New York, New York (NetworkNewsWire) – The North American
marijuana market is growing at rates that are similar to those
recorded by broadband internet in the 2000s. This stunning
comparison, noted in a 2017 report by Arcview Market Research,
highlights the potential short-term and long-term effects of what
many analysts are referring to as the “green rush.” ABcann
Global Corp. (OTCQB: ABCCF) (TSX.V: ABCN) (ABcann
Profile) is one company looking to make the most of
the opportunities presented by this growth. With a strong cash
position and plans to implement one of the most aggressive
expansion plans in the industry, ABcann could be the next in a long
line of cannabis stocks that have exploded in value in recent
years. Some examples include Canopy Growth Corp. (OTC:
TWMJF) (TSX: WEED), which rose by more than 700 percent
following its initial public offering; Aphria, Inc. (OTCQB:
APHQF) (TSX.V: APH), which spiked from C$0.75 at IPO to a
high of C$6.60 earlier this year; Supreme Pharmaceuticals,
Inc. (OTC: SPRWF) (TSX.V: FIRE), which soared by over
1,600 percent after its IPO; and industry investment firm
Cannabis Wheaton Income Corp. (OTC: KWFLF) (TSX.V:
CBW).
According to Arcview data, the North American cannabis sector is
currently on pace to achieve a compound annual growth rate of 25
percent through 2021, when the market is expected to top $20.2
billion. “What broadband changed for the internet was a kind of
remarkable parallel to legalization for cannabis,” Tom Adams,
editor in chief of Arcview Market Research, stated in an
interview1 with Business Insider. “We saw what had been
a $5 billion industry — like this one — in North America take off
at that point on new growth spurts.” These parallels are promising
for investors looking to capitalize on the ongoing cannabis boom.
In early 2000, Pew Research Center2 found that just one
percent of U.S. adults had access to home broadband services.
Today, nearly three-quarters of U.S. adults have broadband service
at home.
While a considerable amount of the focus on North American
marijuana legalization remains on the unpredictable U.S. market, it
presents a number of challenges that put growers and their
investors in an uncomfortable position. Although 29 states and the
District of Columbia currently have laws broadly legalizing
marijuana in some form, these markets operate in a sort of legal
gray area that directly contradicts with existing federal laws
stemming from the Controlled Substances Act (CSA). Passed in 1970,
the CSA identifies marijuana as a Schedule I substance with a high
potential for abuse3 and no currently accepted medical
use. As such, industries operating across state lines, most notably
banks and other financial institutions, have largely steered clear
of the promising sector. Despite nationwide sales of $5.4 billion
in 2015, according to The Arcview Group, banking options for these
budding U.S. businesses have remained few and far between. A 2017
survey by the California Growers Association found that 75 percent
of its members didn’t have a bank account, and this dearth of
banking options extends to markets across the country, according to
a survey by Marijuana Business Daily.
These banking complications present concerns regarding both the
safety and sustainability of U.S. marijuana markets, and they’ve
been compounded in recent months by inconsistent rhetoric from the
current presidential administration. In June, the Washington Post
reported4 that Attorney General Jeff Sessions requested
that congressional leaders undo federal medical marijuana
protections that have been in place since 2014. Sessions went on to
cite a “historic drug epidemic” as justification for a planned
crackdown on medical marijuana. Though the protections, known as
the Rohrabacher-Farr amendment, were extended through September 30,
2017, as part of a spending bill signed into law in early May, the
current administration’s efforts to “crackdown” on state cannabis
programs continues to cast a shadow of unpredictability on the
industry, adding an inescapable level of risk for the investment
community.
While the U.S. cannabis market continues to evolve, Canada is
currently preparing to legalize recreational marijuana at the
federal level, becoming the first G7 country to do so. The new law,
set to come into effect on July 1, 2018, will expand upon a booming
medical marijuana market led by a number of licensed growers.
Because licensing for growers is completed at the federal level,
the number of licenses is limited, preventing the space from
becoming oversaturated and enabling companies to record rapid and
sustainable growth. As noted by Canaccord Genuity Group Inc. in a
November 2016 report, “The rigorous process of becoming a licensed
producer of cannabis in Canada imposes significant barriers to
entry and there will be a shortfall of supply in a legalized market
in the short-term until production capacities catch up by 2020.”
The report goes on to forecast that Canadian cannabis sales could
exceed $8 billion by 2024.
Many Canadian cannabis growers have already experienced sizable
share price increases in recent years, but one company that could
be on the verge of a significant uptick is ABcann
Global Corporation. At just over three months old and
having completed its U.S. listing on the OTCQB Venture Market on
July 13th (http://nnw.fm/BTh41), ABcann is firing out of the gate
with approximately $43 million in cash in its coffers, 100 percent
ownership of a 65-acre parcel of land upon which to construct
expansions to its operations and a completely licensed and fully
operational production facility with annual production capacity of
about 1,000 kilograms of cannabis.
At the heart of ABcann’s expansion effort is its advanced
growing technology, which not only creates a consistent,
organically grown, pesticide free standardized product, but also
brings down costs through the use of exclusive, computer-controlled
environmental systems. By monitoring every variable in the growing,
curing and harvesting processes, the company is able to produce
yield quantities that significantly exceed those produced through
traditional growing techniques.
