CANNABISMARKETINSIGHTS
FEBRUARY7,2019Vol.I
BOULDER NEW YORK LOS ANGELES (303) 325-3501 [email protected]
COLORADOWHOLESALEFLOWERTRENDSPriceDeclinestoContinue:GrowingPainsonthePathtoMarketEquilibrium
Colorado’swholesalecannabisflowerpriceswillseecontinuedpressurein2019.Thestate’swholesaleAverageMarketRate(AMR)prices,atrailingwholesalepriceindicatorissuedbytheColoradoDept.ofRevenue,increasedin1Q19duetomandatorypesticidetestingthatincreasedcostsforcultivatorsinAugust2018.Weprojectfurtherwholesalepricedeclinesin2019despitetherecentuptick.
InpartnershipwithApexTrading,a24/7onlinemarketplacethatconnectscultivatorswithwholesalebuyersandretailers,weanalyzedwholesalecannabisflowertrendsintheColoradoadultusemarket.Ouranalysisconfirmsthewholesalepriceincreasein2H18andshowsmorerecentwholesalepricedeclinesthatpointtofurtherdownsidein2019.
Sources:ApexTradingsampledata,7thirtyCapital
Colorado’swholesaleflowerpricehasdeclinedmarkedlysincethelegalizationofadultusesalesinJanuary2014.Theproliferationofindustrial-scaleindoorandlight-deprivationgreenhousegrowoperationshaveincreasedthevolumeandefficiencyofcannabisproduction,enablingmultiplegrowingcyclesperyearversustheannualoutdoorfallharvest.Aslarger-scalecultivationrampsupinlegalUSstates,weexpectatrendofconsolidationandanefforttolowerproductioncosts.Investmentopportunitieswillariseascultivators,processors,wholesalers,andretailersseektechnologiesandothersolutionstomaximizeproductionandoptimizethemarketplace.
TheColoradoAverageMarketRate(AMR)wholesalepricefellsharplyin2018.TheAMRisusedtodeterminetaxesdueforverticallyintegratedcultivators.TheColoradoAMRforflowerbottomedat
$759/lb.in4Q18,sliding42%y/yfrom$1,305/lb.in4Q18.TheAMRpeakedat$2,007/lb.inearly2015whencultivationlicensesnumberedjust419.Totallicensespeakedat1,511inJanuary2018anddeclinedslightlyto1,499byyear-end.However,wenotethatmanyColoradocultivationlicensesarenowdormant.
Source:ColoradoDepartmentofRevenue(MarijuanaEnforcementDivision)
TheColoradoflowerAMRincreasedasofJanuary1,2019,up3%to$781/lb.vs.$759/lb.in4Q18.TheAMRfortrimincreased22%to$396/lb.versus$325/lb.reflectingbothhighercostsandgreaterstatewidedemandforextractsandedibles.Basedonthe15%excisetax,theflowertaxincreased$3.30to$117.15/lb.andthetaxfortrimincreased$10.65to$59.40/lb.
Cultivatorsincurhighercostsfortesting,squeezingmargins.EffectiveAugust1,2018,Colorado’sMarijuanaEnforcementDivisionimplementednewmandatorypesticidetestingforrecreationalandmedicalcultivators.Testingcancostmorethan$100perstrain,andrequirescultivatorstosubmitasampleofeachstrainevery30days.Whiletestingincreasedcostsforcultivatorsalreadycontendingwiththinmargins,ithasbeenaboontostate-licensedtestinglabs.Thistrendhighlightsanattractiveareaofcannabisinvestment,aspesticideandmicrobialdetectiontechnologieswillremainkeytoproductvalidation.
WillColoradowholesalepricesfindequilibriumin2019?Probablynot.Weexpectwholesaleflowerpricestoremaindepressedandtotestnewlowsin2019.However,pricedeclinesandnarrowingmarginsarenecessaryfeaturesofthismaturingmarketthatwillcreateexcitingopportunitiesforinvestment.
MARKETMONITOR
FEBRUARY7,2019Vol.I
BOULDER NEW YORK LOS ANGELES (303)325-3501 [email protected]
ReturnsofSelectedCannabisETF’s&S&P500,2018-Present GlobalLegalCannabisSpending,2017-2022E
Source:TradingView
Year-to-date,Cannabis-relatedETFs,includingtheETFMGAlternativeHarvest(MJ)ETF(+31%)andtheHorizonsMarijuanaLifeSciencesIndex(HMLSF)ETF(+40%),haveoutperformedtheS&P500Indexwhichhadareturnof9%.
