You can build a business or buy one. Buying can unlock a lot of profit potential. And fast…
Fill out paperwork stacked to the ceiling, pay thousands of dollars in application fees, and then, if you’re lucky, you receive a license to open a cannabis business.
But wait…that’s just the first step in getting things up and running.
After that, you have to build a brand and attract people to your dispensary…without advertising it on social media or having TV commercials like any other business.
You also have to invest heavily in security and technology for safety and to make sure you’re following all compliance laws.
That’s why running a successful cannabis company doesn’t happen overnight; even with the best management team, it takes years to go from a single store to a national brand that’s generating money.
However, something’s been happening over the past year and a half that’s changed all of that.
Savvy entrepreneurs have found a way to skip waiting for all of those things I listed above.
Instead, by raising huge pools of money, they are able to acquire the biggest cultivation facilities in a state, brands that people already line up around the block for when new products are released, and dispensaries that have been up and running for years, serving hundreds, if not thousands, of people per day.
This approach is creating moneymaking machines.
There’s a $7.5 Billion Bounty up for Grabs in California
Special-purpose acquisition companies (SPACs), which we also refer to as Cannabis Venture Trusts, are essentially groups of entrepreneurs from all walks of life getting together, raising money through an IPO, and buying a business or a handful of businesses.
The entrepreneurs, who have done everything from run companies to serving as high-level attorneys, believe they can use their experience to make acquisitions and have the companies they acquire make even more money than they previously were.
That sends us to California.
It’s a competitive market with more than 900 manufacturers, 1,000 brands, and over 6,000 cultivators…but it’s still a market where companies can make a lot of money.
The state sells more legal cannabis than anywhere else in the country, with sales reaching $4.4 billion in 2020. That’s a 46% increase from the $3 billion worth of cannabis sold in 2019.
So instead of building something from scratch and being yet another player in a crowded space, Subversive Capital Acquisition Corp. raised $575 million in July 2019 and went on an acquisition spree.
It purchased Caliva, one of the largest indoor cultivation and manufacturing facilities in California, and Left Coast Ventures, an investment firm and cannabis producer.
On top of that, the combined entity is manufacturing and marketing the premium cannabis brand Monogram from rapper and entrepreneur Shawn “Jay-Z” Carter.
From cultivation operations to established brands to dispensaries to a celebrity influencer, these assets combined form TPCO Holding Corp. (OTC: GRAMF) – and they’re putting this former SPAC in a position to make the most money in California, which is expected to reach $7.5 billion in legal sales by 2025.
This is a long-term story that we’re following, and we will keep you informed on new developments.
From $10 to $20
While the TPCO story plays out, I want to show you an example of how cannabis SPAC prices can go through the roof when a deal is announced.
Silver Spike Acquisition Corp. (Nasdaq: SSPK) launched in October 2019 as a SPAC and made a blockbuster deal in December 2020, acquiring the parent company of Weedmaps, which is an e-commerce platform that connects marijuana consumers and businesses.
Remember that for a dispensary, advertising its business isn’t as simple as placing an ad on Facebook or listing a product on Amazon.
That’s why having a platform that connects cannabis consumers with dispensaries is so important, and Weedmaps projects it can grow it revenue by 175% over the next three years.
The stock price has bounced around recently, but as you can see from the chart below, investing early – around $10 per share – could have doubled your money.
What This Means for You
With a ton of cash raised through an IPO, SPACs can acquire well-known brands, top-notch cultivation facilities, and dispensaries that serve hundreds of people each day.
So instead of waiting to win licenses, follow zoning laws, construct new buildings, buy expensive equipment, train employees, and wait years for a brand to hopefully take off…
A SPAC just buys success.
It’s a whole new way to profit from cannabis. And as always, we’re here to guide you on how to make the most money.
We’ll have more on that very soon.
But until then, I made sure you have free access to my colleague’s complete list of the best and works stocks to buy for 2021 right here.
Partner, RADD Capital
2 responses to “New to Cannabis: The IPO Strategy That’s Banking Investors Double and Triple-Digit Returns”
March 24 2021