In less than two weeks, the cannabis industry will take a significant step forward as nine states vote on legal cannabis ballot initiatives.
Of those nine states, none are more significant than California which is poised to expand the legal recreational marijuana market to almost a quarter of the American population.
We expect to see Proposition 64 which would legalize recreational cannabis in California pass as polls continue to show strong support. The passage of this ballot initiative would not only have a significant impact on the landscape of the legal cannabis industry but would also serve as a major catalyst to California-based cannabis businesses.
The Fastest Growing Industry in the World
In 2015, California accounted for $2.7 billion in sales of medical cannabis product. If Proposition 64 passes, the medical and recreational cannabis market should be a $6.5 billion industry by 2020. The Guardian expects to see $1.6 billion in sales of recreational cannabis products in the first year of legalization.
From an investor standpoint, there are several ways to capitalize on this opportunity but the best and easiest avenue is through investing in publicly traded companies. Although the cannabis sector continues to fly high, we believe that several high-quality publicly traded cannabis companies are still flying under the radar.
One such company is Finore Mining Inc. (FIN: CSE) (FNREF: OTC), which is levered to the California cannabis industry following its acquisition of KushTown USA LLC, a California based cannabis infused products company that is a leader in the cannabis beverage industry.
Levered to the California Cannabis Industry
Finore entered into an agreement for the acquisition of KushTown on late Thursday and the market responded very favorably, sending FIN and FNREF 23% and 103% higher.
KushTown specializes in medicated water, soda, hot sauce, and barbecue sauce products infused with cannabis. The company offers 20 different varieties of medicated sodas on its website and its mission is to become an integrated cannabis brand across all of North America as deregulation measures continue to open new markets.
KushTown has a proven track record of success and has been selling cannabis infused products since 2008. The company’s products are sold in more than 500 dispensaries across California. The company is focused on penetrating new markets within California as demand for cannabis infused products continues to grow.
KushTown was founded by Peter Moret in 1999 after his mother was diagnosed with breast cancer. Peter successfully created a medical cannabis tincture that he gave to his mother in tea and it improved her appetite, made her more active, and made it easier for her to deal with cancer related pain. In the following year Peter’s mother won her battle against cancer. The decision was then made to manufacture and distribute the tincture called KushTown.
Product Expansion Should Significantly Increase Market Penetration
Over the next two years, KushTown plans to expand its product line to include mints, sublingual strips, fudge bars, capsules, chocolate truffles, and oil cartridges for vaporizer pens.
KushTown plans to become a vertically integrated cannabis company across the United States and it is focused on controlling the entire cultivation process, from seed-to-sale, which will provide increased transparency and visibility into the product quality and integrity.
Not only does vertical integration improve transparency but it will also have a significant impact on margins and will improve the company’s bottom line through economies of scale.
Focused on Growth
KushTown plans to expand through strategic partnerships and is actively seeking partners to license its brand in states where medical and recreational cannabis is legal.
KushTown is also focused on expanding through acquisitions as well as license applications in states with a legal recreational market and states that are preparing to legalize recreational cannabis. The company plans to roll out a national branding and marketing strategy across all of its product lines while expanding into new state markets.
Aside from the 500+ dispensaries selling KushTown’s products, several California-based delivery services distribute its products to clients across the state. The company is currently building an e-commerce platform that will lead to increased revenue opportunities as it will allow for direct sales to distributors and consumers.
Attractive Opportunity Due to Upcoming Catalysts and Recent Acquisition
Although the shares are trading near its 52-week high, we are favorable on Finore due to the following reasons: 1) Through KushTown, the company is levered to the California cannabis industry which is poised to see massive growth on a year-over-year basis, 2) The company has a proven track record of sales and it has an extensive product line that is in high demand, 3) Cannabis infused products represent a huge part of the legal cannabis industry and it continues to see strong growth, 4) The company is led by a management team with a proven track record of success, and 5) It is levered to the results of the election and market sentiment which should cause its shares to move significantly higher if recreational cannabis is legalized in California.