It has been a race to the top for the shares of Green Organic Dutchman Holdings Ltd (OTCMKTS:TGODF).
The company whose share price has been on a constant climb has seen their valuation rise from $680 million – at a price of $3 – to their current market capitalization of $1.35 billion – at a price of $5.9. The best part about this is that the surge in valuation – to near double their share price and subsequent valuation– has taken place over a period of one month.
Readers can view the above price action in the chart below:
The fact that Green Organic Dutchman has been climbing the valuation ladder at record speeds alludes to the fact that the company is doing something right.
In this particular case, the company acted as an excellent case study as to the impact of venturing into a specific industry as well as properly aligning a company’s competitive advantage on the share price of a company.
We, therefore, decided to take a look at TGODF and establish the key driver of their valuation as well as evaluate whether or how it would enable the company to grow going forward.
History of Green Organic Dutchman
TGODF, a cannabis industry operator, has little history to it.
The company had its first initial public offer (IPO) back in May 2018, completing it on the 2nd day of the month. During this period, it raised over $100 million, leading it to be termed as one of the largest marijuana IPOs in history.
In their prospectus for this public offer stipulated some of their competitive advantages: US cannabis tourism to Canada, minimal power costs in the region and their large cannabis greenhouses, all which they stated would be in their favor – we will go into detail over the course of this piece.
Thus far, as shown by their share price, it seems that the company was right.
As previously spoken to, the company’s prospectus detailed some of their competitive advantages as they ventured into their market. These advantages would serve as a value proposition to the company as they worked to ensure that they could charge a premium to the market, which they did.
First were the minimal power costs.
The company was recorded to have secured their power at a record low rate: 4 cents per kilowatt, a rate attributable to their close proximity to the Beauharnois Hydroelectric Generating Station. As a result, their production costs are expected to be at a record low, ensuring that their profit is therefore at a record high.
This ties to the second advantage, their large farm size.
Standing on over 820,000 square-feet of greenhouse land – about 76,000 square metres – the greenhouse is expected to house all facets of the production process. In this particular case, the company will benefit from synergies that come with all components of the production process being held at a single location. If completed in line with other similar facilities, the land will be large enough to house its staff as well as all departments – including HR, Finance and Research and Development – and will also ensure that the company can comfortably process the future produce they have.
With their focus being on quality, the low costs allow them to invest their savings into research and development so as to ensure that they benefit from high quality produce. This will eventually be the source of their high tourism visits and see them benefit from the increasing number of US cannabis tourists into Canada.
As seen, TGODF has their short and long-term goals aligned. With all the above working to their favor, the company has a strong business case supported by a favorable environment.
The New Strategy
The management at Green Organic Dutchman have recently unveiled a new strategy.
The company is banking on the fact that their management have years of experience within the beverage sector – a combined figure of 125 years – to ensure that they venture successfully into the sector.
Their strategy entails them venturing into the sector through a myriad of ways, the key being direct investment, joint venture or other suitable opportunities. Here, their strategic target will be to ensure that the tap into large-scale beverage producers in the market. The company will also provide guidance to the entities in which they invest so as to ensure that they enable them increase efficiencies thus boost output.
Through this, they will have tapped into one of their key sectors, ensuring their growth trend remains positive.
It, therefore, comes as no surprise that the company’s Chief Executive Officer Robert Anderson supported this move stating:
“This launch allows us to engage larger beverage companies in a very unique manner as TGOD has the facilities, ingredients and the intellectual capabilities that make us a compelling choice…”
All in all, given their competitive advantages, the experience of their managers will come in handy in ensuring that the firm grows and meets the high expectations the market has set for it.
TGODF is a success story. Their growth trend over a one-month period is one to be envied and one which, if maintained, will see them rise to the top of the cannabis industry in no time. Currently, there is a lot to be hopeful about regarding TGODF as such, we remain bullish about the stock.
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Disclosure: We have no position in TGODF and have not been compensated for this article.