Unlike many of its U.S. counterparts, ABcann has found early
success in attracting investors thanks in part to the
predictability of the Canadian market. On August 2, the company
announced (http://nnw.fm/aVAL7) the close of an initial $15
million investment by Cannabis Wheaton Income
Corp., the world’s first cannabis streaming company, as
part of a larger phased investment to fund an additional 50,000
square feet at ABcann’s second production facility at its 65-acre
Kimmett property in Napanee, Ontario. Plans for this facility, in
addition to the company’s current construction plans for a 100,000
square foot purpose built facility at the Kimmett property,
position ABcann to expand at a rate that’s unparalleled in the
Canadian cannabis industry. It’s important to note that Cannabis
Wheaton’s valuation of ABcann comes at a 160% premium over the
company’s current share price of $0.68. Cannabis Wheaton paid $2.25
per share - $15 million cash - in a $30 million financing, the
remaining $15 million of which is expected to fund an additional
production with ABcann.
Understanding ABcann’s potential upside is most easily
accomplished by studying its competitors in the Canadian market.
Because the Canadian government limits the number of cannabis
production licenses granted under the Marihuana for Medical
Purposes Regulations (more than 1,600
companies have applied to become licensed producers since 2013,
with only 19 winning LP status from 2013-2014), the market
maintains extremely high barriers to entry. These barriers helped
propel Canopy Growth Corporation from a share
price of C$2.20 at IPO in May 2014 to a high of C$17.86 for its
Canada-listed stock in November 2016, when it became Canada’s first
billion dollar marijuana stock. Today, Canopy is one of the
biggest growers in the world, boasting indoor and greenhouse
production facilities spanning over half a million square feet and
a collection of brands such as Tweed, Bedrocan and Mettrum.
Canopy’s emergence as one of the world’s leading diversified
cannabis companies comes as the firm continues to steer clear of
the U.S. market. As it noted in an August 4 news release, Canopy is
committed to only conducting business in jurisdictions where it is
“federally legal to do so,” in an effort to avoid “being exposed to
undue risks.”
Aphria Inc. is another player in the Canadian
cannabis industry that has experienced tremendous growth since
going public in November 2014. The company’s products, which
include capsules, oral solutions and vaporizers featuring 100
percent greenhouse grown medical cannabis, have propelled it to the
forefront of the global medical cannabis industry. Aphria’s PPS for
its Canada-listed shares hit a high of C$7.79 in November 2016 just
before it closed on an offering generating gross proceeds of
C$40.25 million to fund further expansion efforts. To date, the
company has raised more than C$160 million while recording seven
consecutive quarters of positive EBITDA and continuing to expand
its production capacity. Unlike Canopy Growth Corporation, Aphria
is also eyeing the unpredictable U.S. cannabis market. On April 4,
Aphria announced the launch of a U.S. expansion strategy through a
lead investment in an entity to be renamed Liberty Health Sciences
Inc.
Another Canadian cannabis grower that’s recorded huge gains
since going public is Supreme Pharmaceuticals,
Inc. Since its IPO in February 2014, Supreme’s
Canada-listed shares have soared by over 1,600 percent, climbing to
a high of C$2.05 in November 2016. Beginning with 7ACRES, a
federally approved medical marijuana company operating a hybrid
greenhouse production facility, Supreme has taken a unique approach
to establishing a foothold in the Canadian cannabis market. In
2015, the company focused its business model on its strength in
cultivation by becoming the country’s first B2B-focused licensed
producer. More recently, on June 1, Supreme announced the listing
of its common shares on the TSX Venture Exchange, graduating from
the Canadian Securities Exchange, in an effort to facilitate
further growth.
The Canadian cannabis market has shown to be a fertile proving
ground for growers with the resources, leadership and licenses
required to compete. ABcann’s strong management team led by CEO
Aaron Keay and chairman and founder Ken Clement, alongside its
outstanding advisory board headed by the “Father of Cannabis
Medicine” Dr. Raphael Mechoulam, has positioned the company to
follow in the footsteps of competitors like Canopy Growth
Corporation, Aphria Inc. and Supreme Pharmaceuticals. Cannabis
Wheaton Income Corp. has already provided a vote of confidence for
ABcann’s chances in the form of a $15 million investment, and
ABcann’s aggressive expansion strategy has earned it a ‘Buy’ rating
and a price target of $2.25 from PI Financial.
With the company still trading for less than many of its
competitors did before recording huge increases to their share
prices, ABcann should be on the radar of any investor looking to
capitalize on the North American marijuana boom. As noted in an
article published by CNBC, “Now
is the right time to bet big on marijuana… [as] the pot industry is
poised to be gigantic.”
Editorial Sources:
1) Business Insider: http://nnw.fm/Q4UKl
2) Pew Research: http://nnw.fm/m0OG5
3) Drugs.com http://nnw.fm/3UhrB
4) Washington Post http://nnw.fm/J46mL
For more information on ABcann Global please
visit: ABcann Global
(TSX.V: ABCN) (OTCQB: ABCCF)
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