This Low-Priced Pot Stock Deserves Investor Attention
If you’ve been following the cannabis industry, you may have noticed an inexpensive pot stock that goes by the name of Supreme Cannabis Company Inc (OTCMKTS:SPRWF, TSE:FIRE).
With a market capitalization of around $339.5 million and a share price of just over a dollar, SPRWF stock seems like a relatively small player in the business.
However, the company is well positioned to capitalize on the booming marijuana industry. And thanks to a recent announcement, there is one more reason for investors to check out Supreme Cannabis stock.
Supreme Cannabis Company Inc owns a globally diversified portfolio of marijuana companies, products, and brands.
Headquartered in Toronto, Ontario, Canada, the company has built a solid presence in the Canadian marijuana market. Its wholly-owned subsidiary 7ACRES received the “Brand of the Year” award at the Canadian Cannabis Awards last year. (Source: “7ACRES Recognized as Brand of the Year by Cannabis Awards,” Cision, December 3, 2018.)
Earlier this month, Supreme Cannabis announced that it reached an agreement to acquire Truverra Inc., a private cannabis company also based in Toronto. The transaction, valued around CA$20 million, is expected to close before the end of August. (Source: “Supreme Cannabis to acquire Truverra as it prepares for Legalization 2.0 and Global Medical Markets,” Supreme Cannabis Company Inc, July 17, 2019.)
What’s so special about this announcement?
Well, the deal could help the company prepare for what’s being called the “second wave” of legalization or “Legalization 2.0.”
The Canadian government legalized recreational marijuana for adult use on October 17, 2018. And that was just the first step. Later this year, the country is expected to legalize cannabis derivatives, such as edibles, infused beverages, topicals, and concentrates.
By acquiring Truverra, Supreme Cannabis will get its hands on the company’s two wholly-owned subsidiaries: Canadian Clinical Cannabinoids Inc. and Truverra (Europe) B.V.
Canadian Clinical Cannabinoids currently operates a 5,000-square-foot licensed production facility in Toronto. Supreme Cannabis plans to use this facility to house its extraction lab for concentrates and vaping liquids. The company also plans to make changes to the facility in the near term to meet the demand for the pending legalization of other derivative cannabis products.
“The recent introduction of Health Canada’s amended cannabis regulations creates a distinct opportunity for Supreme Cannabis to establish a leading position in the cannabis extracts markets,” said Supreme Cannabis Company Inc’s Chief Executive Officer Navdeep Dhaliwal.
“With the acquisition of Truverra, we secure a Toronto-based facility equipped to extract our high-quality inputs for concentrates and vaping liquids in the near-term.” (Source: Ibid.)
At the same time, the deal would also boost Supreme Cannabis’ international presence. Located in the Netherlands, Truverra (Europe) B.V. is already selling a portfolio of cannabidiol (CBD) products in select European markets.
Note that I called this new announcement “one more reason” to check out SPRWF stock, but not the “only reason.” That’s because, even without this acquisition, Supreme Cannabis possesses something that could turn it into a soaring pot stock: extremely high growth rates.
You see, Supreme Cannabis may not be as well known as the industry heavyweights, but its business is nonetheless growing rapidly.
In the three-month period ended March 31, the company generated CA$10 million in net sales, marking a staggering 382% increase year-over-year. (Source: “Supreme Cannabis Announces Q3 2019 Financial Results,” Supreme Cannabis Company Inc, May 13, 2019.)
In particular, its sales revenue from recreational marijuana markets increased 63% from the December quarter. The year-over-year comparison for this metric wasn’t available because, in the March quarter of 2018, Canada hadn’t legalized marijuana for recreational use yet.
Supreme Cannabis was quick to jump on the opportunity of marijuana legalization in Canada last October. In less than a year after “Legalization 1.0,” the company signed agreements to sell “7ACRES” branded cannabis in eight of the 10 Canadian provinces. (Source: “Investor Presentation,” Supreme Cannabis Company Inc, last accessed July 24, 2019.)
Supreme Cannabis Company Inc (OTCMKTS:SPRWF) Stock Chart
Chart courtesy of StockCharts.com
Trading at $1.07 per share, SPRWF is not exactly the hottest ticker in the marijuana industry. As you can see from its price chart, Supreme Cannabis stock had a solid run in the first quarter of this year, but pared most of those gains in the second quarter.
Still, the company runs a fast-growing business, and has made solid preparations for Legalization 2.0. If Supreme Cannabis Company Inc manages to capitalize on the second wave of legalization as well as it did on the first wave, SPRWF stock could be the next pot stock on the rise.