Cannabis Investors are Getting Savvier, Says Executive

Marijuana investors are getting more specific and want to know more from cannabis firms, says executive.

During the Lift & Co. (TSXV:LIFT) cannabis expo in Vancouver, Niel Marotta, president and CEO of Indiva (TSXV:NDVA), told the Investing News Network as the industry matures so are investors looking for growth in the space.

Rather than only asking about how much product a producer may be able to grow, Marotta said questions now range from precise consumer information, international aspirations and the participation in the upcoming edible market in Canada.

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Despite this maturation for investors, Marotta said a majority of investors are still chasing “size and big balance sheets” in the cannabis public scene.

“I think, in time, what we’ll see is the companies that carve out nice product niches, generate revenue and cash flow, capture market share. Whether it’s in a micro-market like just in edibles or whether it’s overall in the whole cannabis space, that’s how you will drive value and attract investors,” the executive said.

As the public cannabis space faces the potential of a market compression for firms in Canada, Marotta said Indiva won’t shy away from any sort of deal making. “Consolidation is not a bad word.”

When asked about tactics to capture the attention of the market and investors, Marotta expressed frustration with the lack of attention some players receive when experiencing complications.

“I think unfortunately the companies that are getting less attention are the ones that have problems… the companies that have had recalls, companies that have had moldy product,” he said.

Since the legalization of recreational cannabis in Canada on October 17, 2018, consumers have shared pictures and videos online of cannabis product with mold. While not an overall trend across the board, the issue has called into question the quality of massively grown licensed producer (LP) cannabis product.

US-market participation leads to exchange swap

As part of its annual general meeting of shareholders, in July 2018 the company announced it will be moving its shares from the TSX Venture Exchange (TSXV) into the Canadian Securities Exchange (CSE). The transfer has not been completed yet.

This will be done as the company pursues interests in the US cannabis market through investment deals in US-based marijuana firms.

Indiva has partnerships with Bhang Corporation, a cannabis and cannabidiol (CBD) edibles company known for its chocolate bars, and DeepCell Industries.

Indiva is the exclusive licensed manufacturer and distributor of Bhang’s products in Canada. The edibles company has earned a reputation in the US market and has also secured working partnerships with Origin House (CSE:OH) and Trulieve (CSE:TNNF).

Indiva holds a similar partnership with DeepCell to license, manufacture and sell its line of products. These items relate to the health and wellness sector infused with cannabis and derivatives.

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“We believe a CSE listing permits greater flexibility to pursue investment and participation in US markets,” Marotta said in a statement to shareholders. The executive added this move will “opens the door to further US partnerships” for Indiva.

The TSXV, which is operated by the TMX Group, has made it a policy to prevent listings from operating any assets directly related to marijuana in the US due to the federal illegality in the country.

Meanwhile, the CSE elected to ignore the federal illegality and allow thriving business seeking public capital from a growing investor audience, savvy enough to see the benefits of cannabis investing.

Retail aspirations for Indiva lead to outlandish offer

As an LP, Indiva will be allowed to only hold one retail license for its facility located in London, Ontario. Canadian LPs can’t own over 9.9 percent of a retail store.

Following the decision by the Ontario provincial government to forego it’s all-out opening of a retail marijuana market in the province in favor of a lottery system for an initial 25 winners to set up shop, Indiva said it would seek franchise deals for stores.

“We can offer a nice solution for a lottery winner with a very tight timeline,” Koby Smutylo, chief operating officer and general legal counsel of Indiva, told the CBC in January, shortly before the lottery took place.

Since the announcement, Indiva has not confirmed whether it secured a franchise deal with any of the winners in the Ontario lottery.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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