The passage of the US Farm Bill in late 2018 effectively legalized hemp-based cannabidiol (CBD) and served as a catalyst for companies that are focused on this burgeoning market.
According to Hemp Industry Daily, the domestic hemp-derived CBD market could be a $7 billion industry by 2023 and this is an opportunity that is hard to ignore. The passing of the Farm Bill provided the green light to many institutional investors who poured hundreds of millions of dollars into hemp focused businesses so far this year.
When looking at the amount of capital that was raised so far this year, there is a lot to be excited about. Over the next year, we expect this capital to be put to work in ways that are focused on increasing production capacity and bringing new products to market. We are bullish on the growth prospects associated with these initiatives and want to highlight a hemp focused business that has a strong balance sheet, has leverage to strategic hemp assets across the US, and is led by a management team that has its finger on the pulse of the hemp market.
The company, Hemptown USA is a leading play on the domestic hemp market and represents a differentiated opportunity when compared to its peers. In the coming months, the company plans to complete a go-public transaction and this is an opportunity that our readers should have on their radar.
A Pre-IPO Opportunity to put on Your Radar
One of the reasons we are excited about Hemptown is due to way the business is structured. The company is laser focus on the production of high-value cannabinoids, and we are not only talking about cannabidiol (CBD). In 2019, the company plans to cultivate more than 500 acres of rare high-cannabigerol (CBG) genetics and is executing on a strategy to become a leading global producer of this high-value cannabinoid.
Following the passing of the Farm Bill in late 2018, the CBD industry has recorded massive growth, and this is a trend that is expected to continue for the foreseeable future. So far this year, there has been a massive influx of CBD focused companies and many of these businesses are constructing large-scale cultivation facilities. Currently, each kilogram of CBD isolate sells for approx. $4,000 to $6,000 (depending on the size of purchase) and expect to see significant price compression once these CBD focused companies start producing at scale.
Although we have heard a lot about CBD, only a few companies have been focused on CBG, which is the pre-cursor cannabinoid to CBD and THC. Hemptown has been able to differentiate itself from the competition through its focus on the production of both CBD and CBG and through its strategy for growth. Going forward, the company plans to increase production capacity through acquisitions and strategic partnerships, and we are impressed with how the management team has been executing on this strategy.
When analyzing hemp focused businesses, we are primarily looking for companies that are already operational and have a proven track record of success. Investors also should be focused on businesses that are well capitalized, led by a management team with a proven track record, have a sound financial structure, act in the best interests of shareholders, and continue to execute on business initiatives. We believe that Hemptown represents an attractive growth opportunity as it possesses the right traits and is a pre-IPO company that we are excited about.
A High-Growth Story with Attractive Economics
Hemptown initially established operations in Oregon and has eight years’ experience operating in the region. Last year, the company dried and stored 110,000 pounds of hemp and expects to dry and store more than 3 million pounds in 2019. During the last year, Hemptown has significantly expanded its reach and is currently utilizing proprietary technology to cultivate hemp in Colorado, Kentucky, and Oregon.
Between these three states, Hemptown will cultivate on 1,500 acres in 2019 and expects to produce 1 million pounds of CBG and 200,000 pounds of CBD. Earlier in the article, we briefly discussed the economics associated with CBD from a pricing standpoint and want to provide more context on this. Although the cost per kilogram of CBD is attractive, the economics associated with CBG are much more attractive.
Currently, it costs around $20,000 per kilogram of CBG and this is significantly higher than the $4,000 price tag associated with a kilogram of CBD. Next year, the cost per kilogram for both CBG and CBD are expected to decrease and Hemptown will benefit by focusing on the production of hemp that is high in both cannabinoids. We are favorable on the is aspect of the operation and believe that Hemptown is well positioned to combat future price compression by focusing the on the production of these two high-value cannabinoids.
A New Listing with Substantial Growth Prospects
At 1,500 acres, Hemptown could generate upwards of $200 million in revenue which would make it the largest hemp company in the world. Going forward, the name of the game for Hemptown is execution and this is an opportunity to be watching. Over the next year, we expect to see Hemptown substantially increase the number of acres it is cultivating on and we find this to be significant.
One of the reasons we are confident in Hemptown’s ability to execute is related to the strength of the balance sheet. Due to this, we believe the company is well positioned to take advantage of strategic growth opportunities. Hemptown is led by a management team that has its finger on the pulse of the industry and we are favorable on the way the story has evolved so far this year.
During the last year, there have been several major new listings coming out of the US and Hemptown is one to be aware of. To learn more about Hemptown and to be added to our distribution list, please email email@example.com
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