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The Tilray, Aphria deal makes sense and will give better access to Europe: Collective Growth Corp. Chairman

Bruce Linton, Collective Growth Corporation Chairman and Former Canopy Growth CEO joins the Yahoo Finance Live panel to discuss Lidar Startup Innoviz and what to look for in the cannabis industry heading into 2021.

Video Transcript

ZACK GUZMAN: Welcome back to Yahoo Finance Live with the focus today in the cannabis hot box with the founder of Canopy Growth. He's had a very busy year, whether you want to look at the investment he's made in a psychedelics exploratory company in MindMed, or the fact that he's still helping out as executive chairman in Gage Cannabis, a Michigan-based cannabis company there.

Of course, we all knew him first as the founder of Canopy Growth. I want to bring in Bruce Linton once again on the show here. Bruce, there's a lot going on in the cannabis space, a lot going on with you personally in terms of all the ventures you've got going on. But I want to start with the merger that we got yesterday between some of your former competitors in Tilray and Aphria.

Just to get your first initial reactions because the two combined are going to control about 20% of Canada's recreational market. But some are saying that, look, this consolidation just needs to happen because there's not a lot going on up in Canada as these companies wait to access the US market. But what was your take when you saw that deal come through?

BRUCE LINTON: Yeah, so great deal. I think it makes a ton of sense, right, that this is going to give way better access to Europe. It's going to cut-- you know, they've got the synergies. My big question mark on it isn't any of that stuff. They've got about 500 million-ish of cannabis revenue and about 300 million-ish of hemp seeds and pharmaceutical distribution.

What I want to see is what's the actual margin breakout on that nearly $300 million of revenue? Because they'll probably have to kind of click through that. But I think everyone's making great moves. Who's next? If you're OGI, OrganiGram, I bet you're wondering about a dance partner. There's a few other players that have some real content that I can't see why they're not going to mash together.

ZACK GUZMAN: The other thing too is that, you know, Aphria bought out SweetWater Brewing, an Atlanta-based beer company there. Of course, your company, your former company there in Canopy Growth, is also focusing extremely on beverages. When you think about moving to the US, though, we know that Canopy's beverages are going to be coming in the summer of 2021.

Aphria's working on it, it sounds like, with Tilray, but there's a lot of questions about how they're going to access the US market. And, you know, all the multistate operators that are building up right now, well, they're locked out of that opportunity.

BRUCE LINTON: Yeah, like, a part of the reason we did this structure with Acreage in the way we did is we can actually provide to them the intellectual property to make the beverages and not go offside and lose, you know, NASDAQ, as they are now, or NYSE. I don't know how you execute a beverage strategy in the US in something that you own 100% of.

So that'll be an interesting thing to see how they work through it. But listen, man, last summer, if you came to Canada and got to try the beverages, particularly the grapefruit version from Houseplant, you would say these are so much better than Spiked Seltzers, zero calories, not a few, and fantastic effects. So next summer, I bet everybody's going to be hugging and kissing and a lot more fun in America.

ZACK GUZMAN: I'm hoping that's the case. We're all hoping for a little bit more fun here as we're all on lockdown and still worried about all this. But Bruce, the other thing too is, I mean, you're executive chairman of Gage. That's a company that's focused on the opportunity in Michigan. While we're talking about the opportunity here back in the US, you know, that's a company you're looking to list, what, next year.

Talk to me about the growth that you've seen in some of these plays where you're just focusing on one state. Instead of the whole opportunity, you just kind of zone in on it. What's that growth look like?

BRUCE LINTON: Well, it's been unbelievable. So Michigan hasn't really been in the core of the conversation. But, like, the last couple of months have been more than 100 million revenue for the state on cannabis per month. And Gage has, like, total focus, they've got Cookies brand, they've got some SLANG brands there.

And we just saw absolutely ripping growth through Q3. What we try to do is in Q4, we said, well, what you don't want to do is go public and fall over the line. What you want to do is make sure that your grow is producing a great quantity, great quality, that your processing centers can fill your stores and that you have really good locations for retail.

