During the last few years, the cannabis sector has recorded incredible growth, and this is a trend that we expect to continue for years to come.
Although cannabis is not legal at the Federal level in the United States, we are bullish on this growth opportunity and continue to keep a close eye on this market. Last year, we saw a number of leading United States cannabis companies complete a go public transaction and commence trading on the Canadian Stock Exchange (CSE).
One of these companies was Plus Products (PLUS.CN), a leading cannabis edible producer in California. During the last year, Plus Products has significantly advanced its fundamental story and has become one of the top edible brands in California, according to data from BDS Analytics.
We are favorable on the leverage to the California cannabis market and believe that this is an opportunity worth watching. Plus Products has been executing on organic and inorganic growth initiatives that are focused on increasing production capacity and acquiring attractive cannabis edible brands.
Plus Product Completes Strategic Acquisition
Last month, Plus Products completed an all-stock acquisition of California-based cannabis-infused baked goods brand GOOD CO-OP, Inc. This was a significant development and we expect this acquisition to prove to be accretive in the first half of 2019. The terms of the acquisition are favorable for Plus Products and most of the common stock being issued is subject to an earn-out agreement that is milestone based.
For Plus, the acquisition of GOOD CO-OP represents a strategic entry into the third largest edibles category, baked goods, after having achieved the top spot in the edible’s category with only four full-time offerings. The acquisition also adds an additional 4,800 square feet of manufacturing space and associated equipment in southern California, augmenting its existing 12,000 square foot manufacturing facility.
The increased production capacity is a significant aspect of the acquisition and we are favorable on the growth prospects as a result of this. Plus Products hired the management team from GOOD CO-OP and we expect this to help make the acquisition a more seamless transaction. Plus Products has a leading edibles brand in California that resonates with consumers and we think this acquisition adds significant value to the overall company.
A Leading California Edibles Brand to Watch
When it comes to product distribution in California, this is an area where Plus Products excels. The company has agreements with licensed distributors to sell its products to over 200 licensed dispensaries and delivery service customers in California. The edibles company has attractive growth prospects and plans to build upon its leading position in California in 2019.
Plus Products is well capitalized and well positioned to gain market share in California. In 2018, the company has raised more than $15 million and plans to use almost 40% of the capital raised to expand capacity. Plus Products has been using the capital to fund growth initiatives and to expand its reach. The company is led by a strong management team that has a proven track record of success and this is a very important aspect of the story.
Plus Products is in the middle of a major expansion (fully funded) and is constructing the largest dedicated cannabis food manufacturing facility in the United States. The facility will be able to generate $150 million worth of products per year, with the potential to expand to $450 million. Plus holds the eighth temporary manufacturing license granted in California and was one of the first to introduce fully compliant products to the state.
A Leading 2019 Cannabis Opportunity
When compared to its peers, Plus Products has an attractive valuation and has been able to attract some of the smartest money in the cannabis industry. The company is led by a management team that continues to execute and this is an opportunity that investors should be watching.
In late November, Plus Products released third-quarter financial results that showed impressive growth. The company has significant distribution in California and is in the middle of a major expansion. With the addition of GOOD CO-OP to the product line, we expect fundamentals to significantly improve in 2019 and are favorable on this opportunity.
During the last year, we have seen a significant increase in the number of publicly traded cannabis companies. It is important for investors to focus on leading opportunities like Plus Products. The company has been laser focused on growth and has been executing flawlessly. To stay up to date with Plus Products, please contact email@example.com.