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The Huge Potential of Medicinal Cannabis Pre-IPO Opportunities

An (IPO) initial public offering is the process by which a private company can become a public entity by sale of its stocks to the general public. Investing into a pre-IPO company has its upsides and downsides for private investors. According to Investopedia, post-IPO company offerings, and its shares start trading on a stock exchange, its share price is determined by supply and demand for its shares in the market. If there is a high demand for its shares due to favourable factors, the price will increase. [1]

At JPD Capital, we offer a handpicked selection of pre-IPO medicinal cannabis opportunities, our first product in the portfolio to launch was a UK company, Eco Equity whose cultivation operations are located in Zimbabwe. Eco Equity will be exporting medicinal cannabis as an API to pharmaceutical partners around the globe.
The Market’s Past Performance

Canadian and USA companies Aurora and Canopy Growth were some of the first cannabis companies to list on the stock market. Canopy Growth, now worth $15 billion (2019) first listed on Toronto’s TSX Venture Exchange in 2014 via a reverse takeover of a capital pool company. Shares closed that first day at C$2.59 and have gained over 2,139% since then. [2]

Canopy’s success is a positive representation of the potential in the market and there are likely many investors regretting not investing in the early stages of the ‘green rush’… But it’s not too late, Eco Equity was recently valued by Baker Tilly, at $210m – before even reaching its fully-operational milestone and at JPD Capital we will shortly be announcing further regions in Europe where new fund products will be emerging.

This recent valuation has perfectly positioned the company to be a global leader within the industry based on its low production region, and access to export markets. Baker Tilly met with the executive team of its cultivation project in Zimbabwe and were “very impressed” with its business model and operational progress.
Investing during COVID-19
Investing in a pre-IPO opportunity in the current economic downturn may well be associated with risk. However the Medicinal Cannabis market sector is proving to be very resilient. We spoke with Jonathan Roy, Founder of UK Investor Group, including the infamous Cannabis Investor Forum to gauge his opinion on the market:
“With attention shifting the coronavirus pandemic, the medicinal cannabis industry has been quietly resetting itself with major players structuring and cutting cost. Surviving companies are now a lot leaner and have prepared themselves for the next chapter in the global medicinal cannabis story.
With the initial hype surrounding the emerging cannabis industry significantly diminished, investors are now shifting their attention towards profitability and those companies with balance sheets that will allow them to navigate future changes in the cannabis industry.”
Jonathan Roy, Founder at UK Investor Group
Don’t just take our word for it…

The National Institute for Cannabis Investors believe you should invest in cannabis start-ups for diversification benefits and exposing yourself to the higher risk opportunities that yield a higher return for an investor’s portfolio. NICI also have a fairly sentimental approach to cannabis start-ups as they believe that when you invest in a start-up, you’re investing in a small business full of entrepreneurs just like you and your investment makes you part of that company’s family. [3]

We believe in creating a strong family culture, you can check out what JPD Capital’s investors had to say here.

Due Diligence
Before committing to any kind of investment, a suitable amount of research, or in financial terms “due diligence” must be undertaken. When this comes to a medicinal cannabis company, here are some key things to look out for:
  • Is the license to cultivate longer than a year? 4-5 years is optimum and is a valuable and tangible asset.
  • What are their financial projections based on? It is advised to look for an independent assessment or investor analyst to confirm whether the projections have been calculated in a reasonable manner.
  • Is equity sale managed by an administrator and who is responsible for compliance and governance?
  • Are they regulated by the FCA?
The above checklist is vital in your due diligence process and can help you to feel satisfied and confident when seeking an opportunity in the thriving medicinal cannabis sector!

If you enjoyed this blog you can check out investment in stocks, bonds and assets compared with cannabis right now to learn more about the investing marketplace amid COVID-19.

References:

1. https://www.investopedia.com/ask/answers/how-companys-stock-price-and-market-cap-determined/
2. https://www.bloomberg.com/news/articles/2019-04-04/five-years-of-pot-stocks-canopy-up-2-139-since-its-debut
3. https://nicinvestors.com/2020/04/20/3-reasons-to-invest-in-cannabis-startups/

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