Pete worked the downstairs tavern for at least 20 years, building a loyal clientele of masculine weekday drinkers who would spill onto the quiet residential street late each afternoon, more animated than when they entered. And the bar sold the most beer in Toronto: the delivery truck would pull up outside the front entrance and roll kegs directly into the basement. Seventy thousand pints poured through the taps on any given month. The place pumped and the Jewish owner, Paul Sitzer, filled his pockets with the cash. Stockbrokers deliberated, entrepreneurs invented and lawyers argued over a lunchtime pint, accompanied by a steak and veal sandwich from San Francesco. And Pete the bartender delivered drink after drink, year after year to the rowdy all-male downstairs crowd.
Toronto, Ontario: On February 12, 2018, a panel of experts gathered before a discerning audience of professionals to deliberate Canada’s imminent legalisation of recreational marijuana. The discussion, moderated by Andrea Mandel-Campbell of the Canadian Club, navigated the turbid waters surrounding the impending overnight flip of an illicit narcotic into a legal product. The dialogue in particular, turned around how the industry plans to establish integrity in this novice marketplace.
Among the five industry experts sat Hugo Alves. Described as a leading advisor and pioneer of the cannabis industry, Alves currently serves as president and partner of Cannabis Wheaton Income Corp., a significant player in the Canadian cannabis market.
Hugo Alves (second from left) speaks at the Canadian Club panel discussion.
Mandell-Campbell began by probing her panel about industry integrity concerning valuation. She commented on the plethora of marijuana companies listed on the TSX that boast hefty revenues, yet a negative cash flow. These companies also list value at, “two hundred times their earnings.”
“How do we really value these companies?” asked Mandel-Campbell, directing her rhetoric to Alves, who sat casually in an open-necked shirt before a sea of suited men.
“Can you seriously go from throwing around numbers like 200 billion and then still giving a particular company a 200 times earning value: is that really, I mean, when you look at a lot of these companies, what they are offering is their value proposition and they don’t have a lot of revenue – they are losing money and yet what they are talking about is, I just signed an export licence, I have 16 export licences, I have 20,000 square metres of production capacity, but there is no ‘there’ there yet, so should we be at all nervous, Hugo?”
Hugo Alves appeared undeterred by Mandell-Campbell’s summation of Cannabis Wheaton’s business model. Cannabis Wheaton is the first marijuana streaming company, a concept that acquires partners in the production, distribution and export sectors, and who, despite boasting scores of business deals, reported zero revenue for their first 9 months of operation.
“Well, I think that, well, leaving aside how the market values companies, because by and large that is a function of who is willing to sell and who is willing to buy…I think when you see those announcements about an acquisition, what you are seeing is, and that it is a very exciting thing for the Canadian investor…what we are looking at is a once in a lifetime opportunity: we really have no analogy in our industrial history for this shift away from prohibition to regulation, so it’s an exciting opportunity, whether those valuations are sustainable or not,” responded Alves.
In effect, the legalisation of recreational marijuana represents a milestone in Canadian, and even world history. But flipping a business estimated between six to ten billion dollars almost overnight from the black to the white market poses innumerable issues that Mandel-Campbell continued to scrutinise.
“I want to drill down on some flags that I think go to the heart of the integrity of the sector,” she stated, first speaking of the illegal pesticides found recently in so-called organic medical marijuana products. She then referred to industry accounting regulatory dilemmas: no current industry standards are in place, meaning companies can value their plants as they wish, creating inflated profitability.
Mandell-Campbell also questioned the government’s angle on branding, taxation and pricing: issues they must tackle before this summer, when some twenty-nine million Canadian citizens will presumably receive legal access to recreational marijuana. To date, the Canadian government provides no clarification on future quality measures, or consumer education. And no one knows how the government plans to entice black market buyers over to the legal, but likely more expensive white market place.
“What will it take to still be here five years from now?” concluded Mandell-Campbell’s questioning.
“ I think the winners are the ones that establish a very robust and diverse cultivation platform, both in terns of geography and methodology, and that includes international, and that create and licence strong intellectual property, whether that be brands or a particular process, and those that open up diverse distribution channels,” asserted Alves, outlining Cannabis Wheaton’s objectives.
Although changes to Canada’s cannabis legislation changes appear imminent, no one knows for sure how the rollout of industry practice will play out, or what the future really holds for cannabis companies, despite the multi-billion dollar hype and promised potential.
On February 15, just three days after the panel debate, the Canadian government announced delays in legislative processes, pushing the earliest possible sale date for recreational marijuana back to August 2018. The Canadian Medical Association announced the same day their concerns regarding marijuana dependency and the risks of impaired driving.
