A new cannabis company completed its listing debut on Tuesday only to face a negative reaction from the market, which is dealing with a downturn in sentiment.
A new international cannabis firm made its debut on the Canadian markets with the support of a multi-state operator (MSO) in the US.
Despite the current downturn affecting the marijuana sector, on Monday (November 18) Terrace Global (TSXV:TRCE) started trading, providing another option for investors to play the international cannabis market.
Michael Galego, a director with Terrace Global, told the Investing News Network (INN) the company has a vast pool of experience from its leadership team, who have played roles in cannabis companies that went on to get acquired by some of the largest names in Canadian cannabis.
Terrace Global originally planned to raise C$15 million as part of its public debut but ended up closing its deal at C$17 million, according to Galego. The funds will aid in the continued development of the company’s cannabis operations in Uruguay and Portugal as well as 100 acres of hemp cultivation in Spain.
“We asked ourselves where are the opportunities internationally where you can grow cheaply, where there’s a domestic market and where there’s ultimately the ability to export,” he said.
Following its trading debut, shares of Terrace Global were crushed during a period of volatility increased by doubts surrounding the industry with recent announcements such as HEXO’s (NYSE:HEXO,TSX:HEXO) improper growing discovery and Aurora Cannabis’ (NYSE:ACB,TSX:ACB) decision to halt two construction sites.
“The whole sector … people are pulling capital out of the sector generally … I think the market’s probably overreacting,” Galego said. “I think you see that in a number of companies in the sector but at the same time I understand the sentiment of retail shareholders.”
The company opened at a price of C$0.30 per share and closed on Monday valued at C$0.15. On Tuesday (November 19), the firm noticed another double-digit drop in value at the start of the trading session.
“The vast majority of our stock is held by long-term shareholders and I think you can’t really focus on day traders; it is what it is,” Galego said.
When asked about the reason to go public now given the current sentiment in the stock market, he said operating as a public firm in foreign jurisdictions is an advantage in the eyes of international governments.
Galego added the company having public stock opens the doors to a variety of merger and acquisition activity possibilities, which he indicated could come in Q1 or Q2 2020.
MSO supports newcomer in international cannabis
While the market expected to see an escalation in the relationship between Canadian firms and US-based multi-state operators, particularly following the acquisition plan between Canopy Growth (NYSE:CGC,TSX:WEED) and Acreage Holdings (CSE:ACRG.U,OTCQX:ACRGF), those public ties have not yet spread as widely yet.
MariMed (OTCQX:MRMD), an MSO with a hemp business approach selling products in six states, is backing Terrace Global by way of a 6 percent ownership stake in the company.
“We’re lucky … that we have a strategic shareholder that is a US MSO,” said Galego. “That lends credibility to what we’re doing, our business plan and (MariMed is) also a great partner if we ever need advice and guidance.”
MariMed recently issued a revenue report for its Q3 2019 period, indicating an increase to US$11.22 million, while the company reached an operating income of US$1.04 million.
However, on November 13, MariMed filed a notification of late filing to the US Securities and Exchange Commission.
Past cannabis ventures experience directs strategy for Terrace Global
The management team of the company includes former executives with Tokyo Smoke, which was acquired by Canopy Growth, and MedReleaf and ICC Labs, which were both acquired by Aurora Cannabis.
Galego said the company’s shared experience offers a benefit to investors. When asked about the priorities a team with this much experience can settle on, he said understanding the regulatory landscape of foreign countries is key for Terrace Global.
The company holds operations in Uruguay, where it holds a 33.75 percent ownership stake in a recreational cannabis business carrying a greenhouse production facility, and in Portugal by way of a provisional license. Galego envisions the company selling and exporting bulk wholesale cannabis product.
According to Galego, Terrace Global wants to settle a deal to secure the remainder of the stake in the Uruguayan business in Q4 2019.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article..
Editorial Disclosure: Acreage Holdings is a client of the Investing News Network. This article is not paid-for content
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