What You Need to Know About the TGOD IPO
One of the most highly anticipated marijuana IPOs of the year—The Green Organic Dutchman IPO—is just days away from its launch. The marijuana producer and seller is now in the final leg of its pre-IPO preparations.
The company has just filed its amended preliminary prospectus with the Canadian provincial regulatory bodies. The final prospectus will be submitted before long and we expect the shares to begin trading by the end of March.
Here’s what marijuana investors need to know ahead of The Green Organic Dutchman IPO, which is expected to create a $650.0-million marijuana company.
The Green Organic Dutchman first caught our attention back in January when marijuana industry heavyweight Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB) revealed a 17% stake in the company. So, we dug deeper to figure out what exactly piqued Aurora’s interest in it.
It turns out, TGOD is one of the few organic marijuana producers in Canada, and it is strategically located between two of the country’s most populous provinces, Ontario and Quebec. By having a presence in those two provinces, TGOD keeps its friends close and its enemies closer.
Being in Ontario gives it access to the biggest marijuana market in the country, where nearly all of the major marijuana growers are centered. But Ontario is an expensive place to do business.
For indoor marijuana producers, electricity accounts for significant overhead costs. This is why the company has expanded into Quebec, where power costs are nearly half of Ontario’s.
TGOD’s foray into Quebec has partly been funded by its new friend, Aurora Cannabis. Aurora is the only major player in Quebec, where there’s a dearth of marijuana growers.
This should give you an idea of its geographical significance.
Now, coming to its business, TGOD sells 36 kinds of cannabis strains, all of which are organically grown without any pesticides.
Although the company is unprofitable (like most marijuana producers), it has managed to hoard a war chest of more than $133.0 million, which is being used to expand its annual cannabis production capacity to 116,000 kilograms. Of this, about 100,000 kilograms will be produced at the Quebec facility, which is being built in partnership with Aurora.
However, the $160.0 million that TGOD has so far raised in private equity is not enough to fund the construction of this ginormous 820,000-square-foot Quebec facility. So the company is turning to capital markets to raise the shortfall in funds.
The Green Organic Dutchman plans to issue somewhere between 20.5 million and 27.4 million units (shares and warrants), priced at $3.65 apiece, through the IPO. That will help it raise an estimated $75.0 million to $100.0 million for its expansion plans.
Overall, the company is being valued at roughly $650.0 million, making this one of the largest IPOs in the marijuana industry. (Source: “Cannabis company TGOD to raise up to $100 million in late March IPO,” Financial Post, March 14, 2018.)
So, for investors wishing to become a part of Canada’s green revolution, this IPO may be a good chance to get in early for cheap.
IPOs are generally regarded as overpriced and overhyped. It’s true that most IPOs disappoint in the short run, but history is littered with examples of some supremely successful IPOs that have gone on to deliver exponential gains to early investors.
Facebook Inc (NASDAQ:FB) is one example I often cite. In the year it went public, the company was among the first movers in a young industry. Initially, the IPO seemed like a complete dud, but Facebook proved its mettle in the coming years once the social media industry took off.
The marijuana industry is likewise in its nascent phase today. A year later, when Canada will have legalized marijuana for recreational use, this small industry will bloom into a multi-billion-dollar powerhouse. Early movers may turn out to be the biggest winners, and TGOD may be one of them.
Keep your eyes peeled for The Green Organic Dutchman IPO. It may pleasantly surprise you.