The cannabis market is starting to open back up, but there’s a new normal. Gone are the days of overambitious spending and overhyped plans. Instead, operators are looking for the resourceful way to ramp up.
Cannabis investors have seen the market slowly adjust to the new norm. The largest LPs were forced to scale back staffing and production as cannabis stores were rolled out more slowly than expected, and many realized that the further legalization and normalization of cannabis was further away than anticipated.
But over time, the story is coming true. Cannabis sales are indeed increasing and ramping up, even in spite of the COVID-19 coronavirus pandemic (and in some parts because of it). Though the market was beaten up over the last year, operators are focusing on picking up activity as they make it out of the storm, and a golden opportunity for cannabis has emerged.
With stocks depressed following a rough 2019, value is once again everywhere to be found, and once again we’re starting to see waves of investment in operators. Likewise, the worsening state of the market made financing difficult to attain for many incumbent and new operators alike, and put the spotlight on companies like
Xtraction Services Holdings Corp. (“XS”) (
CSE:XS,
OTC: XSHLF,
Forum).
Stockhouse readers familiar with the equipment leasing and financing company know that XS has
already had an impressive year in 2020. After posting a strong and foundational fiscal year in 2019, including many new leases and a
massive strategic partnership with
KushCo Holdings Inc. (
OTC:KSHB), the company’s pipeline was already set up for success.
This week, XS reaffirmed that it can capitalize. On May 12, the company announced that it had
secured a lease agreement for up to US $3.4 million with one of the largest private cannabis operators in the US,
PharmaCann Inc. Deployed in tranches on a pro-rata basis and based on 48-month terms, the first tranche of US $0.87 million is already going to help PharmaCann expand manufacturing capabilities in multiple markets.
For the team at XS, this deal solidifies that the company has hit the right spot in the market. Everyone from incumbent operators to rising producers are looking for equipment and financing, and the company’s business model is allowing it to pick the best possible deals. David Kivits, the CEO of XS, highlighted the strength of the PharmaCann deal specifically as elevating them even further:
“PharmaCann is one of the largest vertically-integrated cannabis companies in the United States, committed to providing safe, reliable, top quality cannabis to improve people’s lives. They represent the quality of customer XS is looking to work with and we are proud to be an integral part of their growth. PharmaCann, a major multi-state-operator, is one of the largest leases XS has signed to date and we are aggressively working to add new customers through our current pipeline of +32 advanced discussions with potential new customers. We are excited with the trajectory the Company is taking and look forward to providing additional updates as they become available.”
It’s important to note how far-reaching PharmaCann is as a new XS client. The vertically-integrated company operates in cultivation, manufacturing, distribution and retail in six states that are seeing significant cannabis market growth, including Ohio, Illinois, Massachusetts and Pennsylvania.
Further, the deal allowed XS to tap into and expand on its Preferred Vendors program. In addition to utilizing Preferred Vendors to match PharmaCann up with the right equipment seamlessly and allow for faster procurement, the company also managed to add new OEMs to the program through the connections made with its new client.
All in all, it’s another concrete example that the company’s business model is on the money. XS was built from the ground-up with the knowledge that the cannabis market lacked a proper leasing and financing arm, and by using a business model that has been successful in equipment and real estate for decades, it has been able to solidify its place in cannabis. PharmaCann might be the company’s biggest deal so far, but if history is any indication, don’t expect XS to let its foot off the gas anytime soon.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.