S&P500
MJ
HMLSF
Source:BDSAnalytics
Globallegalcannabisspendingisforecasttoincreaseata27%CAGRfrom$12.9Bin2018to$32Bby2022,accordingtoBDSAnalytics.U.S.spendingisprojectedtoincreaseata21%CAGRfrom$11Bin2018to$23.4Bby2022.
CanadianLicensedProducersCompany StockPrice MktCap($B) YTDReturn 52-wkReturn* 52-wkHigh 52-wkLowCanopyGrowthCorp. $46.53 $16.07 66% 91% $59.25 $18.93AuroraCannabisInc. $7.57 $7.68 47% 34% $12.52 $4.05TilrayInc. $78.15 $7.48 12% 163% $300.00 $20.10CronosGroupInc. $19.65 $3.72 70% 161% $25.10 $5.12AphriaInc $9.70 $2.47 62% 22% $16.86 $3.75Source:YahooFinance,GoogleFinance,7thirtydata.*52-weekreturnorreturnsincetradingbegan.
PrivateCannabisMarketActivityCompany Location Date Category DealType Amount
($M)IntegratedCBD Scottsdale,AZ 2/4/19 CBD/Hemp Angel $3.35BlühenBotanicals Knoxville,TN 2/1/19 CommercialHemp Angel $4.5CannamedicalPharma Cologne,Germany 1/29/19 MedicalCannabis SeriesA $17.48Socati Woodburn,OR 1/29/19 Hemp/Processing Pvt.Equity $33.0Vangst Denver,CO 1/24/19 OnlineRecruiting SeriesA $10.0Caliva SanJose,CA 1/24/19 Retail/Cultivation Other $75.0GreenReliefacq.BodhiR&D Toronto,ON 1/22/19 DrugDiscovery Acquisition $30.08Source:PitchBook,companypressreleases.
PublicCannabisMarketActivity
Company Location Date Category DealType Amount($M)
GreenGrowthacq.DesertRose Phoenix,AZ 1/30/19 MedicalCannabis PendingAcq. $12.35SlangWorldwide Toronto,ON 1/29/19 Consumer/Beverages IPO $50.63PlusProductsDebtOffering SanMateo,CA 1/28/19 Edibles Conv.Debt $15.1Khironacq.NettaGrowth Vancouver,BC 1/25/19 MedicalCannabis PendingAcq. $13.7AuroraCannabisDebtOffering Edmonton,AB 1/24/19 Cultivation Conv.Debt $345Tilrayacq.NaturaNaturals Nanaimo,BC 1/22/19 Cultivation/Retail PendingAcq. $52Auroraacq.WhistlerMedicalMJ Edmonton,AB 1/14/19 Cultivation/Retail PendingAcq. $132Source:PitchBook,companypressreleases.
FEBRUARY7,2019Vol.I
BOULDER NEW YORK LOS ANGELES (303)325-3501 [email protected]
7THIRTYGROUP MICAHTAPMAN,FundManager
7thirtyGroupprovidesafullrangeofcapitalservicestoinvestorsandcompaniesinthefrontierlegalcannabisandancillarymarkets.7thirtyidentifiesinvestmentopportunitiesinemergingcannabistechcompaniesrelatedtoag-tech,medtech,retail,e-commerce,SaaSsolutions,deeptechresearch,andmarketplaces.Ourteam’shands-onapproachtoeverydealmeansweknowtheins-and-outsofthemarketfromwholesalepricedynamicstolegalandregulatorychallenges.Weworkwiththeleadingcompaniestodevisesmartstrategiestothriveinanever-changingmarket.
7thirtyOpportunityFundisledbyMicahTapman,themostactiveearly-stagecannabistechnologyinvestorintheUnitedStates.Priortofounding7thirty,Micahwasaco-founderandmanagingdirectoratCanopyBoulder,whereheledinvestmentsinover90cannabis-relatedcompanies.Severalofthosecompaniesarenowrecognizedleadersinthecannabismarket,includingWurk,BDSAnalyticsandFrontRangeBiosciences.MicahwasrecentlynamedoneofthetwentyrisingstarsinthecannabisinvestmentworldbyBusinessInsider.
