For the last year, marijuana stocks were the hot new destination for investment capital. But as they became overcrowded with speculation and hype, investors started to look for hidden gems: the rare, valuable, hard-to-find stocks that can turn rags to riches.
I’ve kept my eyes peeled for interesting plays. One of them might be The Green Organic Dutchman Holdings Ltd (OTCMKTS:TGODF, TSE:TGOD), a small-cap marijuana stock that went public at the start of May.
Investors should probably take a closer look at it since, ahem, TGOD stock’s value more than doubled in one month.
What stands out to me is the lack of media coverage about the stock. Next to no information has been available to average investors, yet the company was able to raise enormous amounts of cash. How was that possible?
The deeper I dug, the more I was interested.
Eventually, I went straight to the horse’s mouth. I had an hour-long conversation with Green Organic Dutchman CEO Robert Anderson in order to better understand his company and vision.
Here are seven important quotes and takeaways from Anderson. They cover everything from the TGOD stock history to whether Green Organic Dutchman will seek a listing on a U.S. stock exchange.
1. Before going public, TGOD raised $160.0 million from 4,500 retail investors. Using just six full-time staffers, TGOD visited investing clubs and brokers in what they describe as a “painstaking” process. “The hours that go into it is astronomical,” said Anderson.
But the end result was that TGOD “turned the cart upside down” by relying on average investors instead of big, institutional players. In fact, the company mandated that about 60% of the initial public offering (IPO) should be designated for retail investors.
2. “This is a CPG business, not a commodity business.” Anderson insisted that TGOD is a consumer packaged goods (CPG) company, not simply a firm that cultivates weed and sells it without any thought to branding or marketing.
Anderson kept beating this drum, because, according to him, the commodity price of marijuana will not determine the winners and losers in this market. Branding is king.
3. “Why did Amazon buy Whole Foods?” Anderson pointed out that Amazon.com, Inc. (NASDAQ:AMZN) bought a luxury grocery store chain because it knows that customers will pay a premium for “organic” products. That’s simply the market we live in today.
Green Organic Dutchman can use this same strategy—the power of health-conscious branding—to leverage higher margins.
4. “Worldwide distribution is immediate.” TGOD signed two partnership agreements: one with Colorado-based Stillwater Brands and the other with CBx Enterprises LLC. The deals give Green Organic Dutchman full branding rights on a range of edible, drinkable, and vaporization products.
These partnerships make global expansion an overnight possibility, says Anderson.
5. “We are looking to become the biggest organic marijuana company in the world.” TGOD doesn’t want to be McDonald’s; it wants to be Chipotle.
6. “Listing on a major U.S. stock exchange is a must.” When asked about liquidity, Anderson admitted that TGOD would eventually have a listing on the New York Stock Exchange (NYSE) or the Nasdaq, since those are the biggest stages in finance.
7. Marijuana is having a “great awakening” across North America and Europe. When I asked Anderson where he sees the legal marijuana market going, he spoke of a “great awakening” in cannabis culture.
He said that legalization in Canada and the U.S. will serve as a template for the rest of the world, starting with cash-strapped states in Europe. Their urgent need for tax revenue will force legalization, which in turn will seep through the European Union’s porous borders until there is continent-wide legalization.
Interview with Robert Anderson
If you’re interested in learning more about Green Organic Dutchman, here are some more fleshed-out answers that the company sent me in an e-mail (which has been lightly edited).
Gaurav Iyer: You’ve spent decades in finance. Is that an advantage or disadvantage in running TGOD?
CEO Robert Anderson: We view our experience in finance as a significant advantage, as our business plan requires access to capital and in-depth knowledge of mergers and acquisitions.
When we started the company, we made a financing plan that is very unique and may be an industry first. The plan was to empower retail investors and allow them to participate in all levels of our financings. In contrast, most companies want to take the big cheque and be done with it.
As financings are the foundation of a company’s corporate structure, we wanted to make sure that investors understood our company and had spoken with us about our plans. We wanted to identify investors that can be brand ambassadors, medicinal patients, and soon-to-be recreational customers.
This resonated so well with people that we raised $160 million privately from over 4,500 shareholders. It was a lot of work, and we are so happy we took the approach of empowering the retail shareholder.
