The company saw an 18.02 percent bump in its share price following the restriction change on Monday (November 5).
TGOD has differentiated itself from other Canadian licensed producers (LPs) with similar production numbers by staying put as adult-use sales kicked off in Canada.
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Danny Brody, vice president of investor relations with TGOD, sent company shareholders a set of questions and answers to share an update on where the cannabis producer currently stands.
The company explained that while still producing product, it elected to not participate in the “bottleneck” situation currently seen with the Canadian recreational market.
TGOD expects to begin offering its products “early next year” when it projects distribution and supply chain issues with the provinces will be cleared.
TGOD’S relationship with Aurora Cannabis
Aurora Cannabis (NYSE:ACB,TSX:ACB) has been an active participant on the TGOD’s progress since going public.
The relationship started to change in the public eye once it was revealed Aurora was selling portions of the shares owned on TGOD. Aurora had also failed to acquire an extra eight percent of TGOD shares under an investor rights agreement.
Aurora, according to TGOD, sold approximately 3.5 percent of the owned shares.
In the email, Brody said Aurora still owns 33,333,334 common shares and 19,837,292 warrants, resulting in approximately 15 percent of the company.
“Aurora’s 15 [percent] ownership allows them to maintain the option to purchase up to 20 [percent] of our premium organic product produced in our two Canadian facilities,” Brody said.
In a research note from Canaccord Genuity issued in October, analysts Derek Dley and Matt Bottomley indicated one of the top risks for the stock presentlyis the potential for Aurora to “distance itself” from TGOD.
In September, Cam Battley, chief corporate officer with Aurora, resigned as member of the TGOD board of directors.
“In our view, the potential for Aurora to distance itself from TGOD presents a risk to the company, as we believe it would negatively impact the company’s ability to execute its business plan,” the note from Canaccord said.
However, the report projected it was “unlikely” for Aurora to fully drop TGOD as the company holds no organically certified facilities.
Brody explained TGOD’s recent raise of C$76 million “completely de-risked the capital side of Aurora’s investment.”
“Had Aurora exercised [its] option to acquire an additional 8 [percent] of TGOD, the acquisition price would have been $4.75, adding significantly more dilution for the same amount of capital,” Brody said.
Since last, Friday TGOD has seen its stock rocket to a price of C$4.47, a 76.19 percent growth near the end of the trading session on Tuesday (November 6).
TGOD currently has a market valuation of over C$1 billion on the Toronto Stock Exchange (TSX).
Canaccord’s note awarded TGOD with a “Speculative Buy” rating and a price target of C$7.
While TGOD’s current focus is on increasing production capacity in Ontario and Quebec, we expect the company to be free cash flow positive in 2020 as it plans to build a portfolio of organic cannabis brands that will serve legal recreational and medical markets around the world.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.