultivation license in August and continues to execute on its business plan, 3) It is led by a management team that has a proven record of success, and 4) Its current valuation is attractive as we expect to see incremental growth on a year-over-year basis.
A Differentiated Product
Although the number of licensed medical cannabis producers in Canada has spiked, Green Organic is able to differentiate itself from the competition through its high-quality organic product that sells for a higher price and has better profit margins.
Earlier this year, in the Cannabis Business Times, Brightfield Group market analyst Jamie Schau said recent data indicates that nearly half of cannabis consumers would pay up to 100% more for organic products. This makes us even more bullish on Green Organic due to the company’s ability to realize more revenue and profits from its organic cannabis products.
The millennial demographic is a major factor driving the trend toward organic produced products and they are the largest segment of the recreational cannabis market.
Led by a Management Team with a Proven Track Record
Green Organic is led by a management team that has a proven track record of success with licensed Canadian medical cannabis producers such as OrganiGram and Emblem Corp.
We are favorable on this aspect of the company because it will have access to capital so as to capitalize on an unprecedented growth opportunity.
Green Organic is led by its founders and a management team with a proven track record of success. Since inception, management has invested $6.75 million of their own dollars and executed flawlessly to commence the production of premium cannabis products. These factors, combined with an excellent capital structure makes the Green Organic an attractive investment to the capital markets.
Multi-Faceted Growth Strategy
The Green Organic has a multi-pronged marketing strategy for capitalizing on the Canadian cannabis industry and the business has quickly moved forward after the company received its production license from Health Canada on August 17th.
Initially, the company will generate revenue by selling its product to other licensed Canadian medical cannabis producers. By selling at the wholesale level, the company will be able to realize immediate revenue. The company’s facility is located on 25 acres, a large parcel of property, and is currently licensed to produce 1,000 kilograms per year.
These type of forward sale agreements will provide Green Organic with immediate revenue as it expands its focus on the retail market, the second phase of its marketing strategy.
The Green Organic plans to shift from a wholesale to retail strategy as patient acquisition increase and as the recreational cannabis market comes on line. This is a much more lucrative and profitable market when compared to wholesale.
The company has been developing strategic partnerships with cannabis clinics networks, pain clinics, and veteran networks and we expect this to serve as an initial catalyst to patient growth. We expect to see Green Organic succeed as patients demand a high-quality organic products and are willing to pay premium prices for it.
Long-Term Outlook is Bright
The Green Organic expects to realize significant growth over the next few years and its 2017 expansion plans call for an additional 12,500 kilograms of production.
In 2018, the company expects to produce around 13,500 kilograms and generate approximately $90 million in revenue. During 2018, The Green Organic plans to further increase production capacity and expand its facility significantly.
Although Canadian licensed producers have recently seen significant volatility, we are favorable on The Green Organic Dutchman due to its attractive valuation, its management team, its positive market sentiment and its high interest from Wall Street based off the demand for its recent offering, its leverage to a Federally legal cannabis market, and its state-of-the-art infrastructure and high growth potential.
By mid-to-late 2017, we expect to see the market catch on with The Green Organic Dutchman’s potential. This offering has created an attractive opportunity for investors looking for a company that has remarkable upside, significant growth potential and can survive a recession. To learn more about this opportunity, email email@example.com.
By Michael Berger, President of Technical420.com