Cannabis Wheaton Income Corp (OTCMKTS:CBWTF) has been able to retain investor attention in the past few months. Within a few weeks, its value tripled from $0.7 to $2.1, with a lot of this stemming from a high expectation of future profits from investors. In this article, we share with the detail of the price jump and recently announced plans by management to continue its leadership of the cannabis market.
Here is the stock’s price movement in the last few months:
Cannabis Wheaton Income Corp. was established in 1987 and is based in Vancouver, Canada. The firm engages in the cannabis streaming industry where it also provides funding for cannabis facility expansions, operations, and initial construction in exchange for minority equity interests and a portion of the cultivation production. It previously went by the name Knightswood Financial Corp. before undergoing a name change to Cannabis Wheaton Income Corp. in May 2017.
For more information, you can go through our previous post here.
Recent research has estimated that medical cannabis sales would rise to as high as $5.3 billion in 2017, which would count for nearly seventy percent of all cannabis sales. Sales of medical cannabis in states where it is deemed legal expected to reach about $13.2 billion in 2025, accounting for no less than fifty-five percent of cannabis sales. To put this in context, recreational and other purpose sales in 2017 are estimated to earn $2.6 billion in 2017 and increase to nearly $11 billion in 2025. On January 1st, 2018, California’s changes were enacted in the laws governing the recreational use of cannabis in California. Further research also estimated that sale of cannabis legally would beach expected to earn about $3 billion in 2017 and over $6.5 billion by 2025 an impressive twelve percent CAGR in just eight years.
The firm is listed on the TSX Venture Exchange with the ticker ‘CBW.’ Earlier this week the company announced that due to increased demand from investors, it has driven up the size of the private placement for convertible debenture units to go as high as $100 million. The total funds collected by the firm is to be expended as working capital and for other general corporate expenses such as the funding of its streaming partners following the contracted streaming agreements and selling and admin overhead. With other conditions met, counting the receipt of approval by the TSX Exchange, the private placement was closed on January 12, 2018.
Cannabis Wheaton Income Corp has adopted the streaming model approach in its funding of cannabis companies, by receiving an equity portion along with expected cannabis harvests as a form of repayment. Although CBWTF has agreements with multiple partners, it has revealed a preference for its significant investments in two of these partners. The firm has plans to manage these partners more closely, starting with due diligence along with the agreement of terms.
The company’s management already revealed an intent of focus on deals that are immediately additive and setup with positive outcomes expected for all parties involved. As explained, a method to successfully generate value would be to set up actual capacity with accredited producers. For instance, a cultivator requiring financing for a hundred thousand square feet facility could be allowed to raise funds for a 150,000 square feet facility which would improve production volumes, increase margins and efficiency of production.
In such a situation, the owner would not have to lose any planned production while the CBWTF could still get a percentage of the agreement such as the 50 percent added. Such a scenario would lead to a win-win, as both parties would be getting what they initially set out to get.
In addition to this, the firm’s streaming partners would retain the opportunity to work with industry veterans. Cannabis Corp CEO, Rificii is highly regarded as a leading businessman in the cannabis industry. He already established Tweed Marijuana Inc., which is now known as Canopy Growth Corp., and developed the firm into a major player with five hundred thousand square feet of production capacity and large market cap of US$3.75 billion. He has also succeeded in attracting other big industry names such as Hugo Alves, current President of CBW and Mike Lickver, Executive Vice President of Strategy, who are both regarded as significant consultants in the Canadian cannabis market.
We already estimated that the firm’s massive investment in the Canadian market would pay off which it has. Considering our recent analysis of its financial statements and management’s commitment to win-win agreements, we can only expect this trend to continue in the long term.
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Disclosure: We have no position in CBWTF and have not been compensated for this article.