International Cannabis Corp has strong IPO

Any savvy investor knows what a ride Canadian listed marijuana stocks have been on since October.  If you haven’t paid attention to the sector, pull up a three-month chart of virtually any public licensed producer and you’ll see what I’m talking about.  A large part of the activity in the sector is the anticipation of the Trudeau government making recreational marijuana legal this coming spring.  What if I told you that there is a TSXV listed marijuana producer that operates in a country where recreational marijuana is already legal?

International Cannabis Corp. (TSXV:ICC), formerly Shogun Capital Corp, began trading on the TSX Venture Exchange on November 29th, 2016 after the closing of its qualifying transaction involving the acquisition of International Cannabis Corp. by way of a “three-cornered merger.”  In addition to this, they also announced and subsequently closed a $13 million CDN brokered private placement and the stock began trading with 112,000,000 shares outstanding (121,373,010 fully diluted).  ICC plans to use the proceeds from the private placement for the construction of facilities necessary for the production and processing of recreational cannabis, medicinal cannabis, and industrial hemp pursuant to licenses and authorizations issued by the Uruguayan government, and also for general corporate purposes.  ICC also plans to develop its product range, including partnerships with pharmaceutical companies to develop medicinal products and capitalize on opportunities to export to new legal markets, subject to prior receipt of all requisite regulatory authorizations.

Uruguay passed the “Cannabis Law” in December of 2013 which created the IRCCA (Uruguayan Institute for the Regulations and Control of Cannabis) with the purpose of regulating and controlling the production, planting, growing, harvesting, distribution, and dispensing of cannabis.  It also gave the government of Uruguay control over and the capacity of regulating the activities of importing, exporting, planting, cultivation, harvesting, production, acquisition, storage, marketing, and distribution of cannabis and its derivatives.

In October of 2015 the IRCCA granted a license to ICC for the production and sale of recreational cannabis in Uruguay, one of only two granted.  ICC has been growing recreational cannabis since March 2016 and their first harvest took place in June 2016.  Currently, the company has inventories of 100 kilograms of recreational cannabis for the Uruguayan market.  They are working with the governmental authorities to develop the distribution infrastructure and expect the first sales to occur by year-end 2016.  Their product will be sold in pharmacies to registered adults who can buy a maximum of 40 grams per month.  

CEO of ICC Guillermo Delmonte said, “With the closing of the Qualifying Transaction behind us, ICC will be focusing on first sales of recreational cannabis to a captive market in Uruguay.  Given Uruguay’s favorable climate, we expect to see all in costs continue to be among industry leaders.”  Currently, ICC’s production costs (including applicable licensing fees) are approximately $0.60 US per gram for recreational cannabis but the company expects these costs to fall as it builds out its production facilities and ramps up production.

ICC is hoping to build a dominant position in South America where several countries have either recently relaxed their cannabis and hemp laws, or are in the process of doing so.  They hope to capitalize on their “first-mover” advantage and a comprehensive license from the Uruguayan government which provides more scope for product development through R&D.  They also plan to produce hemp and hemp based products which are expected to include: clothes, chocolate, energy drinks, tea, soda, cooking oil, shampoo, soap, and cosmetics.

The future definitely looks bright for ICC for several reasons; they have lots of cash on hand to build facilities and ramp up production on their 100 acres of licensed green space for production of recreational cannabis, being the first public licensed producer in South America, their largest shareholder, Union Group, has experience in large scale agriculture projects, being close to some big markets that may open up to medicinal or recreational cannabis use in the future (Brazil and Argentina), and perhaps most importantly, their low cost of production which they see getting even lower as they ramp up their operations further.

Shares of International Cannabis Corp. opened at $0.91 CDN and hit a high of $1.29 before closing at $1.14.  The stock traded a little over 3.5 million shares on its opening day.

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Written by Kirk Holt

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