Cannabis Holding Companies Offer Diversification & Growth Potential
June 26th, 2019
App, Exclusive, News, Top News
Suppose that you want to invest in a portfolio of cannabis companies. You could purchase an exchange-traded fund (ETF) or build your own portfolio by carefully selecting individual publicly-traded companies. While these are good approaches, you’re limited to publicly-traded companies and the valuations they’re assigned by the market. You can’t access privately-held companies at low valuations, which could offer compelling growth potential.
Cannabis holding companies, or investment companies, are publicly-traded entities that provide exposure to these smaller companies. Often times, these businesses start by providing consulting services to small cannabis companies. They may identify interesting opportunities through these connections and make strategic acquisitions in the space that are either consolidated into their entity or held as investments on their balance sheet.
For investors, cannabis holding companies provide greater diversification since they tend to hold many different companies across the value chain — in a single security. They may also have attractive growth potential since they can acquire private companies and provide the capital and expertise that they need to grow. Down the road, they could spin these companies off to shareholders to take them public as their own entity.
Let’s take a look at some cannabis holding companies, their approach to the market, and what makes them compelling for investors.
STWC Holdings Inc.: Consulting with Equity Agreements
StrainWise Consulting (OTCQB: STWC), better known as Strainwise®, is a complete ecosystem of entities and services supporting the cannabis industry, including capital formation, strategic partnerships, seed-to-sale consulting, design, marketing, and advertising. Through its unique approach to the market, the company creates significant value for cannabis entrepreneurs and businesses around the world.
The company’s business model involves three types of contracts:
- Service Only: The company provides services on an annual or monthly basis, which generates recurring cash flow, creates brand awareness for STWC, and opens the door to potential acquisitions in the future.
- Service + Equity: The company provides services in exchange for an annual amount plus a percentage of equity in the business. In addition, the company may have options to increase its equity stake in the future.
- Services + Investment: The company provides services in exchange for an annual amount plus an equity stake in the business, as well as makes a strategic investment and takes a more active role in the business.
The company has already signed contracts in Oklahoma, Puerto Rico, California, and Colorado, including a CBD retail location and dispensary in Oklahoma. In addition to plant-touching businesses, the company recently announced a new joint venture to develop a unique software package for cultivators, manufacturers, distributors, and retailers, that could open the door to high-margin recurring revenue streams.
ManifestSeven Holdings Inc.: Cornering the Supply Chain
ManifestSeven Holdings Inc. (Pending Ticker: MSVN) is focused on becoming the Amazon.com Inc. (NASDAQ: AMZN) of the cannabis industry by cornering the market for supply chain logistics. The company has already built an impressive list of subsidiaries, including Weden, its unified storefront and on-demand delivery retail brand, as well as Hippie Butler, White Coat Hemp Company, CM Smoke Supply, Puff Pack, and others; the Company also recently acquired MyJane, a wellness technology platform to curate cannabis experiences and subscription-based product boxes.
In addition to this supply chain focus, the company established its own real estate investment vehicle, called Vicinity, which is structured as a joint venture between the company and a network of high net worth investors aimed at acquiring, developing, and managing properties leased to licensed entities owned and controlled by ManifestSeven. Vicinity has already backed the acquisition of Oakland and Long Beach facilities.
After receiving shareholder approval to merge with P&P in April, it is only a matter of time before ManifestSeven lists on the Canadian Securities Exchange (CSE). At that point, the company could have a leadership position in the California cannabis supply chain.
Nabis Holdings Inc.: Entering 18 States in 18 Months
Nabis Holdings Inc. (CSE: NAB) (OTC: NABIF) is a Canadian investment company focused on investing in high-quality, cash flowing and strategic assets across multiple parts of the U.S. cannabis industry with the goal of expanding global. But rather than making hands-off investments, the company provides a hands-on approach that assists companies in enhancing their operational pedigree by leveraging top expertise.
The company aims to acquire positive EBITDA, vertically-integrated operators in limited license states with large addressable markets using a combination of cash and equity, along with incentive bonuses. Since sellers take a significant portion of consideration in equity, they are aligned with existing shareholders over the long-term. The company also aims to leverage any potential economies of scale that could be gained by holding related businesses.
Nabis’ initial focus is on Michigan — one of the largest medical cannabis states in the country — where it has definitive agreements in place to acquire eight strategically-located properties. In addition, the company has agreements in place in Arizona and Washington State, with the goal of entering ten states in 2019 and 18 states in 18 months. These states include California, New Mexico, Nevada, Ohio, Oklahoma and Oregon.
Cannabis holding and investment companies offer investors diversification and growth potential. While investors have many options for building a diversified portfolio, these companies could be suitable for those building cannabis exposure.
For more information on the companies profiled, please visit:
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