We had over 4,500 shareholders as a private company, and I suspect we are now close to 20,000 since becoming public.
Most of our financings came with warrants, which allow the investor to purchase additional shares at a higher price. That enables us to be self- funding from the exercise of those warrants, as we no longer need to go back to the market for financing. This is unique and protects the current and future shareholders of our company.
GI: As the marijuana space grows more crowded, what does TGOD offer that other weed stocks do not?
RA: We have several differentiators. First, as mentioned, our financing and share structure is the most unique in the sector. Second, we are the largest producer by funded capacity of premium organic cannabis (116,000 kg). Third, we have, if not the largest treasury, one of the top three bank accounts in the business.
All of that aside, TGOD is different, as we are not a marijuana cultivator, and that may sound strange as our facilities will produce 116,000,000 kg.
Let me explain: we grow premium organic cannabis, but then we have a planned budget of $55 million for research and development of new innovative medicines and products, which we will then package and sell around the world. I guess then that makes us also a consumer packaged goods company.
I believe our business plan and management’s ability to execute is what separates us from the crowd.
This will allow us to take advantage of various business opportunities that arise, both domestically and internationally, that most can’t execute on.
Fourth, we have major industry-leading partnerships with Ledcor and Eaton Corporation that allow for efficiency in building and power. We will be the lowest-cost producer in the space. We believe that starting with a premium certified organic input will allow TGOD to develop a suite of higher-margin products.
Lastly, we have assembled the most experienced CPG team in the sector. The team consists of former Cott Corp executives—one of the largest distributors in the bottle and food service industry—in addition to Andrew Peller Ltd, the ultra-premium wine brand in Canada.
GI: Aurora Cannabis is TGOD’s biggest investor and customer. Does that foreshadow a merger?
RA: We are excited to be partnered with Aurora Cannabis Inc, who we view as industry leaders. Terry Booth and his team are knowledgeable, innovative, and the best partner we could have asked for. I really can’t say enough good things about them.
We are confident that working with Aurora Cannabis and Aurora Larssen Projects Inc. will ensure that TGOD develops the most technologically advanced hybrid facilities in the industry. [Aurora Cannabis CEO] Cam Battley has joined our board, providing additional expertise to our already diverse and experienced board.
What they intend to do in terms of mergers and acquisitions in the future, only they know. TGOD will be successful on its own, but if ACB offers shareholders a great premium, that is great as well.
GI: Do you believe there is a marijuana supply glut?
RA: No. At the moment, there is major demand when recreational marijuana hits. We see the supply/demand balance shifting to the supply side in Q4 2019–Q1 2020. Only the lowest-cost, highest-quality premium product will thrive.
Our business forecasting suggests an oversupply in the later part of 2019 into 2020 for lower-range product grown in traditional greenhouses. We believe that irradiation of dried flower will equate to lower selling prices.
TGOD’s business plan of selling premium organic flower and a full suite of derivative organic products should command premium pricing.
Additionally, we have one of the largest cash positions in the industry, allowing us to enter foreign markets. TGOD has the ability to not only supply Canada, but also fill the demand in other higher-margin countries with premium organic product.
GI: If marijuana prices continue to fall, how would TGOD plan on increasing shareholder value?
RA: As you may have seen in our last two press releases, we will continue to look for opportunities in all aspects of the cannabis supply chain. The international market is interesting; Europe is almost 20 times the size of Canada.
The beverage and food segments of the business is something we are looking at more closely. We encourage investors to explore our licensing deals with CBx Enterprises and, more recently, Stillwater Brands (exclusive license for CBx cannabinoid technologies; TGOD to exclusively license fast-acting Stillwater foods “Ripple SC” soluble cannabinoids and other proprietary beverage and food technologies).
Additionally, with the funds we have in our treasury, coupled with the world-class senior management team we have assembled, we are confident in our future. We look to acquire businesses that are accretive and complementary to our business plan.
GI: In your opinion, will more U.S. states legalize recreational marijuana?
RA: Yes. In due time, I suspect that all states will be medically legal and eventually recreationally legal.
GI: Do you plan to list in the U.S.?
RA: Yes. As we have seen a couple players do so already, we have plans and will be applying to list in on a major U.S. exchange.