TransCanna Acquires Massive Vertically Integrated Cannabis Facility in California
April 24th, 2019
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California’s cannabis industry is projected to generate more than $6.5 billion in annual revenue by 2020, according to New Frontier Data and Arcview Market Research, which represents a 23.1% compound annual growth rate. Many companies are racing to build their production footprint, introduce new brands, expand distribution, and open new dispensaries, but few have reached a scale that could make them a statewide leader.
TransCanna Holdings Inc. (CSE: TCAN) (FSE: TH8) provides branding, transportation and distribution services through a wholly-owned network of California subsidiaries. Last week, the company acquired a 196,000 sq. ft. vertically-integrated cannabis production facility in the state as well as subleased space for the first of its satellite facilities in Adelanto. Through this network, the company plans to introduce up to 15 reliable, consistent branded products.
Let’s take a closer look at California’s market and how TransCanna is well positioned to take advantage of the market over the coming quarters.
California’s Huge Potential
California legalized recreational cannabis in November 2016, but new laws didn’t go into effect until January 1st, 2018. With over 800,000 medical cannabis users, 40 million residents, and over 240 million visitors per year, the state’s cannabis industry is larger than Arizona, Colorado, Oregon, Washington State, and Nevada combined. The state’s market is even larger than the entire Canadian cannabis industry, according to Statista.
These figures are likely to grow as legal production overtakes the black market. According to BDS Analytics, the black market still provides about 80% of all cannabis sales in the state compared to only 30% to 40% of sales in states like Colorado and Oregon. Regulators are starting to recognize these problems and loosen the high taxes and regulations that have been hampering the state’s legal industry since the beginning of 2018.
While the state industry is highly regulated—making it difficult for some producers to compete with black market products, these same regulations provide successful companies with barriers to entry. The license portfolios acquired early during the state’s rollout (e.g. 2018 and 2019) could become even more valuable as the industry matures over time. Investors may want to take a closer look at companies building a supply chain in the state.
The Making of a State Leader
TransCanna raised C$16 million in an oversubscribed brokered private placement in early-April, where it sold eight million units for C$2.00 containing one common share and a purchase warrant for one half of a common share at a price of C$3.00 through 2022. The company used these funds to make a C$8 million down payment on the 196,000 sq. ft. cannabis facility in California, as well as purchase equipment for the facility.
“A tremendous effort by the TransCanna team on closing arguably the largest vertically integrated cannabis focused facility in California,” said Jim Pakulis, CEO of TransCanna. “Simultaneous to putting our efforts into purchasing the facility, we’ve been searching extensively for the key individuals who will be overseeing the day to day operations. We’ve made great strides over the past several weeks.”
The company’s long-term plan is to have the 196,000 sq. ft. facility serve as its primary base of operations with five smaller satellite facilities located throughout the state. After subleasing the first of these satellite facilities at a rate 30% below market, the company is shifting its focus to scaling up the two facilities with the equipment and personnel needed to execute on its goal of launching up to 15 branded products across the state.
TransCanna Holdings Inc. (CSE: TCAN) (FSE: TH8) aims to build an end-to-end supply chain in one of the largest legal cannabis markets in the world. After acquiring a 196,000 sq. ft. vertically-integrated production facility, the company is well positioned to mass produce a wide range of products for the state’s nascent market, which it can then distribute through its network of satellite facilities that it’s starting to setup around the state.
For more information, visit the company’s website at www.transcanna.com.
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