And so we're just sort of working our way through our reggae. Probably Q1 listing in Canada. And the whole logic was be great in a state and don't arrive to the public markets running on fumes. And so it's really a mature operation run by combinations of people from automotive expertise on supply chain to some of the best hydroponics and grow guys you'll ever meet.

AKIKO FUJITA: Bruce, clearly, you've got a lot happening in the cannabis space, but you recently backed a Lidar startup to go public through a SPAC, Innoviz, of course. And I am curious what attracted you to the company and how big you think ultimately the addressable market is there?

BRUCE LINTON: Yeah, so the company, the SPAC was called Collective Growth. We position-- you know, it's a blank check company, but we positioned initially that we were going to either be disruptive industrial with hemp or food to pharma. And so this SPAC goes out to make a hemp pizza, and the next thing you know, you come back in a driverless car and people say, well, how did that happen?

Well, if you look at who is the biggest producer of the most hemp-based cars on the planet is BMW. You can buy an electric car 21% hemp inputs. Who's using the Lidar system from Innoviz to have a car probably Q3, Q4? BMW. And who's a big shareholder? Magna. Well, who could be a supply chain for that?

So love how they actually have adopted the technology to be a software upgrade. So you can get it today, use it today, and as the automakers want to make more and more responsibility, that of the automaker, for how your car drives, it's simply a software upgrade. Right price point, right process. And what I liked is our connective tissue improved into the disrupting markets that we want to go to should we ever do something with hemp.

ZACK GUZMAN: In the car space specifically?

BRUCE LINTON: Well, sustainable industrial. Like, what's COVID told us? We like shorter supply chains, we like if things are environmentally sustainable. So hemp as an input is massively disruptive. It's about three times more carbon capture than any other field crop. So this is still a theme I like. But where you don't want to do is say, like, I'm not going to compete with Tilray and Aphria trying to get you to eat a handful of hemp seeds. That is a good business, but it's a low margin business.

ZACK GUZMAN: Yeah, no, that's an interesting point there too because I think some people might have lived-- or looked too deep into the fact that Collective Growth wasn't able to find necessarily a direct hemp play there and said, uh-oh, maybe there aren't opportunities here. But we have talked before in the past about maybe using hemp in some more industrial processes to cut down on some of those-- the carbon footprint piece as well.

Not a lot of automakers have pursued it, so interesting to see if something comes of it. But I also wanted to ask you about the MindMed piece of what your time's going to hear as well. Because both you and "Shark Tank's" Kevin O'Leary invested in MindMed. You've been working with them for some time.

It sounds like making progress on the phase two trials now. You're looking at LSD properties to maybe help patients struggling with some other mental issues there. Talk to me about that because the stock's up about 1000% since June. So what does the progress look like there?

BRUCE LINTON: Yeah, so I'll for sure hit that. Just to close on the prior one, part of the reason we did the deal with Innoviz is if you're an investor in a SPAC and you calculate quality of deal and time it takes to do a deal, and we have 18 months, we pulled the trigger in just after six months. So it means that if you put cash in, it gets to work sooner, you see a return sooner, which probably says, Mr. Linton, do you want more cash?

MindMed has been absolutely amazing in that it's been a combination of our strategy, which is not to back one altered molecule, but to build instead a portfolio. So think of it as creating a new industry based on a new drug class, taking good molecules on amending them to be better. And the scientists in the shop in my experience, and I'm not a scientist, but what they're working on, the way they're working on it, and the progress they're making is driving valuation.

Many investors, and as we announced our intent to cross this to NASDAQ, what they want to be involved is in the space, and what they don't want to be doing is crying in about six months when they picked the wrong horse. And so I think you're already seeing rapidly a flight to durability and quality, which is how we've been able to fill the coffers with cash, which will power the work, which we hope will then deliver the results.

And so, yeah, it's been a good start. I think if we annualize that kind of rate of return for several years, it should turn out quite well. That was a joke, Zack. Come on.

AKIKO FUJITA: Bruce Linton, the chairman of Collective Growth--

ZACK GUZMAN: There's a lot of jokes.

AKIKO FUJITA: --Corporation, it's good to talk to you. Thanks so much for your time.