2 Pre-IPO Opportunities That Were Derailed By Covid-19 That Are Bach On Track

2 Pre-IPO Opportunities That Were Derailed By Covid-19 That Are Bach On Track

The COVID pandemic has put a significant strain on the global economy and it will take a few years to get back to the new normal. From the cancelling of movie releases to the delaying of initial public offerings (IPOs), almost every industry across the globe has been negatively impacted by the pandemic.

Although the US cannabis market was declared to be an essential industry in the early months of the pandemic, it is much tougher for companies to access capital and this has delayed the going-public process. Selectivity in the cannabis industry is more important than ever and we have been working to identify private companies that have continued to execute and that plan to go public in the near future.

Today, we want to highlight two cannabis companies that have come across our radar as they plan to complete a go-public transaction.

The first company, ManifestSeven (M7) is a California company that is levered to some of the most attractive verticals of the cannabis value chain and it recently reported second quarter financial results. In the near future, M7 plans to complete a go-public transaction on the Canadian Stock Exchange (CSE) and we expect the listing to gain traction.

M7 is comprised of a number of divisions and we believe that a substantial amount of value can be created between the divisions. Going forward, we will see how the management team is able to identify and execute on these opportunities that should result in the business record improving profit margins.

The California cannabis company is one of the few companies to have benefited from the COVID pandemic and it has been able to turn a negative into a positive. During the COVID crisis, the company benefited from cannabis being declared an essential industry. The delivery and dispensary side of the business have been major value drivers for M7 and this is a trend that is expected to provide a tailwind for growth.

From growing revenues to controlling costs, M7 has been reporting improving fundamentals and this is a trend that we will be closely following on a going forward basis. If the management team can execute, we expect the business to continue to record strong revenue growth and higher profit margins.

M7 expects to commence trading on the CSE in the second quarter of 2020 and we are monitoring how the story ahead of the planned listing. The company expects to be reporting positive adjusted EBITDA this year and to record a 100% increase in revenue when compared to 2019. M7 is an opportunity that we will be closely following and is one to have on your radar.

The second company, Hemptown USA is another operator that has been forced to delay its IPO and is an opportunity that we have been following since 2019. One of the reasons we were initially excited about Hemptown was related to the cannabinoids it was focused on, cannabidiol (CBD) and cannabigerol (CBG).

Based on available industry data, we have noticed a significant decline in the price per kilogram of CBD and CBG. Although we believe that the price compression has impacted the business, the structure of Hemptown’s operation has help insulate them from the risk that is associated with the cultivating process.

Owning massive hemp farms is not the cornerstone of Hemptown’s business and the management team focused on forming contract farming agreements to grow the business. We believe that the company has been able to differentiate itself and control costs by operating this model and we are interested to see how the business has been able to manage the current market environment.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

Published at Fri, 14 Aug 2020 11:41:13 +0000

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