You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.
A few months ago, CB1 Capital CIO Todd Harrison pointed to the newly developing trend of institutional investors buying American cannabis stocks, highlighting stakes held by Fidelity, Putnam Investments and Wasatch Advisors. On Friday, the game changed, in our view, as a single unnamed institution took down $79 million in GTI stock in a private transaction. The 5.5 million shares represented 2.5% of the entire company and about 5.5 days of trading volume across the OTC and Canadian exchanges.
We find such a substantial investment to be quite positive for the company and other MSOs. This institution and the others that have been investing are recognizing the promise of the industry and also validating corporate governance, which has been questioned by some due to the multiple voting classes of stock typically at MSOs. Further, they see value at the current prices.
The trend towards a growing institutional investor base bodes well and is happening ahead of any potential ability of the MSOs to list on major exchanges, which would likely accelerate interest among these investors. While raising capital has been a challenge for MSOs, and a broader base of institutional investors could help alleviate that challenge, this transaction could also serve as a model for founders and early investors to find liquidity. In general MSOs trade a tiny fraction of their overall market cap each day, making it difficult for buyers to buy a large stake without pushing up the price. Rather than insiders and early investors selling into the market, which depresses the stock, perhaps we will see more private transactions like this one.
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