Cannabis Wheaton shares dropped to $1.60, their lowest for 2018, following the announced delays. The company, while boasting news of each acquisition on their website, lists minimal financial information and all inquiries divert to Everton Murdoch, an investor relations agent from IRTH Communications, in Los Angeles. When I called Murdoch, he revealed he knew little about Cannabis Wheaton and, “has never even been to Canada.”
Cannabis Wheaton Stocks dropped to $1.60 following announced delays in recreational cannabis legislation.
Andrea Mandell-Campbell. (Moderator). (2018, February 12). Cannabis in Canada: will the market meet the hype? Canadian Club Toronto.
CBC News (2018, February 13). Doctors highlight marijuana’s health effects. CBC News. Retrieved from http://www.cbc.ca/news/health/marijuana-health-1.4070132
E Murdock. Personal communication. 16 February 2018.
Tasker, J. (2018, February 15). Senate deal on cannabis means no sales before August. CBC News. Retrieved from http://www.cbc.ca/news/politics/senate-vote-pot-bill-1.4537624
On January 30, 2018, Cannabis Wheaton Income Corp., a provider of funding to marijuana producers in exchange for equity, struck an interim deal with Inverell Corp., an Uruguayan-based marijuana producer. Inverell agrees to cede 80% of their shares to Cannabis Wheaton in exchange for approximately 15 million dollars in cash and capital. This newest acquisition propels Cannabis Wheaton into the international market space.
Cannabis Wheaton’s interest in the Uruguayan company stems from the expertise of its CEO, Raul Urbina. Urbina, a molecular biology expert, previously operated Stevia One, the lowest cost producer of Stevia worldwide. Stevia is a sugar alternative extracted from the leaves of the Stevia plant. Urbina turned from Stevia to marijuana last year after obtaining a federal license to grow and export marijuana products. In anticipation of the growing worldwide interests in medical grade marijuana, Urbina exercised his molecular biology expertise to transform his 16-acre property into a low THC marijuana crop. His first crop matures next month.
Low THC marijuana, also known as Cannabidiol (CBD) contains little of the chemical Tetra-hydro-cannabinol (THC). THC affects a person’s perception of time, space, memory, and pleasure. In medical marijuana, these effects are undesired. Low THC strains remove the undesired effects and instead, prioritise the plant’s pain relieving qualities. Dr. Peter Grinspoon, of the Harvard Medical School, claims that patients prescribed CBD report relief from insomnia, pain, anxiety, and reduced spasticity in conditions such as epilepsy. Dr. Grinspoon states that, “Although we don’t have rigorous studies and “gold standard” proof of the benefits and risks of medical marijuana, we need to learn about it, be open-minded, and above all, be non-judgmental.”
Currently, medical marijuana benefits patients in Chile, Columbia, Australia, New Zealand, the Czech Republic, Canada, parts of the United States, and Uruguay. Uruguay, the first country to legalise the cultivation, distribution, and usage of both recreational and medical marijuana in 2013, holds a strong advantage in the expanding international marketplace, due to its longevity in the business.
Laws on marijuana possession and use differ from country to country.
Hugo Alves, president of Cannabis Wheaton, stated with regards to the Inverell deal that, “We are incredibly excited to work with Dr. Urbina and his team in Uruguay. This transaction helps us secure a significant amount of CBD-rich hemp production that can be exported to other federally legal jurisdictions for further processing into nutritional and pharmaceutical products. We expect to see a significant increase in global CBD demand over the course of the coming years and believe that low-cost jurisdictions with favourable climates for outdoor cultivation will be key sources of CBD supply. As we continue to execute our international strategy, we are thrilled to have identified Inverell as our first international production operation.”
On behalf of Inverell, CEO Raul Urbina stated, “We are very excited to start this new adventure with a company that shares our values and vision and that will allow us to help deliver cannabis products under our 3 ‘P’ philosophy: People, Planet, Profit.”
Because of Urbina’s reputed success as a producer of high quality, high profit Stevia, Cannabis Wheaton anticipates Inverell’s crops to deliver strong margins. Uruguay already offers an opportunity for lower-cost production, compared to local Canadian growers. Cannabis Wheaton anticipates their most successful partnerships will occur in the international space.
Cannabis Wheaton claims as many as 16 partnership deals with local producers and suppliers of marijuana. Inverell’s production line adds to Wheaton’s growing distribution channel and potentially enables the company to become one of the largest suppliers of marijuana worldwide.
Cannabis Wheaton’s stocks closed at $2.18 following the announcement.
Cannabis Wheaton stocks closed at $2.18 following the announced Inverell Corp. deal.
Andrea Mandell-Campbell. (Moderator). (2018, February 12). Cannabis in Canada: will the market meet the hype? Canadian Club Toronto.
