In a single of the biggest investments to date by a single investor in a publicly traded cannabis organization, MedMen (MMNFF) announced this morning that Gotham Green Partners (GGP), a major investor in the worldwide cannabis investment sector, will invest up to USD$250 million into the Los Angeles-primarily based cannabis organization.
In reaction, Northland analyst Paul Penney reiterates an Outperform rating on the cannabis stock, with a $9.00 price tag target, which implies almost 178% upside from present levels. (To watch Penney’s track record, click right here)
Turning to the specifics, MedMen would obtain $250M in a convertible note structure, with the 1st $100M closing in April. The subsequent two tranches can come six months and 12 months following the closing of the initial $100M investment. For Tranche I (the 1st $100M) the conversion price tag is the lesser of US$three.565/share or a 15% premium to what ever the share price tag is just before it closes subsequent month. For Tranche II and III (US$75MM each and every), the conversion price tag is the lesser of a 15% premium to the 20-day VWAP at the time or US$7.00/share. At $three.565/share, the $100MM from Tranche I would outcome in issuing 28.1 million shares if converted.
Penney highlights a “handful of constructive quantitative and qualitative positives out of the GGP investment:”
- We think this $250M strategic investment basically requires all lingering future dilution / equity financing dangers off the table. Mentioned an additional way, we think numerous MMEN naysayers and fence sitting / prospective MMEN shareholders have been reluctant to invest due to the apprehension about ongoing dilution and / or the draconian worry that MMEN was going to be challenged to proficiently raise further development capital.
- We think the GGP connection has quite a few strategic positive aspects that go above and beyond the capital infusion. In time we think GGP will probably achieve an official MMEN BOD seat and think getting even far more “adult supervision” to guide MMEN’s operational / economic pathway is only additive to their lengthy term efforts.
Penney concluded, “We think MMEN is in the early innings of a multi-year development story and is poised to be a single of the preeminent brands in legalized cannabis. With effective operational / economic execution (in particular with their newly minted / hugely capable CFO & COO), we think MMEN’s close to term income / earnings energy and longer term challenging to replicate / strategic worth will come far more clearly in concentrate.”
To study far more on the nitty gritty of what’s going on in the increasing cannabis sector, click right here.