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This Multi-State Operator Could Be One Of The Hidden Gems of the Cannabis Industry

Feb 5, 2019 • 11:40 AM GMT+0000
Stem Holdings.png
8 MIN READ  •  By Michael Berger
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The United States cannabis industry represents one of the most exciting growth opportunities and we have been closely monitoring this burgeoning market.

During the last month, the cannabis sector has been trending higher and investors need to be monitoring this opportunity. We have been laser focused on the United States opportunity and want to highlight a company that has been capitalizing on it.

The company, Stem Holdings Inc. (STEM.CN) (STMH) is in the middle of a major expansion and has been nothing short of an execution story. The company is positioned to capitalize on the cannabis markets in Oregon, Nevada, and Oklahoma. Stem is focused on further expanding it’s reach and is looking at the opportunity in Massachusetts, Florida, and New Jersey.

During the last year, the company has significantly advanced its fundamental story and is well-positioned for success. The last month has been very busy for the company and this is an opportunity that investors need to monitor.

Although Stem Holdings has been executing flawlessly, the shares have been trending lower and we are monitoring this emerging opportunity. Stem Holdings has significant catalysts for growth and today, we have issued an update on the opportunity.

Expands into Nevada and Opens a Cultivation Facility

Earlier this month, Stem Holdings reported a significant development and announced that it would be opening a cultivation facility in Nevada. The cannabis market in Las Vegas is booming and the facility is strategically located just a few miles off the Las Vegas strip. We are favorable on the growth prospects associated with this asset and will monitor how the team executes from here.

Stem Holdings is strategically positioned in Las Vegas and we expect to see the company’s family of brands gain significant traction in this burgeoning cannabis market. One of the brands that Stem will introduce to Nevada is TJ’s Gardens variety of cultivars. TJ’s Gardens is recognized as the Pacific Northwest’s premier cannabis cultivator. TJ’s Gardens will introduce its proprietary products to the Nevada market through the Travis x James brand, which produces high-end flower and great tasting vaporizers. This is an organic cannabis product line and we expect to see substantial demand for it. The focus on producing organic cannabis is significant and we expect to see these products get shelf space in Las Vegas dispensaries.

Stem will be operating a state-of-the-art facility that includes space for cultivation, an edibles kitchen, and an extraction lab. The company will be able to produce premium cannabis flower and oils and will be able to introduce highly sought-after brands into the Nevada market. Stem will utilize the kitchen to create cannabis edible products under the Cannavore brand. The products that will be produced include, but are not limited to, caramels, gummies, hard candies, honey, and soda. The company will use the extraction facility to introduce its line of extracts called Dose-ology, which will provide consumers with CBD and THC tinctures. Stem will also sell pre-roll joints that contain Yerba Buena flower.

The Nevada cannabis market represents a significant opportunity and we are favorable on Stem’s leverage to it. More than 44 million people visit Las Vegas on an annual basis and the cannabis industry is thriving. Stem is well positioned to capitalize on this burgeoning market, and this is an opportunity to watch. The opening of the cultivation facility represents a major milestone and we will monitor how the team executes from here.

Focused on Capitalizing on the Oregon Cannabis Market

In November, Stem Holdings received a license from the Oregon Liquor Control Commission (OLCC) for its newly constructed cannabis facility in Springfield, Oregon. This represented an important development for the company, and we expect this to be a significant growth driver going forward. 

The approved facility is located on a 28,000 sq. ft. property that will provide 10,000 sq. ft. of space dedicated to sustainable, indoor cannabis cultivation. The building is comprised of eight, 1,100 square foot, clean grow rooms that will utilize cutting-edge lighting and ventilation systems. The facility will be able to produce over 2,500 pounds of cannabis flower annually.

Stem plans to dedicate two additional spaces to conduct research and development new cannabis strains. An on-premise plant tissue culture laboratory will allow Stem’s operators to utilize advanced propagation technology. The laboratory will produce a continuous supply of plant strains derived from award-winning genetics. The company is focused on being efficient and will streamline its processing and packaging process through the use of a dry room, a curing room, a space for processing harvested cannabis material, and a loading dock.