YOURLONG-TERMSTRATEGICPARTNER
AdvisoryServices• Buy&SellSideStrategicPlanning• FundraisingStrategies• M&AExecution• CorporateRestructuring• ExpansionStrategies
CapitalInvestments• EquityInvestments
- 7thirtyOpportunityFund• DebtStructures• High-YieldDebt
InvestorRepresentation• InvestmentIdentification&Sourcing• DueDiligence• DealStructure&Execution• OngoingRepresentation&Management
7THIRTYOPPORTUNITYFUND
The7thirtyOpportunityFundisanearly-stagegrowthfundtargetingprivatecannabis-relatedtechnologyinvestmentsaroundtheworld.ThefundisalliedwiththeCanopyBoulderbusinessacceleratorthataffordsunparalleleddealflowandaccesstotop-tierinvestments.HeadquarteredinBoulder,Colorado,7thirtyCapitalisideallysituatedtocapitalizeonthe30%averagecompoundannualgrowthinthelegalcannabisindustry.Ahighlydisciplinedinvestmentapproachallowsthefundtobuildadiversifiedportfolioofexceptionalinvestmentspoisedtogrowwiththeindustry.
AccreditedinvestorsworldwidehaveeasyaccesstothisexceptionalopportunitythroughtheOurCrowdinvestmentplatform.TheOurCrowdpartnershipsimplifiestheinvestmentprocessandprovidestheFundwithadditionalinternationaldealflow,includingIsrael’sbest-in-marketcannabisresearchandtechnologycompanies.
*Note:onlyaccreditedinvestorsmayinvestinthefund.
7THIRTYOpportunityFund*
FEBRUARY7,2019Vol.I
BOULDER NEW YORK LOS ANGELES (303)325-3501 [email protected]
7THIRTYCAPITALINVESTMENTBANKING
7thirtyCapitalprovidescorporatefinanceservicestogrowthcompaniesactiveintheemergingcannabiseconomy.Theteamhasraisedoverabilliondollarsprimarilyforcompaniesactiveincommoditiesandemerging/frontiermarkets.Ourcommoditiesexpertiseandexperienceinnavigatingfast-growing,complexmarketsinemergingjurisdictionstranslatewelltothecannabisspace.
PRIVATEEQUITY
7thirtyCapitalplacesequityincompanieswithestablishedoperatinghistoriesand/orcompetitiveadvantages(includingphysicalassets,technology,know-how,equipment,intellectualproperty,oranestablishedcustomerbase).Weofferassistanceinraisingcapitalaswellasstrategicandtechnicaladvisoryservicesinordertodevelopself-sustainingbusinessesorbusinesscapableofattractingexternalfinancing.
The7thirtyteamwillprovidethecapital,humanresourcesandbusinessdevelopmentskillsnecessarytogrowworld-classbusinessesinthecannabisspaceandhelpcreateexitsthroughtradesalesorpublicofferings.Issuerswillbevettedfromtheperspectiveofprincipalinvestorsand,inmostcases,7thirtyOpportunityFundwilldeploycapitalintransactions.Thegroup'sabilitytoparticipatewithowncapitalindealssignalsastrongvoteofconfidencetoinvestors.
CONVERTIBLEDEBT
7thirtyCapitalalsoadvisesonstructureddealssuchasconvertiblebonds.Asaprincipal,themerchantbankcanoffercompetitiveinterestratesonconvertibledebt,pricingtheupsidefromequitykickers.
CANNABISMARKETINVESTMENTLANDSCAPE
Cultivation Processing Retail Consumption AgricultureTechnology
MedicalTechnology
LicensedproductionWholesaleSeedsClonesGenetics
ExtractionHarvesttechTrimtech
DispensariesMedicalCentersHRsystems
BrandsPremiumproductsDevicesVaporizersAccessories
GrowsystemsGreenhousesLightingsystemsHydroponicsAutomationGrowingMedia
PharmaceuticalsAPIdevelopmentDrugapplicationsCannabidiolIP
CannabisProducts Testing AncillaryProducts
&Services Consulting Financing Hemp&CBD
InfusedproductsEdiblesTopicalsDrinks
ProductvalidationGeneticverificationPesticidetestingMicrobialdetection
InsurancePackagingSeed-to-salePOSsystemsTransportationSecurity
ResearchMkt.IntelligenceOperationsComplianceRegulatoryAccountingTaxStrategyLicensing/Zoning
GrowFinancingHarvestFinancingEquipmentLeasing
Food&BeverageBuildingMaterialsFiberPaperFuels
