The most important information to look at when analyzing a cannabis SPAC…
One of the main benefits of launching a cannabis special-purpose acquisition company (SPAC) is the speed in which it can raise money.
As soon as the money is raised, a cannabis SPAC can aggressively go after a target and make an acquisition.
But the catch is that you won’t know what the special-purpose acquisition company is going to buy ahead of time.
In an SEC filing, the executives behind a SPAC do not have to list what they are going to buy. They can list broad criteria for the type of opportunities they might pursue, but they won’t name a specific company that is on their radar.
Now, there’s still a lot of valuable information for investors to review in SEC filings.
That’s why we wanted to dive into the filing for Tuscan Holdings Corp. I (Nasdaq: THCBU), one of the first cannabis SPACs to raise money.
A Google search will easily show you where to access the SEC filing for Tuscan. But once you access the filing, it can be a bit overwhelming.
In fact, it would take 211 pages to print out!
We do recommend familiarizing yourself with the prospectus summary, risk factors, and the use of the proceeds. But today, we wanted to show you a shortcut for how to get down to business.
There is a section in the report in the table of contents labeled “Proposed Business.” That’s where investors can get a better understanding of the type of business Tuscan could purchase.
” Potential areas of interest in the cannabis industry include but are not limited to domestic and international businesses that are ancillary to the production, distribution and sale of cannabis as well as businesses that legally cultivate, process and/or aid in the retail distribution of cannabis.”
This description is a little broad, but remember that it has to be broad.
What it does tell us though is that Tuscan could invest in an extractor or an equipment company in the United States. With its line that it is also looking at opportunities with businesses that legally cultivate, process, and/or aid in the retail distribution of cannabis, that could be referring to a potential investment in a Canadian business.
So, after you have a little bit better of an understanding – even if it is vague – of what the cannabis SPAC might buy, you can then turn your attention to the management team.
That’s the secret sauce behind cannabis SPACs.
The executives behind the operation will be able to target a business, turn it around, and make a tidy profit for shareholders.
In this guide, you are free to learn more about how a cannabis SPAC operates and even more about why the management team behind these “cannabis cash piles” is so important.
2 responses to “What to Look for in a Cannabis SPAC Filing”
April 08 2020