Cannabis SPACs Offer ‘Free Look’ at Market, Says CEO

A Special Purpose Acquisition Corporation (SPAC) executive tells INN why SPACs offer investors a free preview into the cannabis world.

At the core, SPACs are an investment vehicle in which a company raises capital through an initial public offering (IPO) before any operations are determined. Once the total sum is raised the goal becomes for the company to go out, find and acquire an operating business.

SPACs have a time limit agreed with investors and if the company does not meet its end of the bargain, the money goes back to the investors.

Joe Crouthers is the chairman and CEO of Ceres Acquisition (NEO:CERE.UN), a SPAC looking into the cannabis business which went public on the NEO Exchange in March after raising US$120 million.

Ceres has not completed its acquisition but Crouthers told INN the company is heavily interested in the US cannabis market.

The executive described SPACs, particularly those in cannabis, as a free look for investors interested in the market.

But Crouthers and Ceres are not newcomers to cannabis investments. In fact, Ceres will continue to invest through its holding company.

What Ceres will hope sets it apart is its attention to consumer and more directly the marketing of cannabis products to consumers.

“We brought on two different talent management firms to sort of open the top of the funnel in terms of consumer awareness, consumer access or finding creative ways to get in front of consumers.” Crouthers said.

As part of its public listing, Jos Schmitt, president and CEO of NEO, praised Ceres for a deep understanding of the cannabis industry’s evolution.

“Go-to-market efficiency and tailored client-service has driven our leadership in the Canadian SPAC space, and we believe this is just the beginning of an exciting year for SPAC transactions, not only in the cannabis sector but across many industries,” Schmitt said.

Crouthers told INN his company went with the NEO for its listing since the exchange has been a great partner for this investment model. The NEO has become a hub of sorts for cannabis SPACs.

The executive said there will be a day when US companies touching the cannabis plant will be allowed to list in US-based senior exchanges but at the moment that timeline didn’t align with the company.

“Even if you get your rescheduling in the US, our view is it’ll take several months for the exchanges to get ready to do that,” the SPAC executive said.

Listings in senior exchanges, like the NASDAQ or the New York Stock Exchange, are not currently permitted for cannabis companies operating in the US, given the federal restrictions of the drug. However, Canadian-based companies have secured these listings by maintaining a distance from any plant-touching business below the border.

The company reached the public markets just before the full effects of the COVID-19 pandemic took on the global markets, an aspect Crouthers said gave the firm a chance to become more efficient in its acquisition pursuit.

“I’m very excited about where we’re headed, but no, I don’t have an exact timeline yet on it,” he told INN.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.