The property will be leased to Stem’s partner operators, TJ’s Gardens and Yerba Buena. Both licensed cultivators are renowned growers of craft cannabis in Oregon. We are favorable on the management team’s ability to execute and will monitor how this adds value to the entire business.

Awarded Cannabis Licenses to Operate in Oklahoma

Last year, Stem Holdings along with its in-state partners were awarded four cultivation, five processing, and four dispensary licenses by the Oklahoma Medical Marijuana Authority (OMMA). This was a significant development that supports the company’s strategic expansion into Oklahoma.

Stem will introduce their partners’ award-winning brands to the Oklahoma medical cannabis market. All of the products will be manufactured using medical cannabis grown by the renowned Oregon-based cultivators TJ’s Gardens and Yerba Buena in state-of-the-art Oklahoma-based facilities. Stem plans on offering a wide variety of flower, edibles, and extracts at the four licensed dispensaries in the cities of Moore, Norman, Oklahoma City, and Tulsa. This represents a significant growth initiative and we will monitor how the team executes on this. 

Stem strategically partnered with two successful Oklahoma business owners for this venture – Ty Hartwig and Lincoln Owen Clifton. Ty is an entrepreneur and investor who has founded and developed a dozen different successful businesses across a great breadth of industries. Lincoln is an entrepreneur and a large commercial real estate investor who previously owned 100 convenience stores and a large-scale wholesale fuel distribution business, which were both subsequently sold to publicly traded companies. Lincoln currently works with the oil and gas industry and is in involved in the service of every aspect of the business, including pipeline structure operations and transportation.

Completes the Acquisition of Yerba Buena

In October, Stem Holdings executed a definitive agreement to acquire Yerba Buena, an award-winning Oregon cannabis brand. This is a significant acquisition that enhances the company’s position in the Oregon cannabis market. The acquisition improves the portfolio of brands under Stem’s umbrella and we are favorable on the growth prospects associated with this acquisition.

The acquisition of Yerba Buena directly supports Stem’s plans for nationwide expansion. While Stem’s operational affiliates have developed partnerships with a number of widely recognized cannabis brands and licensees across the country, the acquisition of Yerba Buena solidifies Stem’s commitment to providing shareholder value through strategic mergers and acquisitions within the cannabis space.

Yerba Buena is widely recognized as a cannabis industry leader and is one of the only cannabis farms in the country to hold both Clean Green™ and Certified Kind responsible agriculture credentials. The company delivers naturally-grown products that have garnered numerous industry awards and has also been honored for their exemplary workplace practices. Yerba Buena is the first cannabis company to receive the 100 Best Green Companies award by Oregon Business Magazine, winning in both 2017 and 2018, placing 9th and then 6th respectively across all industries.

A Company Worth Watching

Stem Holdings is led by a management team with a proven track record of success and this is an important aspect of the story. The company is well capitalized after recently completing a $3 million offering of special warrants and plans to use the proceeds for expansion initiatives and general corporate purposes.

Last year, Stem Holdings strengthened its management team with the addition of Geno Purtell as Director of Sales for Oregon. As a former Nike executive, Geno brings over 20 years of extensive sales experience to the company. He will work with both TJ’s Gardens and Yerba Buena with the goal to build a robust sales initiative for both brands’ products. Geno will also help sell Incredibles’ products, Cannavore caramels, G Pen vaporizers, and Tinctures by TJ’s throughout Oregon.

When compared to its peers, Stem Holdings is trading at a very attractive valuation and this is an opportunity worth monitoring. To learn more about the company, please email support@technical420.com.

 

 

 

Pursuant to an agreement between StoneBridge Partners LLC and Stem Holdings (STEM) we have been hired for a period of 180 days beginning February 1, 2019 and ending August 1, 2019 to publicly disseminate information about (STEM) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month (STEM) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero shares of (STEM), which we purchased in the open market. We plan to sell the “ZERO” shares of (STEM) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (STEM) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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