SinglePoint Executes on Cannabis Acquisition Strategy
March 15th, 2017
The cannabis industry is expected to be worth upwards of $50 billion over the next decade, which has spurred a lot of interest in the space among investors. Despite the rapid growth, there are many risk factors that investors should carefully consider, including the risk of a federal crackdown on recreational marijuana and competition from the tobacco industry. Ancillary product and service providers may be an appropriate way to diversify some of these risks.
In this article, we will take a look at how SinglePoint Inc. (OTC Pink: SING) is following through on its goal of rolling up smaller companies and building a promising presence in the space.
Rapidly Growing Industry
The U.S. cannabis industry is expected to be worth $50 billion by 2026, according to Cowen & Co., driven by ongoing legalization across the country. The analysts see the tobacco industry grabbing a fifth of the market by 2036, adding more than 20% to their revenue and nearly doubling their underlying growth, thanks to their well-honed ability to navigate regulatory issues and significant existing resources to enter the market and scale up.
Cannabis investors may want to focus their efforts on ancillary products and services that are well-positioned to grow without competition from Big Tobacco. In addition, these companies benefit from reduced regulatory risks in the current market – especially following negative comments from White House Press Secretary Sean Spicer and Attorney General Jeff Sessions suggesting that recreational marijuana could see a federal crackdown.
Smart Acquisition Strategy
SinglePoint’s strategy is to build a portfolio of cannabis-focused businesses by acquiring and incubating accretive small- to mid-sized companies that are involved in these ancillary (e.g. non-drug-touching) areas of the market. After acquiring a business, the company plans to leverage its access to capital markets, existing customer base, and management’s expertise to help grow the business and ultimately deliver long-term value to shareholders.
The company announced its first major investment in Jacksam Corp. dba Convectium – the profitable creator of the 710Shark and 710Seal system for filling and packaging vape cartridges or disposable vape pens. The 710Shark is the only machine on the market which fills cartridges or disposables en masse (more than 100 in 30 seconds) for wholesale distribution. This one-of-a-kind cartridge/vaporizer filling machine can fill both disposables and/or reusable cartridges made of plastic, glass, ceramic, or stainless steel with no exchange of parts or equipment necessary. The complementary 710Seal machine completes the pioneering end-to-end system by sealing the products in childproof blister packs.
The initial $800,000 investment could pay significant dividends over the long-term with Convectium projecting revenue of $3.5 million this year, which represents a 150% increase over the $1.4 million in revenue reported last year. According to Eaze, a legal cannabis delivery network, vape orders from its California customers comprised 6% of total sales in 2015 but rocketed to 24% in 2016. This trend may reflect consumer preferences in the wider market as well, indicating a wealth of potential for Convectium’s revolutionary packaging system going forward.
SinglePoint also operates a mobile payment solution geared towards the cannabis industry called SingleSeed. By providing non-cash payment solutions, the company aims to simplify transactions for dispensaries and consumers. The company also provides text message-based marketing solutions designed to help engage customers and drive sales. The client base from these efforts dovetails nicely with its acquisitions focused on the same end markets.
SinglePoint Inc. (OTC Pink: SING) represents a compelling opportunity within the burgeoning cannabis industry. With a market capitalization of just $40 million, the company trades at a fraction of its potential long-term value as it acquires small- to mid-sized businesses operating in ancillary parts of the industry. Investors may want to consider the stock as it completes its first major acquisition of a profitable and rapidly growing business in the space.
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