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Canadian Rec Cannabis Leader Adds Large Alberta Footprint

Jeff Nielson Jeff Nielson, Stockhouse
1 Comment| February 27, 2019

Click to enlargeThe legalized market for the recreational consumption of cannabis in Canada is nearly six months old. However, cannabis investors would never know this from looking at the share prices of cannabis companies with connections to this recreational market.

While cannabis valuations have been tracking higher for many companies in recent weeks, these share prices are still recovering from the massive, irrational sell-off that hit this sector in Q4 of 2018. Few companies have equaled their pre-October 2018 share price, let alone added value based upon this large, emerging market.

Meanwhile, media stories abound as this market takes off:

Canadians spent $43M on cannabis in first two weeks after legalization: StatCan

Pot’s retail therapy: Marijuana market could be bigger than the market for beer in Canada

Alberta experiences cannabis retail boom as 100 more stores to roll-out by mid-November

Even as these strongly bullish stories were emerging from the mainstream media, valuations for companies seeking to capitalize on this market were heading straight down. This disconnect between fundamentals and valuations spells opportunity for cannabis investors.

One cannabis company that is squarely focused on the booming retail market is Choom Holdings Inc. (CSE: CHOO, OTCQB: CHOOF, Forum). Choom has already been covered in previous Stockhouse articles, beginning with a full-length feature from January 22, 2018.

That article alerted investors to (at that time) a new entity that was positioning itself for this enormous, pending opportunity. One cannabis industry player that took immediate notice of Choom is Aurora Cannabis Inc. (TSX: ACB). One of the dominant players in the cannabis industry, Aurora made an initial $7 million strategic investment in June 2018 and then followed that up with an additional $20 million strategic investment in November 2018.

At that time, Aurora secured the right to acquire up to 40% of the Company, at a set share price of $2.75 per share. That’s a strong endorsement of Choom’s potential and how Aurora sees Choom as a value proposition. At its current share price of (as of this writing) $0.50, investors have the opportunity to capitalize on this value disconnect.

Choom has been busy. On February 13, 2019; the Company announced an LOI with one of Ontario’s recreational cannabis “lottery winners”. These selected companies have been granted the opportunity to apply for a license for retail cannabis store operations in that province.

Much further advanced are the Company’s retailing initiatives in Western Canada. Choom has already secured rights to more than 50 retail opportunities in Western Canada. Crowning these initiatives is Choom’s most recent acquisition.

On February 27, 2019; Choom announced a definitive agreement to acquire 100% of the shares of Clarity Cannabis MD Holdings, a major player in recreational cannabis retailing in Alberta. Clarity operates three licensed cannabis retail stores. A total of 10 stores have been completed for retail operations with two more currently under construction.

Clarity holds a total of 30 leases for cannabis retail operations in Alberta and has 19 pending applications to the Alberta Gaming, Liquor & Cannabis Commission (AGLC) for licensing the retail outlets. Moving forward, these stores will be branded to the Choom™ trademark with the AGLC’s approval. Choom’s President and CEO, Chris Bogart framed this transaction for investors.

“We are thrilled to welcome Clarity into the Choom brands portfolio through this acquisition. Clarity has been successfully operating two stores in Alberta since December and has submitted applications in highly secured areas all throughout the province which increases our competitive advantage in the adult use cannabis retail channel.  Moving forward we will be working diligently to maximize our retail footprint Canada wide, and this transaction helps us to achieve that goal.”

A large retail footprint in Alberta (and Western Canada). A growing retail cannabis footprint Canada-wide. All this with a bargain-basement valuation. While the Canadian recreational cannabis market is six months old, muted valuations mean that this market – and Choom itself -- is still a ground-floor opportunity for investors.

With its large retailing presence and major strategic backer (Aurora Cannabis) and with Canada’s recreational cannabis market still in the early stages of evolution, Choom offers investors “an elevated customer experience” and brand diversity.

Click to enlarge

Say Hello To Choom™

The Company’s trademark (and slogan) is aimed primarily at the 30+ million Canadians who now have legal access to recreational cannabis for the first time. However, as cannabis investors position themselves for a belated rise in recreational cannabis valuations, many may wish to “Say Hello” to opportunity.

FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.

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