-A Brief history-
Round 1
I first heard about TGOD in the fall of 2016 before the Canadian Marijuana Stock market was in full swing. I heard about a company that had been growing under the ACMPR system for years that had a huge plot of land somewhere in Canada that wanted to expand under the guidance of veteran operators in the Canadian Pot Stock arena.
At the time, Health Canada had given them a license (to my best recollection) they had approval to cultivate 1,000 kilograms worth of sweet organic cannabis. At this time they were raising a round of financing at $0.50 CAD and I fully expected them to have a second round at $0.75 and a 3rd round in the $1.15-$1.25 CAD range, but somewhere in between rounds the whole company changed.
The change was facilitated by Health Canada coming back with a new production amount for TGOD to cultivate; 14,000 kilo’s. Now I full well expected their production size to increase over time given the size of their land and the need for Health Canada to have LP’s meet what will likely be a shortfall in supply, I just wasn’t prepared for the speed.
In any case, my original investment thesis was that 1,000 kilo’s of organic cannabis in a market that is saturated with non-organic cultivators was a value proposition with a high likelihood of scaling up.
-In this round they raised roughly $13,000,000 and issued 26,581,172 6-month restricted shares with a focus on targeting smaller retail investors between $5,000-$10,000.
Round 2
Once word started to get around about TGOD’s updated production capacity people were experiencing a bit of jealousy and fear of missing out, but management under the helm of Rob Anderson had something exceptional to offer entrants both structurally & fundamentally. A full warrant exercisable at $2.15 attached to the $1.15 CAD common share and fundamentally a strategic alliance with Eaton Energy Solutions (ETN) a $36 billion dollar, publicly traded energy solutions company.
The key to this alliance was reduced cost in components for power optimization, data tracking for 10 years & most importantly a 65% reduction in power cost vs pretty much
every competitor in Ontario and Quebec (later in RD 3). To put it into perspective, I’ve gleaned that 50% of any LP’s monthly overhead is a direct result of power costs. If company A is spending $100,000 a month in power across the street from TGOD and they accidentally get TGOD’s utility bill, they are likely going to lose their mind when they see TGOD is paying about $40,000 a month in the same energy per kilowatt hour. Energy is everything, second to construction and management, but I don’t want to put you to sleep.
-25,156,096 restricted shares issued with 6 month hold raising an additional $28,929,511.
Round 3
This is simple, figuratively speaking Health Canada says, “Hey we love what you guys are doing, would you want to also do it in Quebec?” Sure says TGOD, and through partnerships with Hydro Quebec (Read:POWER) they selected a huge parcel of land in an area that has everything they will need for operations without needing to burn through millions to meet responsibilities with power, sewage, drainage, fresh water, etc.
-67,878,787 restricted shares issued at $1.65 with 6 month hold time and a half warrant exercisable at $3.00 if price is above strike for 10 days.
** I almost forgot Aurora bought $55,000,000 worth of shares in this offering for 17.62%, not to mention bought out the construction partner that TGOD had/has that is also building their Aurora Sky facility. TGOD signed a standstill agreement whereby Aurora cannot buy more shares other than that’s outlined in the term sheet, they are locked up for 6 months, and TGOD has a right of first refusal on their stock if they wish to sell.
In essence that investment is locked up. Aurora also has the right to purchase up to 20,000 kilos of TGOD’s high quality organic cannabis as part of the deal. They also have an option to buy up to 51% of The Green Organic Dutchman, but I find that highly unlikely given the cost they would have in acquiring 51%. Still, Aurora’s CEO & management team are making a serious move to position themselves with what will be the biggest organic producer in the world.
Round 4
IPO! If you talk to any Canadian that wanted to get a piece of the IPO at $3.65 per share with a half warrant exercisable at $7 they will likely tell you they wanted 10,000 shares and only got filled 2,000 shares. The demand for the IPO round was excessive to say the least, and not in a bad way.
Reasoning here was the likelihood of making an open market purchase that could be volatile or run away from you. Investors saw this as a way to lock in what they perceive as a fair market price. When I look at valuations in this space I look at funded kilo’s because its as a direct a way as possible to figure out forward values in a vacuum.
I say vacuum because I can’t factor in any surprise variables that become event driving catalysts for a company, Constellation Brands purchase of 9.9% of Canopy is a good example, recreational cannabis passing June 7th with the C 45 bill is another. With that said, for every kilo of cannabis they can grow with the cash they have on hand I assign a conservative 2 to 1 value.
Given the fully funded nature of TGOD plus a 50% higher margin on organic I think a safe number to use would be $20,000 in market cap per funded kilo since many of these trade like the biotech companies. I will let you do the math on a 116,000 fully funded capacity.
Highlights:
•All founder shares subject to 42 month escrow, and management options vest over 36 months
•Fully funded domestic operation from raising $160 million privately
•Heavily oversubscribed IPO financing, closing an estimated maximum of $115m
•Expected post IPO cash position: $250 million
•970,000 sq. ft. expansion underway across Ontario and Quebec, expected to produce 116,000 kg’s annually
•Completely organic product and process leads to increased margins from higher sale price
•High quality, (organic) low cost model achieved through scale, automation including heavy automation and low-cost power jurisdictions
•Proven management team specific to finance, consumer packaged goods, consumer products, brand building, international markets, brand building and the cannabis industry
•Strategic Investor: Aurora Cannabis for $55m and 20% wholesale agreement with Aurora Cannabis
•Building four purpose-built R&D laboratories to generate diverse product offerings, IP, and support clinical studies on cannabis
•Industry leading construction and design partners including Eaton Corp, Ledcor group, Hamilton Utility Corp, and Aurora Larssen Projects Inc.
•5,000+ retail shareholders
•And my wife loves everyone at TGOD, mainly Jeanette the founder & Danny Brody because he’s “so nice.”
Written By: The Wolf Of Weed Street
Twitter: @WolfOfWeedSt
Marijuanastocks.com is owned by MAPH ENTERPRISES LLC (MAPH), a Florida corporation. The principles of MAPH participated in the IPO for The Green Organic Dutchman Holdings, Ltd. (TGOD) & own a collective 353,624 shares which are restricted for 6 months from the IPO date of 5/2/2018, 30,000 free trading shares & 221,898 warrants. The principals of MAPH intend to sell their positions in (TGOD) for profit. MAPH nor any of its principals have been compensated for any material related to (TGOD).
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