Plus Products Inc. (PLUS.CN) (PLPRF) has been nothing short of an execution story and is a cannabis company that is dominating the California edibles market. The company is barely in the first inning of a major growth cycle and has already become the top edibles brand in California.
Plus Products has been seeing increasing demand for its product line and has been taking cannabis edibles market share at a staggering rate. These statements are not considered to be an opinion and have been confirmed and verified through data provided by BDS Analytics and Headset, two leading cannabis market research firms.
The cannabis edibles manufacturer has been laser focused on the California cannabis market and we are favorable on this focus. Plus Products is a leading brand in this multi-billion-dollar cannabis market and this is an important aspect of the story. After successfully becoming a leading cannabis brand in California, which we consider to be the most important cannabis market, Plus Products will be planning a nationwide expansion and this could prove to be a major catalyst.
A Cannabis Company that is Positioned for Massive Growth
When looking at cannabis companies from an investment standpoint, it is important to see who you investing alongside. Plus Products has attracted some of the smartest and most strategic capital in the cannabis industry and has fully funded its expansion.
Plus Products is backed by Tiger Global Management, a high powered hedge fund that was an early investor in the E-cigarette manufacturer JUUL. According to Plus’ prospectus, the hedge fund owns approx. 15% of the company and we are favorable on this aspect of the story. Tiger has an incredible track record of helping turn small companies in rapidly growing industries into multi-billion-dollar businesses and we find the relationship with Plus Products to be significant.
With Plus Products planning a nationwide expansion, we believe that the relationship with Tiger Global couldn’t be more important. Tiger has a proven track record of success and we believe that it will take a lot of what it learned through JUUL’s expansion and apply it to Plus Products. This relationship gives the company a huge advantage when it comes to marketing, distribution, manufacturing, hiring talent, financing, and more.
In late January, the cannabis edibles manufacturer announced a $20 million convertible debenture financing that can be converted at $6.50 a share. At the time of this financing, the shares were trading at $6.50 and we found this to be significant. Most cannabis companies that announce private placement financings price the deal at a more than 10% discount to the current price (on average). The fact that Plus Products priced its financing at the market price (with a $9 warrant attached) is a testament to the strength of the company and the belief that its investors have in the company.
Although Plus Products is generating significant revenue and has more than $20 million in cash (no debt), the capital being raised will most likely be used for expansion focused initiatives and we are favorable on this decision. With Tiger Global behind the company, we expect to see this money put to work in a way that will be accretive to the business and will monitor how the team executes from here.
A Growth Story that is Worth Watching
In late 2018, 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. For Plus, the acquisition 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 sq. ft. of manufacturing space and associated equipment in southern California, augmenting its existing 12,000 sq. ft. 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.
We have been closely monitoring the cannabis industry and believe that Plus Products is one of the most exciting opportunities out there. The company has significant catalysts for growth and has been executing flawlessly on the California market. With a nationwide expansion on the horizon, the growth prospects for Plus Products are becoming even more enticing and this is an opportunity we are monitoring closely.
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