Chuck Rifici resigns from Aurora (ACB.V), Supreme (SL.C) as Cannabis Wheaton (CBW.V) debuts

He’s oft referred to as the Godfather of Weed in Canada, and today’s news explains why: Chuck Rifici, former federal Liberal Party CFO, co-founder of Tweed/Canopy Growth Corp (WEED.T), handler of over a dozen M&A transactions, and principal at private equity firm Nesta Holdings, has resigned from the boards of Aurora Cannabis (ACB.V) and Supreme Pharmaceuticals (SL.C) to devote time and energy to his new gig as CEO and Chairman of Cannabis Wheaton (CBW.V).

That sentence was a mouthful.

SO WHAT IS CANNABIS WHEATON?

The idea behind Cannabis Wheaton is to build a cannabis streaming company, financing growth plans of licensed producers and late stage applicants in return for a commitment to supply end product for years to come.

That’s the ‘Institutional-ready’ pitch. The retail pitch is far simpler: This is a major, nation-wide dispensary play. I’ll explain in a bit.

Few are as well connected and equipped to make this deal happen as Chuck Rifici. While some industry insiders I’ve spoken to question how much value the man brings to his deals beyond name recognition and a solid list of contacts, others point to the ‘Rifici news release’ as being a major potential investor catalyst, a situation I’ve seen first hand as every second weed deal I’ve had pitched to me over the last year has started with the words, “We’re talking to Rifici next week.”

That’s why, when offered a spot on Supreme Pharmaceuticals’ (SL.C) board, the powers that be at his then-board of directors at Aurora Cannabis (ACB.V) did the hitherto unthinkable: they let him play for both teams.

Better to get some of Chuck than none at all, went the thinking.

But having a foot in several boats was last year’s thinking; now, it’s all CBW, all the time. And thus, the board seats have been tossed.

This:

“Over my nearly two years on the Board, I was extremely impressed with how Terry [Booth, Aurora Cannabis CEO] and his team successfully executed on the Company’s aggressive growth strategy, and transformed Aurora into a trailblazing, world-class company,” said Rifici. “As a shareholder, I will continue to follow Aurora’s progress with interest.”

And this:

“It’s been a pleasure serving on Supreme’s board with one of the most passionate management teams in Canadian cannabis,” said Mr. Chuck Rifici. “I am proud to have been part of Supreme’s journey to build a core competency in scaled cultivation, and look forward to enjoying future success as a long term shareholder.”

I know, you’re still thinking about ‘dispensary play’. Let’s talk about that.

So the plan is for CBW to be on the receiving end of a boatload of weed on the reg by helping companies get yuge right now.

Cannabis Wheaton’s first cohort of streaming partners includes 14 outstanding companies in six provinces across Canada. Our streaming partners consist of licensed producers pursuant to the ACMPR regulations or late stage LP applicants under the ACMPR. Collectively, our streaming agreements include existing built capacity and to be constructed capacity of approximately 1,300,000 square feet of cannabis cultivation and production space net to Cannabis Wheaton by 2019.

Chuck doesn’t want to grow weed. Growing weed is hard. And the margins might not be so great going forward. What Chuck wants is the weed others grow.

And when they have that weed in their hot little hand, what will they do with it? Why, sell it of course. In their own clinics.

Through its patient service agreements, the Company also has access to patient service companies’ platforms which collectively operate 39 physical cannabis clinics and/or resource centres across Canada as well as multiple virtual clinics. The patient service companies service more than 30,000 medical cannabis patients registered under the Access to Cannabis for Medical Purposes Regulations (ACMPR).

Which clinics?

Chuck is currently […] Chairman of National Access Cannabis, a clinic chain helping patients access the Canadian federal medical cannabis program.

SO. MANY. QUESTIONS.

Like, what happens if weed is commoditized to the point where it doesn’t return on that investment?

And, what happens if the government says you can only sell it in pharmacies? Or liquor stores? Or Home Depot?

And, which LPs are locking in to these deals already?

And, dispensaries you say?

Thankfully, we’ll have Rifici answering questions LIVE on our Equity.Guru livestream Thursday at 1pm Pacific (www.twitch.tv/equitydotguru) to answer these questions and more.

But here’s my suspicion, offered without any first hand confirmation:

I think Rifici has had his eye on the dispensary space for a while. I think he sees the feds shutting down the grey market and believes he can be a part of a future dispensary model that is regulated and taxed and looks more like an Apple Store than a fireworks hut, that he’ll lock down regulated, tested, federally approved supply that will serve his needs for decades, and that his connections with the Liberal Party won’t hurt in that respect as they continue to evolve national weed laws.

In short, he’s going to cockblock the Emery’s and do what they should have done a long time ago; make it professional.

I suspect this because every time I talk of a need for high grade dispensary models on Twitter, Rifici ‘likes’ the tweets. And every time I ‘crimp off a length’ in the direction of the self-righteous and comedically self-important Emery clan, Rifici chuckles along. And when I asked him, point blank, if he was heading in this direction with his business plan, I got an emoji sent my way.

You can guess which.

CBW pulled an Abcann (ABCN.V) on day one of its listing, exploding out of the gate and then dropping hard through the day – likely an indication of sector weakness more than corporate shortfalls. But even on the heels of a significantly down day, CBW is valued at over $200 million, right out of the gate. Imagine how that worth will shift when details of the LPs hooked into the deal emerge…

— Chris Parry

FULL DISCLOSURE: There is no commercial relationship between Cannabis Wheaton, Chuck Rifici, or any of his assets.

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6 Comments on "Chuck Rifici resigns from Aurora (ACB.V), Supreme (SL.C) as Cannabis Wheaton (CBW.V) debuts"

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Simon
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Please ask him about the existing share structure and warrants at $0.02. Sounds fishy to me!

carbonize
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Do you think this news has impacted the share price of Canabo negatively?

Stranius
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Does a Wheaton model work in the Cannabis space? CBW raises a big slug of financing ($100M – $200M). CBW uses this war chest to offer up-front financing to LP’s or soon to be LP’s that cannot secure financing through other means (bank, equity, debt or private equity markets) in exchange for a commitment from said LP to provide a part of their future production of cannabis at a much discounted price. It seems absurd to me that someone has tried to adapt the Wheaton stream style business model used in mining to the cannabis space. It’s clearly a sign… Read more »
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