IVITF - Cannabis Growth Opportunity Corporation Begins Trading on the Canadian Stock Exchange
The common shares and share purchase warrants of Cannabis Growth Opportunity Corporation (CSE: CGOC) and (CSE: CGOC.WT) are now trading on the Canadian Stock Exchange.
The initial capital raise is slightly more than CAD 35 million. There are currently 15,513,251 common shares outstanding, as well as 15,513,250 warrants. There is a total of 35,500,000 shares reserved for issuance. Initial shares are issued with one warrant attached.
Each share purchase warrant entitles the holder to acquire one common share at a price of CAD 2.50, subject to adjustment, on or before 5:00 p.m. (Toronto time) on the expiry date, January 26, 2020. The warrants may expire sooner if specific performance requirements are met.
Listing and disclosure documents will be available at www.thecse.com.
What Does CGOC Do?
The company is an investment corporation seeking to provide shareholders with a long-term total return through capital growth by investing in an actively managed portfolio of securities of public and private companies operating in, or deriving a significant portion of their revenue or earnings from, products or services related to the cannabis industry.
The Corporation will invest primarily in publicly traded equity securities but may also invest up to 40% of the Corporation’s total assets in private equity investments. The portfolio composition will change over time depending on the Corporation’s and the Investment Manager’s assessment of overall market conditions, opportunities, and outlook including the allocation between the public and the private portfolios. Generally, the Corporation plans to invest approximately 60% of its total assets in the public portfolio and 40% of its total assets in the private portfolio.
The Story is Great
You receive early mover advantage, the ability to participate in directly source deals, access to early and pre-IPO deal flow. Management receives no set salaries or bonuses. Compensation is dependent on the Corporation’s share price.
The People
CGOC has no operating history, so key people are of strategic importance. You are placing a bet on the team’s ability to perform at a market-beating level of excellence.
Brayden Sutton, a company director, co-founded and served as Executive Vice President of Supreme Pharmaceuticals from 2013-2014. He played an instrumental role in the early days of Invictus MD Strategies (TSX: IMH), Aurora Cannabis (TSX: ACB), and CannaRoyalty (CSE: CRZ).
Mr. Sutton comes first as he has the most cannabis industry experience and his experience tilts toward startup companies. The fund is only starting with CAD 35 million in capital. Therefore, the most significant opportunities for profit are in the private equity investing in small companies and trading the shares of smaller public companies. Buying and holding shares of Aurora provides little value to shareholders.
Paul Anderson, CPA, the company's CFO comes with cannabis-specific experience as he currently serves as a director of Canada House Wellness Group. He has worked as a consultant for an Oregon-based cannabis company.
The more cannabis experience, the better the value to shareholders.
Bruce Campbell, Chief Investment Officer, is often quoted in Bloomberg, The Globe and Mail, and Small Cap Power regarding investments in the cannabis space and more. His media influence and investment expertise will allow the company to reach investors on multiple channels, allowing the company to promote itself.
You would expect the bio of the media influencer to have better storytelling. The company needs to create a more dynamic bio for Mr. Campbell.
Jamie Blundell, President, and CEO has a more than 25-year background in senior leadership roles and managing teams of over 1,000 employees. Blundell has extensive experience in mergers and acquisitions, and private equity.
Again, the storytelling needs reworking. Managing 1,000 employees does not mean much for an investment company that only needs a small number of employees to operate. How his experience in M&A benefits you as an investor is of maximum importance.
Closing Thoughts
This is a stock for long-term investing.
Do the math on investing in the warrants.
If the CGOC share price does not exceed the cost of the warrant plus the exercise price (currently CAD 3.10), it was a bad investment anyway, and you minimized your losses. On the flipside, if the share price at exercise expiration exceeds about CAD 3.35, you maximize your return on investment.
A very attractive investment if you like the story. Maybe wait a few days to see how the first action settles out.
On January 29, 2018, CGOC closed at CAD 2.35 and CGOC.WT closed at CAD 0.60.
The author has no direct investment in CGOC. The author might have an indirect stake in ACB, IMH, and CRZ through ownership in shares of the Horizons Marijuana Life Sciences Index ETF (TSX: HMMJ).