Invictus MD Strategies (IMH.C) seriously added to its coffers when the company announced last Friday it had closed its previously announced bought deal private placement underwritten by Cannaccord Genuity and Eventus Capital Corp.
According to the news release, including a portion of the over-allotment option, aggregate gross proceeds of the transaction totaled $16.22 million.
Just over 9.8 million units were issued, including those pursuant to the exercise of the over-allotment option were issued at $1.65 per unit.
Each unit is made up of one common share and one half one common share purchase warrant.
You can exercise each full share purchase warrant for one common share in the company at an exercise price of $2.35 per warrant share until September 2, 2018.
There is an acceleration provision attached to the warrants issued in this transaction that allows the company to give notice of an earlier expiry date if the company’s daily volume weighted average share price on the CSE (or any other stock exchange the company may be trading on) is greater than $3.75 for 10 consecutive trading days.
The underwriters picked up a 7% commission on gross proceeds, paid partly through cash and partly through the issuance of 281,818 units having the same terms as the units issued to purchasers.
Underwriters also received a total of 688,039 Underwriters’ warrants, with each Underwriters’ warrant exercisable to acquire one common share at a price of $1.65 until September 2, 2018.
All securities issued in this transaction are subject to a customary four-month hold, expiring July 3, 2017.
This cash infusion will come in handy considering the company’s growing portfolio.
The end of last month, Invictus announced it signed a definitive option agreement with an unnamed late-stage applicant (“OptionCo”) under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”).
According to that release, the applicant had plans to expand its current production facility located in a 60,000-square foot perimeter on a 150-acre property in Alberta.
This latest production deal is stacked on top of a 33.33% stake in AB Laboratories, a federally licensed producer of medical marijuana with a 16,000-square foot facility located in Hamilton, Ontario.
Invictus also owns 33.33% of AB Ventures as part of its agreement with AB Laboratories. AB Ventures is a newly-created company intended to build a second licensed expansion facility through its common ownership with AB Laboratories.
AB Ventures intends to begin with the construction of a 42,000-square foot production facility on a 100-acre property also located in Hamilton, Ontario.
Long range plans are for five production facilities totalling 100,000 square feet to be built on AB Ventures’ property by 2019.
With just AB Laboratories and AB Ventures, Invictus predicts it will put out 20,000 kilograms of cannabis in 2019. The deal with OptionCo, if everything goes to plan, will significantly add to that number.
Then you have PlanC BioPharm Inc which Invictus will own 100% of once $8.0 million has been raised for the acquisition of the land and the construction of an initial 30,000 square foot facility on the property located in Salmo, British Columbia.
If PlanC works to capacity, Invictus expects it will be producing 20,000 kg a year by 2020.
Okay, so that’s 25,000 kg plus 20,000 kg plus whatever OptionCo pops out.
That’s a lot of marijuana but still only a small portion of a predicted market that experts think will require 600,000 kg of cannabis a year once Justin Trudeau legalizes recreational weed sometime this year.
In fact, analysts predict the Canadian retail cannabis sector will be worth between $4.9 billion and $8.7 billion if legislation is passed.
Closing this latest bought deal has given Invictus the fuel necessary to follow through on the expansion plans of its assets so that it can capitalize on a nascent cannabis market.
Things look bright for Invictus, but I have one caveat.
I see the production segment of the legalized cannabis sector becoming seriously industrialized, and except for a handful of boutique producers, it will most likely be dominated by a small collection of big business entities like Canopy Growth and Supreme.
That means the race is on for Invictus and other companies like it to grab enough market share to survive the tide of consolidation and the resulting price wars.
Will they be able to execute in time?
I can’t predict the future, but this bought deal indicates that institutional money considers the company a good risk and industry pundits like our own Chris Parry have given the company and its CEO a “thumbs up.”
FULL DISCLOSURE: Invictus MD Strategies is an EQUITY.GURU client. As always do your due diligence before making any investment decision.