Cannabis firms are considering an IPO.
The burgeoning marijuana market includes several companies looking to raise capital to expand, acquire businesses and stay ahead of the competition by going public. U.S. and Canadian cannabis companies are anticipating growth in the recreational and medicinal use of marijuana. Although U.S. federal law prohibits the use of marijuana, medical usage is allowed in more than 30 states and the District of Columbia. "Having access to more capital and being able to use your stock as currency to make acquisitions or investments and grow the business are the main advantages of going public," says Michael Berger, founder of Technical420, a Miami-based company that researches on pot stocks. Here are five marijuana companies planning an IPO in 2020.
ManifestSeven, a Commerce, California-based integrated company that owns dispensaries and six delivery services, plans to go public as soon as the first quarter of 2020. The company has raised $22 million, is completing another fundraising round and does not have any debt. With that, ManifestSeven will have the infrastructure to expand if marijuana is federally legalized, Berger says. In January, the company acquired Lady Chatterley Health, a San Francisco-based cannabis delivery service focused on high-end women's products. "We're making acquisitions and have a strong balance sheet and are three months away from profitability," CEO Sturges Karban says. "This is the ideal time to go public."
A Central Point, Oregon-based multistate cannabinoid hemp plant producer, Hemptown USA could yield more than 2.5 million pounds of flower and biomass from the 2019 harvest season. The company has farmland across three states in Colorado, Oregon and Kentucky, along with extraction and processing capabilities. Cannabigerol hemp, or CBG, can sell for 10 times a kilo compared to cannabidiol, or CBD, which is a lesser quality, Berger says. The company has "substantial growth opportunities," he says. The company controls 40% of the world's CBG production, says Jason Spatafora, co-founder of Marijuanastocks.com and a Miami-based trader and investor. "They're going to be one of those companies that will fly under the radar for only for so long."
Pure Extracts, a Pemberton, British Columbia-based cannabis extraction company, could go public in the first or second quarter of 2020, Berger says. The company has strong brand recognition and will be white labeling and selling its own private label in the near term, he says. Berger adds the company's facility is well structured and developed as more consumers are turning toward products made in the legal market. Canada legalized the recreational use of cannabis in 2018 and began the rollout of sales shortly afterward.
A Canadian company, Shelter operates three divisions: Shelter Farmstead, a fully licensed facility in Canada; Shelter Craft Collective, which works to assist small farmers to get their product to market; and Shelter Brands, which includes products such as cannabis oils, vapes and dried flower. The company signed a white-label deal in January to work with MediPharm Labs, an Ontario-based company that provides pharmaceutical quality cannabis extraction, distillation and derivative product production. Shelter Brands has a good management team and is well-positioned to attain additional growth and brand recognition, Berger says.
Third Wave Farms
Founded in 2017, Third Wave Farms is a Huntington Beach, California, industrial hemp grower. The company has several ventures with other public companies and plans to expand farms in five states this year compared with farming in four states in 2019, says Trent Paasch, co-founder of the company. Third Wave Farms seeks to raise $70 million to $100 million when it goes public this year or in 2021 and list on a U.S stock exchange, he says. Third Wave Farms has raised $3.8 million in cash and has $1.8 million in debt. "Hemp is rapidly becoming a commodity and 2020 is about the company executing and expanding its acreage in the U.S.," Paasch says.
Marijuana companies poised for an IPO:
-- Hemptown USA
-- Pure Extracts
-- Third Wave Farms
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