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TransCanna Is Redefining Vertical Integration In The California Cannabis Market

Apr 15, 2019 • 10:15 AM GMT+0000
7 MIN READ  •  By Anthony Varrell
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Last month, we issued an update on TransCanna Holdings (TCAN.CN)(TCNAF) and we hope that you put this opportunity on your radar. The company has attractive leverage to the California cannabis market and is in the middle of a major transition that will result in the creation of significant growth opportunities.

The goal of TransCanna Holdings is to create a self-contained branded ecosystem in which the company is able to produce and own fifteen reliable, consistent brands in California.  Subject to the completion of the acquisition, the Company should have the ability to create and oversee all activities from seed to sale including nursery, farming, extraction, manufacturing, bottling, transportation and distribution, and sales.

Completing a Massive Acquisition in California

Last week, TransCanna Holdings recorded a major milestone after it signed definitive closing documents to acquire 5.5 acres of land, an existing 196,000 sq. ft. facility, and asset package that includes cannabis packaging and processing equipment. The land and the building are located in a cannabis zoned area.  We are favorable on the growth prospects associated with this acquisition and will monitor how the team executes on this opportunity.

In February, TransCanna first reported this acquisition and we are favorable on the upgrades that have been made to the facility. During the last two years, the facility has undergone major renovations which has created specific divisions for nursery, cultivation, manufacturing, extracting, bottling, remediation, and transportation and distribution. These are some serious upgrades and we are favorable on the company’s ability to create value out of this state-of-the-art cannabis facility.

One of the reasons why we are so excited about this opportunity is due the growth prospects associated with this asset. The total cost of the facility was $15 million and there have been $8 million worth of renovations made to the property. TransCanna plans to fund the acquisition by completing a brokered private placement, which is currently very oversubscribed and is expected to close on or around March 28th.

The Company recently reported in a clarifying press release on March 26th that the enterprise value of the facility was a range of between US$50 -$75 milion subject to the Company reaching various milestones.  The real estate value with equipment was reported at US$16.3 million. Anecdotally, our internal research for real estate located in municipalities that have zoned the area for cannabis related products has property selling between $250 to $425 per sq ft.  Regardless of the method of valuation, we believe this is an extremely attractive purchase for the Company.

A Company With Significant Growth Prospects

TransCanna Holdings has had its finger on the pulse of the cannabis market and has been focused on creating a platform to solve the need for integrative services in California. This multi-billion-dollar cannabis market is an attractive opportunity but suffers from a lack of integrity and integration across its supply chain that would provide growers, manufacturers, and customers with optimal efficiency and quality.  Consequently, the Company believes it has the physical capability, management team and liquidity to control the complete ecosystem in a reliable, consistent manner.  If correct, the assets they’re acquiring will allow them to scale relatively quickly.

TransCanna Holdings is led by a management team who has significant experience in the California market and has a proven track record of success. CEO & Chairman James Pakulis was the former Chairman and CEO of publicly traded General Cannabis Inc. and from 2010 to 2012 oversaw the company’s growth from $0 in revenue to over $16 million in annual revenue in less than two years. He is also the former president of Lifestyle Delivery Systems (LDS.CN) (LDSYF), a vertically integrated cannabis related entity operating in California. This is an important aspect of the story and we are favorable on the leadership team that is in place at the company.

Expands on the Relationship with GoodFellas Group

Last year, TransCanna entered into an agreement with Goodfellas Group to acquire 23 exclusive Branding & Design contracts. Since then, the company has expanded on this relationship and signed a non-binding letter of intent to acquire the company. We are favorable on the potential synergies that can be created through this acquisition as well as the existing relationship between the companies. GoodFellas is a full-service advertising and marketing agency for the cannabis and hemp industries that was formed in 2017.

More importantly, Goodfellas has an established sales force with existing relationships with budtenders and dispensary owners.  We believe that the sale of cannabis is comparable to any other consumer goods product, and that a requirement of consistent sales is the result of relationships with retail establishments.

We believe that this acquisition will eventually prove to be accretive as it allows TransCanna to offer its own products, whether acquired or created, through the Goodfellas sales channels.  This opportunity could prove to be a major growth driver for TransCanna and this is something we are watching this year.

Receives its Temporary Distributor License in California

Earlier this year, Transcanna Holdings reported a major milestone after TCM Distribution, the non-profit entity managed by the company, received its temporary distributor license from the state of California. This was a significant development that comes only a few months after TCM Distribution received a formal approval from the City of Adelanto regarding the transfer of TCMD’s city issued medical cannabis transportation and distribution permit.

This is an attractive opportunity for the company and is something that we are closely watching. The permitted facility is located on a parcel of land in which the landlord is scheduled to build two, 20,000 sq. ft. cannabis related facilities. We are bullish on the amount of product that can be cultivated and/or distributed in this facility and will monitor how the team executes on this.

The landlord has offered to lease one of the facilities to TCMD and is currently in negotiations. The facilities will have all the required power and electricity for TCMD to successfully manage its distribution operations and we are closely monitoring this opportunity. We prefer the leasing over purchasing route for this satellite facility due to it being a much less capital-intensive project and are favorable on the growth prospects associated with this.

A Company that is Worth Watching

The California cannabis market is the world’s largest cannabis market and is one of the most exciting opportunities for companies. In fact, as reported in USA Today on May 5th, 2018, California is now the world’s 5th largest economy, surpassing the UK.  TransCanna has significant leverage to this burgeoning market and we are favorable on the growth prospects as a result of this. The company is in the middle of a major expansion and the completion of this project should prove to be a major catalyst for the stock.

During the last few months, TransCanna has significantly advanced its fundamental story and this is something that we are very excited about. The company is focused on solving a major need in the California cannabis market and has massive growth prospects as a result of this focus. We are monitoring how the management team executes on this project and are favorable on their ability to create value.

TransCanna Holdings has been laser focused on execution and has been working tirelessly on a major expansion. We have been fortunate enough to be able to speak with the management team and are favorable on this aspect of the story. TransCanna has significant catalysts for growth and we are monitoring how the team continues to execute from here.

To learn more about this burgeoning California cannabis company, please email support@technical420.com.

 

 

 

Pursuant to an agreement between StoneBridge Partners LLC and TransCanna Inc. (TCAN) we have been hired for a period of 180 days beginning February 1, 2019 and ending August 1, 2019 to publicly disseminate information about (TCAN) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month (TCAN) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero shares of (TCAN), which we purchased in the open market. We plan to sell the “ZERO” shares of (TCAN) 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 (TCAN) 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

Anthony Varrell

Anthony Varrell is Managing Director of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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