ABcann Global (ABCN.V) is involved the production of pharmaceutical-grade cannabis products.
On March 06, 2018, ABCN published a business update announcing that it now has “$135 million in cash to accelerate the growth of our business”.
Abcann’s market cap is $368 million.
The $135 million war-chest is 36% of the total value of the company.
Snap quiz: if Abcann decided to hand $135 million cash back to the shareholders – the value of the company would be:
a. $233 million [$368 – $135].
b. Greater than $233 million
c. Less than $233 million
Correct answer: c
Here’s the reason: in a frontier industry buzzing with mergers and acquisition – the value of the cash is given a premium based on the belief that the company will make astute investments on behalf of the shareholders.
The fact that the company has the money to make those investments – has value beyond its intrinsic worth as a fiat currency.
Weighing in on the weed sector, Equity Guru analyst, Braden Maccke recently wrote:
Whether the equity prices have gotten ahead of themselves or not, this is a growth industry from top to bottom.
On May 12, 2017 Equity Guru’s CEO Chris Parry summarized Abcann’s fascinating early innings:
“It’s been a rough opening ride for Abcann, which not only came out right in the midst of a weed market softening,” stated Parry, “but also endured its founders absolutely blasting out 41c stock at the open, destroying the market handily.”
“The shorters were also out in abundance, so the stock got triple hammered until it appeared to bottom out Wednesday, at $0.84, having opened the show as high as $1.50 just days earlier. If you got in at that $1.50, your balls are hurting now.”
The balls of the $1.50 buyers are now feeling better.
The founders may be experiencing seller’s remorse.
The .41 stock is now worth $2.12.
Abcann’s stock price is up 135% since Parry starting tracking it.
On the chart below, you can catch the major mood swings.
“Over the past five months we have enhanced our leadership team, strengthened our balance sheet, improved operational effectiveness and executed a strategic acquisition,” stated Barry Fishman, Abcann CEO.
“A disciplined capital allocation process is in place, with the following four priorities:
- Expanding to 500,000 square feet to produce over 30,000 kilograms of capacity
- Focusing on branding and product innovation in the medical and adult-use sectors
- Expanding our proven Harvest Medicine platform to multiple new locations in 2018; and
- Developing strategic partnerships in the industry to broaden our reach and scale
High-tech, scalable growing is Abcann’s differentiator.
The technology “allows us to precisely control environmental variables to maximize yield and produce pharmaceutical-grade cannabis.”
On February 01, 2018 ABCN completed the acquisition of Harvest Medicine for a cash payment of $1.5 million and about 1 million common shares.
Harvest Medicine is an “education focused, patient-centric, cannabis discovery center and clinic” with 9,700 active patients. It’s gaining about 1,300 new patients monthly from a single Calgary location.
Harvest Medicine is going to expand across the Canada. The first of these new clinics is expected to open in Edmonton in the spring of 2018.
“Using a highly trained team of medical doctors, Harvest Medicine provides an environment that focuses on educating patients on the safe use of medical cannabis.”
“The acquisition of Harvest Medicine represents further progress toward our goal of becoming a vertically integrated medical cannabis company,” stated Fishman, “It is one of the fastest-growing medical cannabis clinics in Canada, with an aggressive expansion plan.”
“This transaction will allow Harvest Medicine to rapidly accelerate our expansion plans,” stated Mr. Parmar, CEO of Harvest Medicine.
ABCN is also pursuing international opportunities.
Its near-term objective is to obtain a distribution license for Germany.
ABCN is also planning to begin exporting cannabis to Australia mid-year, and to Germany close to year-end.
We are going to track how ABCN spends the $135 million.
We think it’s highly probable that some of it will fund further expansion into international markets.
Can we trust ABCN to spend the shareholder’s money well?
The company blew 1.1% of the war chest on Harvest Medicine – acquiring 9,700 new cannabis patients.
That’s good bang for the buck.
Stay tuned, it’s getting interesting.
Full Disclosure: Abcann is an Equity Guru marketing client, and we own stock.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.