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Embattled Cannabis Heavyweight Maricann Stands Firm

Marc Davis Marc Davis,
1 Comment| March 6, 2018

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[Editor's note: the text of this article has been altered from the original version published March 6, 2018]

Marc Davis, the editor of and Germany's leading cannabis investment writer, recently spoke with Ben Ward, the CEO of the Maricann Group Inc. (CSE: C.MARI, Forum) – one of Canada's leading large-scale cultivators of medicinal cannabis.

Marc Davis: First of all, Maricann has been in the news lately due to the collapse of its recently-announced $70 million equity financing. Obviously, what many investors are now wondering is if this jeopardizes Maricann's business expansion in 2018?

Ben Ward: Not at all! In fact, we're already fully-funded to vastly increase our annual output of dried flower cannabis and high-margin cannabis oils, as well as our pipeline of other value-added cannabis-based products. Remember that we already completed a $40.25 million financing just a few months ago to top up our treasury.

All told, we're now funded to have 942,000 square feet of growing and processing capacity built-out in Canada. This will translate into 95,000 kilograms of annual production of dried flower, starting in 2019. And that's a very conservative estimate.

Click to enlargeWe're also on-schedule to bring on-stream one of the world's largest state-of-the-art cannabis growing facilities in Germany in 2019 with our joint venture partner, which will serve as a springboard for expanding our reach into the rest of Europe.

Again, I just want to emphasize that the intended recent $70 million cash raise was meant to be a contingency fund for any future business opportunities that we might want to pursue in Europe. As you suggest, it's important for our investors to realize that none of this money was earmarked for any of our existing business initiatives.

Marc Davis: So what are some of these initiatives and how quickly are they coming to fruition?

Ben Ward: Well our share price is already rebounding. And this is largely due to the fact that we have plenty of positive news flow that we are poised to announce in the coming weeks.

For instance, there will be a full national launch of our retail pharmacy initiative in Canada. Also, we're excited about our the pending launch in Europe of our globally-patented VesiSorb drug delivery technology through our subsidiary Mariplant.

This game-changer for the cannabis industry solves the problem of the very slow uptake of medicinal cannabis in the human body by conventional oral delivery means. Our technology reduces this process from around an hour or more to as little as ten minutes. We're also able to deliver six to seven times more cannabinoids to the patient than with conventional ingestion of cannabis products. This offers a far more powerful therapeutic effect.

Additionally, we are moving ahead with closing our acquisition of Haxxon AG in Switzerland, which will allow us to manufacture and market CBD-rich hemp cigarettes in Switzerland, followed by the rest of Europe.

To put this deal in context, there is an existing Swiss competitor that already sells 15 million Swiss Franc’s worth of cigarettes each month that are a blend of tobacco and hemp.

We believe that our non-tobacco products will prove far more popular, thereby allowing us capture the lion's share of a largely untapped market place for CBD-infused products that is estimated to be worth at least $2 billion Euros per annum. All told, we expect to open up markets for CBD-infused, tobacco-free cigarettes in around 18 European nations.

We also expect to begin importing cannabis to Germany some time in Q2, followed by domestic production at our Dresden area facility once all our permits are in-place.

Marc Davis: So Ben, with so many great things going on with Maricann, why did your last financing endeavour come undone?

Ben Ward: The whole cannabis sector sold off immediately following the launch of our financing. One of the underwriters likely didn’t have the capital to execute on our financing if its clients pulled their orders. But the financing was a so-called “bought deal”, meaning that the underwriter in question could not back out.

Consequently, one of the underwriters illegally leaked confidential information regarding the company to the Globe and Mail, which got published on the front page of this newspaper. That included leaked confidential documents from the Ontario Securities Commission that were not for public consumption. Frankly, this was a shocking and unprecedented turn of events.

The Globe article was a clear “hit piece”, including not only the regulator’s documents but a copy of the engagement agreement. This came complete with a false spoon-fed story on how one of the underwriters thought that this gave them an “out” of the deal that they didn’t contractually have.

So they likely thought they could create an environment of opinion in the market that would kill the deal, while at the same time destroying Maricann’s shareholder value.

Marc Davis: Was this then just a matter of bad timing for the underwriters who no longer felt that a weakening market for the cannabis sector could justify a $4-a-unit equity financing?

Ben Ward: No. There was clearly something nefarious afoot. We believe the underwriter in question was working with clients that shorted our stock in the wake of the deal collapsing with the intention of destroying Maricann’s shareholder value and making off like bandits at the same time.

We are also of the opinion this may have also served another hidden agenda, which was to allow one of our competitors to engage in an attempted takeover bid for Maricann, thereby trying to acquire the company on the cheap. In this regard, there was collusion on the part of this underwriter as far as I'm concerned.

Consequently, we are considering pursuing legal action. In fact, we are going to hold accountable to the full extent of the law any party that was acting in bad faith.

Marc Davis: Ben, it's my understanding that an apparent effort to discredit and weaken Maricann may have also become personalized. Is that right?

This is true. I'm convinced that this one underwriter even tried to throw me personally under the bus by leaking to the media information about a confidential Ontario Securities Commission investigation into my past involvement with an entirely different business venture. Most importantly, this matter is entirely unrelated to my role as CEO with Maricann.

What's really frustrating is that this illegal leak of confidential documents smacks of a personal smear campaign in the attempt to permanently cast a cloud of suspicion over the company.

All I am allowed to say in my defense at this time is that an independent special committee of Maricann's board of directors has conducted a full review of this issue and has concluded that there is no reason why I cannot continue in my role as CEO of Maricann.

Marc Davis: I understand that one of the reasons why Maricann was scrutinized by stock market regulators was the timing and reporting of certain trades of shares owned or controlled by two company directors.

Ben Ward: This is correct. This matter has already been dealt with internally by Maricann. The two directors in question have now resigned and Maricann has moved on. The business itself is in great shape and there’s nothing holding us back. It's full steam ahead for Maricann.

Marc Davis: So you don't anticipate any more head winds for Maricann in 2018?

Ben Ward: No I certainly don't and to put matters in a proper perspective, this is not the first time that forces have conspired against Maricann in the hope of handing us on a platter to an attempted takeover candidate. It happened last year, too and it obviously failed. Now we're an even stronger company with an even more dynamic business model.

So investors can take heart from the fact that we are well on our way to becoming a dominant cannabis cultivating company in both Canada and in Europe. And nobody is going to rob us of our hard-earned shareholder value and prospects for an even brighter future.

Marc Davis: I'm sure Maricann will continue to make headlines in 2018 – and for all the right reasons. In which case, I wish you continued success. Ben, thank you for your time.

Full Disclosure: Maricann Group Inc. is a paid client of Stockhouse Publishing.

About the Author: Marc Davis has a deep background in the capital markets spanning 30 years. He is also a longstanding financial journalist, having worked for leading digital financial news agencies in North America and in London’s financial centre. He is also a former business reporter for CBC Television.

Over the years, his articles have also appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post and AOL.

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Ben Ward does not mess around. The timing of events was very suspicious. Glad to see that Maricann is engaging firms to clear up the noise in the markets.
March 6, 2018

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