Going public appears to be paying off for ABcann Medicals (TSXV: ABCN), since the medical cannabis grower launched its initial public offering (IPO) on the TSX Venture Exchange. Although the IPO was just launched on May 4 (http://nnw.fm/Lt5DO), its value took off, soaring over 26% on the first day and trading over 25% of the total volume on the exchange. ABcann is one of Canada’s major legal cannabis producers, and the public offers are set to provide even more investor benefits as the recreational marijuana market is now positioned for nationwide legalization.
Raising capital was part of the company’s decision to launch a public offering. ABcann Medicinals was recently acquired by ABcann Global Corporation, which included capital raises of $26.8 million to be used to expand production. In connection with the acquisition, W. Brett Wilson, a financing expert specializing in building early stage ventures, was appointed to the Advisory Board.
The IPO launch has great potential for the company, and much profit is anticipated. Canadian cannabis IPOs have seen share prices rise 700% to 1,400%, but, unlike other medical marijuana companies in the country, ABcann has substantial medical marijuana growing experience and access to technology. Its cultivation and yield has enabled it to become one of the most dominant Canadian firms of its kind. It was one of the first to obtain a license to produce from Canada, which involves a 6-step program and extensive background check. Companies must also invest in their operations, and build their facilities, before being granted a license, which happens with only 3% of those who apply.
ABcann compares favorably with other companies in the industry. Supreme, as an example, has a market cap of $250m and doesn’t have a sales license. Hydropothecary, at $150m, just got its sales license suspended. Emblem, which has the same size facility as ABcann, is valued at $200m. Clearly, ABcann’s current market cap is low, yielding obvious opportunities for investors.
As of now, ABcann is licensed to sell to the entire Canadian market. It can also form partnerships to sell to the U.S. market, and there are plans for Europe and Australia. The company’s computer-controlled environmental system maximizes not only productivity and yield, but also the quality of its products. A collaboration with the Controlled Environmental Systems Research Facility, begun in 2014, helped it identify the best lighting, air quality, and temperature for growing marijuana. The partnership has also helped the company understand the ideal plant nutrition to perfect the finished product.
ABcann’s yield per square foot ranges from 250 to 300 grams, compared to the industry average of 60 grams per square foot. Less water, energy, and fertilizers are used during the process, which also does not require pesticides. So, as the company’s production process has improved, so have opportunities for investors as its IPO continues to spur rising valuations.
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