IM Cannabis and Highland- first thoughts
The next chapter begins in following the Highland grow story, a peculiar tale if there ever was one. I think a recap here might help out the IM Cann owners who will hopefully share some good insight.
Highland was first formed by Cultivator Catalyst corp around 2016/7 as a later stage medical applicant. The company, brought to market in late 2018 by way of Biome Grow (Orca Technologies rto as per most of these listings) at a not absurd $200 million valuation given the excitement at the time. Biome's plans were to originally build several hundred thousand sq ft of grow capacity in Ontario and Newfoundland, even managing to secure a lucrative tax break deal from the NL government in exchange for facility and jobs gurantee. After a few million was burned and the air let out of the initial cannabis wave, Biome shares dropped from $2 down to a low of 0.025 at one point in Feb. 2020 when announcing the abandonment of almost all major capex.
However during that whole fiasco Highland grow, from a small sub 10k sq ft facility came to become a dominant brand in the super premium category. Intially starting with small maritime distribution the footprint began to grow nationally. Dwindling cash and a tough finance market put Biome in a difficult position. Enter MYM.
MYM was also swept up in the late 2017 exuberance, rocketing to over $4 from a tenth of that a few months earlier. Their grand plans were a million sq ft facility in Weedon QC, international Australian plans etc. A lot of talk of the time thinking the investment dollars would flow. Their ace was simply the small 30k sq ft Sublime Culture faclity in Laval QC. Submitting application for HC approval they like many others got caught in limbo waiting for that day, burning cash, unable to really do anything. Eventually being awarded that grow license, MYM now too was a shell of its former self with little cash, an amazing state of the art craft facility and no means to get it to market.
MYM and BIO formed a strategic partnership that saw then Biome director Mike Weiner, enter into a postion of CEO with MYM. It entailed an all stock deal that would see BIO give up their only good asset Highland in exchange for a substantial interest in MYM. Within a week the deal was closed and now MYM had instant cash flow and Biome had an out for their obligations.
Many shareholders from either side share feelings of anger, resentment, frustration, at what are purported to be lies from management. It could also be just bad circumstances but there are many who will be vocal about how either company ran their respective business. None of that really matters anymore. For personal disclosure I own shares in both MYM at a signicant paper gain, and BIO at an equally large loss. I simply follow Highland as that is the key asset here and what everyone is after.
In a completely saturated Canadian market where cannabis has already become a cheap commodity, Highland grow continues to position themselves as the premium name brand in the Canadian craft cannnabis market. Holding a seed bank with Sublime culture of over 150 strains gives them one of the best positions to leverage their brand and sell product at a higher margin with few competitors. As mentioned in the release since the MYM/BIO deal Highland has expanded into every market in Canada except QC, though I expect that could change soon.
With IMs pending deals in Israel and Germany, the door is now open to begin an early start at positioning select brands into an international market. It will be interesting to see if that initial medical shipment will carry a Highland strain name. Israel has committed to recreational use within nine months and the current state of things is going well from what I've read.
Owning Highland now allows IM to book what will be high 20 million in revenue for the current year from what is a high margin profitable operation. The price paid of $87 million in stock is reasonable, not cause for celebration on its own. The long term play is now being part of once again an even larger platform that is properly positioning itself to be an MCO, multi country operator. Let that sink in.
Recent share consolidation and a NASDAQ listing places this in a rarer group of companies with such wide market exposure. The prospectus filing of $250 million over two years will of course imply dilution but this one may very well be a monster.
I don't know how I overlooked this to be honest. I was a very early owner of Cannaroyalty/Origin House, Marc Lustigs previous sucess, and rode that up and down until the Creso buyout of $1 billion. If IM can deliver the multi thousands of kilos into the high margin pharma markets of Germany and Israel, followed up by EU recreational use, man, watch out. I need to dig deeper to see what the big boys are up to in different parts but at $400 million MC right now, if the plans are executed well this will be something to see. Looking forward to researching this company more and willing to hear all opinions on the state of things.