Earlier this year, Select, a leading US cannabis concentrate company, was acquired for almost $1 billion and this was a development that caught our attention. This acquisition was all the proof that we needed to show that the interest in cannabis brands is reaching an inflection point and Plus Products (PLUS.CN) (PLPRF) is a burgeoning cannabis brand that we are excited about.
Plus Products is highly levered to the cannabis edibles market and has been primarily focused on the California market. The company has been nothing short of an execution story and is the top selling edible in the California market (according to BDS Analytics). This is a major accomplishment and we are impressed with the company’s ability to be successful in one of the most competitive cannabis markets.
In late May, Plus Products announced plans to expand into the Nevada market through a definitive agreement to partner with TapRoot Holdings, a vertically integrated cannabis company with cultivation and manufacturing facilities in Las Vegas. When it comes to selection a strategic partner, Plus Products conducts significant due diligence and believes that it can leverage TapRoot’s extraction capabilities as a part of a supply agreement. In addition to TapRoot’s extraction capabilities, it has also received 7 of the 61 newly issued retail licenses in late 2018.
Plus Products believes that TapRoot has the facilities available for the company to easily and quickly deploy its machinery, ingredients, and personnel to ensure that the product remains consistent both in California and Nevada. As the company expands into new markets, it will serve as the manufacturing operations partner to ensure quality and consistency across markets. We find this to be significant when it comes to creating a consistent product and are bullish on the growth prospects associated with this relationship.
On an annual basis, Las Vegas attracts more than 42 million tourists, and this has made Nevada one of the most significant cannabis markets. When a company is working to build a national (or global) brand, they need to be focused on several key markets. These markets are similar in the way that they attract tourists and bring the people to the brand. We are favorable on the leverage that Plus Products will have to Las Vegas and believe that it is a key market to building an internationally recognized brand.
We believe that Nevada is just the start of something much bigger for Plus Products and this is an opportunity that we are excited about. One of the reasons we are favorable on Plus Products is due to the type of investors that it has attracted. The company has received large investments from some of the most significant hedge funds that are focused on the cannabis industry and this is a testament to the quality of the opportunity. Plus Products is a company that has massive growth prospects and is an opportunity we continue to watch.