Jack Smith
The Green Organic Dutchman Holdings (TGOD) said it would boost the size of its initial public offering to $115 million based on increased investor demand. The stock will begin trading on the Toronto Stock Exchange at the market open on May 2, 2018.
Aurora Cannabis, which already owns a stake in TGOD, will be exercising its right to participate in the IPO, which has yet to set a date. Aurora, which already trades on the Toronto Stock Exchange under the ticker symbol “ACB,” owns approximately 17.5 percent in TGOD.
As a result of the added purchases by Aurora, TGOD amended its prospectus, which initially had the company raising $102.2 million, selling 28 million shares at $3.65 per unit. A unit consists of one common share in the company, as well as half of a share purchase warrant. The warrants are exercisable at $7 per share.
TGOD, which refers to itself as a “research and development company” and is led by CEO and Co-Chairman Robert Anderson, will use the funds for general corporate purposes, including helping to build out its facilities in Ontario and Quebec. Currently, it has facilities in Ancaster, Ontario, where it produces cannabis from.
The company was issued a license by Health Canada that allows it to produce dried marijuana, marijuana plants, and fresh marijuana at its 100-acre property near Hamilton, Ontario, and to sell such marijuana products within Canada to Licensed Producers. TGOD has constructed a modular cannabis oil extraction laboratory for the purpose of developing traditional and new extraction technologies and products through research and development.
In addition, TGOD has also applied for a license from Health Canada for the extraction lab. The company has also acquired a 49.99% interest in a Québec company in a 72.4-acre property in Salaberry-de-Valleyfield, QC, that it intends to develop into an
820,000 sq. ft. hybrid-greenhouse cannabis production facility, as well as a 2,700 sq. ft. research and development
breeding facility and a 20,000 sq. ft. flagship licensed dealer facility through a wholly owned subsidiary. TGOD also received a building permit in December 2017 to construct a 2,700 sq. ft. breeding and research facility in Québec that will be used to secure a cultivation License from Health Canada for the Québec Facility.
Investment bank Canaccord Genuity is acting as the sole bookrunner in the offering, which is being co-led with PI Financial, Industrial Alliance Securities Inc., INFOR Financial Inc., Echelon Wealth Partners Inc. and Mackie Research Capital Corporation as agents.
The timing of the upsized offering is curious, especially after cannabis-related equities fell sharply in the first quarter, particularly those based in Canada. However, TGOD believes it is one of only a few LP’s that provides organic cannabis which provides Canadians with a safer, more sustainable option for cannabis use, especially for medicinal purposes. With concerns over pesticides, organic cannabis is becoming more popular.
Extreme optimism led to investors bidding up cannabis-related stocks in 2017, especially towards the end, but that bubble burst a bit as investors fretted when Canada would legalize cannabis for adult use. Prime Minister Justin Trudeau and his team have hinted that recreational use could start in the fall, as opposed to July, as had been previously thought.
The sharp corrections seen in Canadian cannabis stocks are indicative of the entire cannabis sector in the first quarter. The Green Market Report Cannabis Company Index fell 21.9 percent in the first quarter, as regulatory concerns, especially in the U.S., weighed on investors’ minds.
