Legal cannabis sales in California were double Canada’s in 2016.
To this point, legislation allowing for the largest legal cannabis market in North America came into effect this January in California.
Although geographically much smaller than Canada, California — the sixth largest economy in the world, according to Bloomberg — recorded more than double Canada’s volume of legal medical cannabis sales in 2016, as stated in a joint report by Arcview Market Research and BDS Analytics. According to the report, that accounts for over 30% of all legal sales of cannabis and related products sold in the United States that year.
Due to the dichotomy that exists between state-level and federal-level cannabis legislation in the US, most banking institutions have chosen not to do business with cannabis companies. This presents a unique challenge for new market entrants, as traditional channels for securing finance are less accessible, or not accessible at all.
But that challenge spells opportunity for FinCanna, a Canadian firm that has stepped in to offer financing to emerging California licensed medical cannabis companies, in exchange for ongoing royalties from those companies.
The firm has already inked a $14 million deal with one California-based proposed medical cannabis producer to partially finance the development of its new production facility to be constructed in Coachella, California.
“California is the biggest single market in North America,” says Andriyko Herchak, FinCanna’s CEO.
“It’s going to be a dynamic market space. With FinCanna’s royalty model, we should be very well positioned to see new top-tier projects, and to invest in these projects to the benefit of both FinCanna shareholders and the operators of the projects.”
Having completed their private financing round of C $7.1 million in late 2017, FinCanna launched publicly this December, trading on the Canadian Securities Exchange under the symbol CALI.
FinCanna’s going public came on the heels of an announcement that their flagship investment, Cultivation Technologies (CTI), will share with FinCanna 50% of the profits of CTI which are derived from CTI’s interim medical extraction facility currently operating in Coachella.
Recent changes to the agreement with CTI provides FinCanna with potential additional revenue during the interim period before CTI’s planned 111,500 square foot, state-of-the-art licensed facility is developed that will include cultivation, extraction, manufacturing, testing and distribution.
Herchak says the deal with CTI is just the beginning. With significant combined finance and banking experience, FinCanna’s management team is well situated to evaluate and act on new opportunities.
Part of the firm’s strategy is to continually evaluate new projects, and to expand the firm’s portfolio with promising royalty investments in top-tier companies and projects in the medical cannabis sector.
Photo of CTI extraction apparatus in operation at Coachella, California
This new California legislation will likely prove to be a boon for new companies eager to stake a claim in the California gold rush, but the new regulations effective in January of 2018 also include non-trivial barriers to entry for production companies.
Licensing is set to go through state and local governments, with anticipated wait times up to a full year or more. Even basic compliance with security standards can require significant capital commitments.
With costly obstacles to market entry, and with the lack of institutional financing options making those costs prohibitive factors, FinCanna’s royalty model is designed to enable both new startups and expanding companies to bridge that gap.
Also, it does so without requiring the owners of those businesses to surrender equity ownership of their companies. Instead of selling voting shares, clients provide ongoing royalties to FinCanna and can retain full control of the shares of their companies.
As this royalty model is scalable, FinCanna is poised for expansion to aid top-tier companies operating within the California licensed medical cannabis market boom.
Please visit the company’s website for additional information and associated risks, the company at
https://fincannacapital.com/
[Editor’s note: The opinions in this article are coloured by the fact that its author is a shareholder of the company.]
About the Author: Marc Davis has a deep background in the capital markets spanning 25 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.