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With marijuana being illegal at the federal level in the United States, retail and institutional investors have largely avoided investing south of the border. The Toronto Stock Exchange has gone as far as considering de-listing Canadian cannabis companies with operations in USA. Although there are barriers to direct investing in USA, Canadian companies have found a great deal of value bringing intellectual property from USA to Canada and the globe.
CannaRoyalty is a unique investment vehicle for those looking to gain exposure to the highly lucrative USA cannabis market, with a more direct focus on California, who legalized recreational adult access on January 1, 2018. The company's core focus is to acquire assets of high value ancillary businesses that don't touch the plant, and to commercialize the intellectual property, patents, and consumer brands through licensing agreements to cannabis companies in Canada and globally in exchange for royalties. The royalty licensing model is one of the leanest forms of revenue in the business world. Assuming that the products being licensed are sought after by consumers, it allows for the company to constantly generate highly profit-based revenues on a perpetual basis from the licensees. By working in these value added market segments, they bypass two significant investment hurdles: USA's schedule 1 status on cannabis, and the ultimate commoditization of dried cannabis.
Industry experts have suggested that as cannabis commoditizes over time, those with unique delivery systems and strong brands will emerge as leaders in an overly saturated and
highly competitive market. Many states have legalized medical and recreational access south of the border, and the markets in those states have had time to mature. This has spawned many successful consumer brands, delivery systems, and medical formulations. CannaRoyalty has positioned itself very well by leveraging their expertise in capital markets to raise over $30 million to date, and has deployed the majority of the proceeds to building their vast portfolio which currently consists of 19 holdings.
Canadian licensed producer Aphria Inc. (TSX: APH) is an investor in CannaRoyalty. The company has invested a total of $4.6mm to date over two separate transactions, and has made significant unrealized gains on those investments. Whether Aphria intends to remain solely an equity holder of CannaRoyalty or seeks to license brands in the Canadian (or global) marketplace is yet to be seen, but thus far their relationship has proven to be a value generator for shareholders of both companies.
On November 28, 2017, the company announced the acquisition of two leading California cannabis companies with a combined annual revenue of $12.4mm USD. Included in the deal was the exclusive rights to globally recognized and award-winning brand Bhang® vaporizer and Bhang® chocolate products, as well as a distributor with an extensive California dispensary network.
On December 13, 2017, the company announced that it had entered into an exclusive agreement with Aurora Cannabis (TSX: ACB) to license its portfolio of MüV branded medical products in Canada, Europe, and Australia in exchange for royalties on sales. The specifics of the deal are expected to be announced within 90 days of the press release.
CANNAROYALTY CORP
CSE: CRZ; OTC:CNNRF
As At December 29, 2017
Shares Outstanding: 43,891,716
Share Price: $3.75 Market Cap: $164,593,935