The Green Organic Dutchman: Largest Cannabis IPO To Date
May 9th, 2018
Exclusive, News, Top News
The cannabis industry is projected to reach C$22.6 billion over the coming years, according to Deloitte, driven by the legalization of adult-use cannabis nationwide. As the only G12 country to legalize cannabis, the 90 or so licensed producers in the country have an opportunity to become global titans in the cannabis industry as legalization spreads. Investors have many opportunities in the space, but some may be better than others.
The Green Organic Dutchman (TSX: TGOD) (TGOD.WT) (OTC: TGODF) is a licensed producer that went public on the Toronto Stock Exchange on May 2, 2018. With fully-funded plans for 970,000 sq. ft. of production, the company could produce upwards of 116,000 kilograms of premium organic cannabis per year, making it among the largest licensed producers. Investors may want to take a closer look at the company following its successful IPO.
The Green Organic Dutchman successfully completed its initial public offering of 31,510,000 units at a price of $3.65 per unit for gross proceeds of $115,011,500. Each unit consists of a common share and one-half of one common share purchase warrant, with the warrant being exercisable at a price of $7.00 per common share for a period of two years. The company also has an acceleration right if the stock price exceeds $9.00 for any ten day period.
Enormous Footprint & Production
The Green Organic Dutchman has one of the largest land packages in the industry and is building a laboratory dedicated to oil extraction in Ontario, a genetics and breeding center in Quebec, and a cultivation facility in each province.
The two production facilities include:
- Quebec Project – A 75-acre property located near Montreal, Quebec, with an 820,000 sq. ft. high tech hybrid facility capable of producing 102,000 kilograms of high-quality organic cannabis per year. With access to $0.04 kWh electricity, the facility will be one of the lowest cost producers in the entire country. The company secured initial construction permits in December 2017 and began construction in January 2018.
- Ontario Project – The company’s existing facility in Ontario will be expanded to 150,000 sq. ft., which will boost production capacity to 14,000 kilograms per year. In addition, its agreement with Hamilton Utility will lower its electricity costs from 13 cents per kWh to just five cents per kWh. Construction of an oil extraction facility is also well underway.
These world-class projects could make the company a leading licensed producer of medical – and soon recreational – cannabis over the coming year. Unlike many cannabis projects, both of these facilities are fully funded to 116,000 kilograms of annual production, which limits dilution for existing shareholders and execution risk for new investors. The agri-park style developments also open the door for joint ventures, licensing, and distribution agreements in the future.
High Quality, Low Cost, Organic Product
Organic foods are a growing market subset, evidenced last year when Amazon bought Whole Foods for $13.7 billion. That trend transfers to the cannabis market as well. More than 60 percent of Canadian consumers considering recreational cannabis believe that consuming organically-grown and processed product is important, according to Hill+Knowlton Strategies. The company estimates that organic products sell at a nearly 30 percent premium to non-organic products, but only about five percent of licensed producers provide organic products, which creates an enormous market opportunity.
The Green Organic Dutchman is focused exclusively on organic production that avoids synthetic pesticides, synthetic fertilizers, and/or irradiated products. While several licensed producers have experienced product recalls, the company believes that its products will set a new standard for quality while remaining competitive in terms of price, due to its low electricity rates, efficient use of water, and its focus on sustainability and operational efficiency.
The company’s facilities are setting the industry standard for sustainability. The buildings are LEED certified, equipped with high-efficiency LEDs to reduce energy consumption and heat as well as in-house power generation with natural gas. Management is also working with the Grand River Conservation Authority for habitat creation and protecting species at risk, while collecting and reusing ~90 percent of its water and drawing the rest from natural on-site wells.
Strong Management & Partnerships
The Green Organic Dutchman’s management team has decades of experience in finance, plant cultivation, and consumer products. Chairman & CEO Rob Anderson has 22 years of experience in the capital markets, having raised $400 million for cannabis companies over the past 2 years.
VP of Growing Operations David Perron led the first Canadian certified organic licensed producer, at Whistler Medical Marijuana Corporation, before joining the company.
In addition, Head Grower Amer Cheema has 20+ years of experience in greenhouse vegetable production and won several awards for high production and best quality of greenhouse produce.
Strength in Consumer Packaged Goods
The Green Organic Dutchman’s latest round of staff additions highlight the company’s commitment to the emerging retail market for cannabis-based consumer products. Brian Athade, new CFO, comes most recently from Andrew Peller Limited, one of Canada’s leading consumer alcohol companies. He also served as Finance Director and CFO for Procter & Gamble, involved with multi-billion dollar international consumer products. Other key hires in sales, marketing and operations draw heavily from the beverage and consumer packaged goods sectors.
“We are very proud to introduce these new additions to the TGOD team. These individuals bring a vast amount of experience and proven success in their respective fields. TGOD’s ability to attract this outstanding talent is a testament to our vision and strategic plan. With our President Csaba Reider, TGOD now has over 125 years of combined consumer packaged goods experience from industry leading companies. The breadth and depth of experience on our management team will enable the Company to execute on its goal of becoming the world’s largest organic cannabis producer,” said Robert Anderson, TGOD’s Chief Executive Officer and Co-Chairman.
The Green Organic Dutchman is 17.62 percent owned by Aurora Cannabis Inc. (TSX: ACB), one of the largest licensed producers in the country. The $55 million cornerstone investment includes an immediate purchase order for 20 percent of The Green Organic Dutchman’s future production while the company also has immediate access to international markets. When it comes time to raise more capital, Aurora may also exercise options to acquire additional shares.
The Green Organic Dutchman represents a compelling investment opportunity in Canada’s burgeoning cannabis industry. With fully-funded plans to become one of the country’s largest licensed producers, investors may want to take a closer look at the company following its IPO.
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