Approximately three weeks ago; Cannabis Wheaton Income Corp (TSX: V.CBW) debuted as an IPO on the TSX Venture Exchange – with much fanfare. Cannabis Wheaton is led by Chuck Rifici, better known to many cannabis investors as the founder of Tweed Marijuana Inc. (now Canopy Growth Corp).
CBW is the first cannabis streaming company. Metals investors are already familiar with precious metals streaming (and royalty) companies. These companies provide financing to gold and silver mining companies, taking in return a percentage of production (or royalty). Now this royalty/streaming model has been exported to the cannabis industry.
Cannabis Wheaton has already announced deals with more than a dozen cannabis companies, spanning six provinces. However, CBW is doing something different, in
a new cannabis deal just announced on
May 30th.
ABcann Global Corp (
TSX: V.ABCN,
OTCQB: ABCCF,
Forum) is receiving a total of $30 million in funding from Cannabis Wheaton. However, this is far from the only detail of this deal which would be of interest to investors.
Cannabis Wheaton is a streaming company, but this is not a simple streaming deal. CBW is making a large investment in ABcann – a strategic investment. In addition, Cannabis Wheaton is entitled to a 50% revenue stream (net of certain costs) from what is being designated as the “Expansion Production Area” (EPA).
Part of this $30 million in funding will be dedicated to construction of 50,000 square feet of additional cultivation space on ABcann’s 65-acre Kimmett property. This is the EPA. CEO Rifici indicated the enthusiasm of CBW for this hybrid funding arrangement.
Over the past three years, I've watched ABcann's involvement and evolution in the Canadian cannabis industry. They are widely recognized for their proprietary cultivation methods that produce high quality cannabis with industry leading yields. It's clear to us that they had their pick of funding sources, so it's an honour to make this announcement today. [emphasis mine]
(click to enlarge)
Further emphasizing the enthusiasm of CBW for this strategic investment and streaming agreement with ABcann are the precise terms of the deal:
- on the date that is the earlier of 10 days of the final closing of CW's previously announced financing or by June 30, 2017, CW will subscribe for $15 million of ABcann common shares at an agreed upon valuation of $2.25 per ABcann Share; and
- on the date that is the earlier of 10 days of CW raising an aggregate of $150 million or March 31, 2018, CW will subscribe for an additional $15 million at a price per ABcann Share equal to the greater of two times the 10 day volume average trading price of the ABcann Shares at the relevant time or $2.25.
At the time that this deal was concluded, shares in ABCN were trading below $1 per share. Cannabis Wheaton is happily paying close to 2 ½ times the current trading price of ABCN with its first installment. That is an expression of confidence. And that company has already agreed to pay at least a 100% premium on its second installment of shares – no matter how much ABCN appreciates in the interim.
Naturally, the enthusiasm for this new deal goes both ways. ABcann’s CEO Aaron Keay spelled out the significance of the agreement for his Company:
"This Partnership is a great opportunity for both ABcann and Cannabis Wheaton. ABcann significantly enhances its cash position through the equity investment, providing ABcann with the capital to construct up to 180,000 square feet of fully funded capacity."
The $30 million in funding will fully finance 130,000 square feet of cultivation space for ABCN. Cannabis Wheaton will participate in the growth opportunity from the EPA. It participates indirectly (via its shares) in the entire 130,000 square feet of cannabis expansion. Win/win.
It’s a game-changer for ABcann, a game-changer for Cannabis Wheaton, and a strong indication to investors of where the principals of these two companies believe ABcann is heading.
ABCN had already announced plans for construction of a 100,000 square foot cannabis cultivation facility at Kimmett, with construction to commence imminently. With funding now in place, that original expansion has the green light. Now that expansion plan has itself been expanded.
Not only is the Company’s growth fully funded, it has been funded on terms which are very advantageous for ABCN’s existing shareholder base. All that remains is for ABcann to apply their industry-leading yields and
standardized cannabis cultivation model to all this additional cultivation space.
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There had already been considerable investor enthusiasm for this new publicly-listed cannabis company. With the joint announcement by Cannabis Wheaton and ABcann Global of this unique, hybrid funding agreement, there is suddenly a lot more to get investors excited.
ABcannglobal.com
FULL DISCLOSURE: ABcann Global Corp is a paid client of Stockhouse Publishing.