Bradford, A. (2017, May 18). What is THC? Live Science. Retrieved from https://www.livescience.com/24553-what-is-thc.html
Cannabis Wheaton acquires Uruguayan hemp CBD producer for $15 million. (2018, January 30). Marijuana Business Daily. Retrieved from https://mjbizdaily.com/cannabis-wheaton-acquires-uruguayan-hemp-cbd-producer-15-million/
Cannabis Wheaton Income Corp. (2018, January 30). Repeat: Cannabis Wheaton Income Corp. announces expansion to Uruguay and securing of significant hemp production. Cannabis Wheaton Income Corp. Retrieved from https://globenewswire.com/news-release/2018/01/30/1314183/0/en/REPEAT-Cannabis-Wheaton-Income-Corp-Announces-Expansion-to-Uruguay-and-Securing-of-Significant-CBD-Rich-Hemp-Production.html
Grinspoon, P. (2018, January 15). Medical Marijuana. Harvard Health Blog. Retrieved from https://www.health.harvard.edu/blog/medical-marijuana-2018011513085
Kuhl, L. (2018, January 30). Cannabis Wheaton Income enters Latin America via interim agreement with Inverell. Pot Network. Retrieved from https://www.potnetwork.com/news/cannabis-wheaton-income-enters-latin-america-interim-agreement-inverell
Nuckus, l. (2017, November 1). Where in the world is marijuana legal? Marijuana.com. Retrieved from https://www.marijuana.com/news/2017/11/where-in-the-world-is-marijuana-legal/
Stock Watch Daily. (2018, January 31). Cannabis Wheaton to buy 80% of Inverell for $15 million. Press Reader. Retrieved from https://www.pressreader.com/canada/stockwatch-daily/20180131/281492161755210
Toronto, Ontario: On May 26, 2017, Chuck Rifici, Chairman and CEO of Cannabis Wheaton Income Corp. strode onto the stage of the Lift Cannabis Business Conference to the tune of Bruno Mars’ 24k Magic. Hand in pocket and a grin beaming through his ginger hipster beard, Rifici positioned himself behind the podium and declared, “Legalisation is here!” The sneaker-clad businessman then clarified, “We are legalising by next Canada Day, and that’s amazing!”
Rifici’s Lift Cannabis Business Conference appearance came just weeks after Cannabis Wheaton debuted as the “world’s first marijuana streaming company.” The company previously traded as Knightswood Financial Corp., a boutique merchant bank. In April 2017, Rifici renamed the company to Cannabis Wheaton and changed its business model. The concept of streaming allows Cannabis Wheaton to fund licensed, or nearly licenced, marijuana producers by providing capital in exchange for a royalty-based partner agreement. Cannabis Wheaton will not produce marijuana, but plans to offer potential partners the funds and expertise needed to succeed in the new marketplace.
The concept of streaming may be new to the marijuana business, but Rifici is not. His interest in pot stems back to 2012, when Health Canada announced measures to restrict sales of medical marijuana to online and call centre sales only. Rifici understood this business model well: his first start-up company was a successful online Internet provider that he sold in 2003, age 21, for 1.1 million dollars. Rifici seized the opportunity to manipulate his Internet-business expertise into marijuana sales, co-founding Tweed Marijuana Inc., an online distributor, in 2013.
While thousands of disorganised and informal marijuana producers around the country scratched their heads over the legislation changes, Tweed carefully aligned its production and distribution with the new rules, and scooped up the very first Canadian license to legally sell and produce medical marijuana in 2014. Rifici’s personal wealth grew by $5 million overnight as the share price rose more than 25%, from $2 to $2.58, following the announced license. Meanwhile, the self-made millionaire volunteered his spare time as CFO of the Canadian Liberal Party. Rifici, now nicknamed the “Godfather of Weed,” claims there is no connection between his role as CFO and Tweed’s swift licensing by Health Canada.
Under the new reforms of 2012, Chuck Rifici’s company, Tweed Marijuana Inc. became Canada’s first licensed medical marijuana producer to sell online.
“It’s not going to be the Cannabis Culture anymore, it’s going to be The Culture, it’s going to be who we are as Canadians,” asserted Rifici in the opening minutes of his Lift Conference speech.
Dressed in jeans and a token sports jacket, Rifici grinned and gestured towards his audience as he continued, “We have a government that are taking a very safe approach going forward…but we are going to help the legal community make this law right and make it effective.”
Health Canada predicts marijuana users will increase ten-fold over the coming decade.
Cannabis Wheaton shares currently trade at $1.17, up from $0.03 at the time of its evolution.
Austin, I. (2014, May 24). When cannabis goes corporate. Retrieved from https://www.nytimes.com/2014/05/25/business/international/when-cannabis-goes-corporate.html
Cannabis Wheaton. (2017, May 5). Cannabis Wheaton the world’s first marijuana streaming company announced appointment of industry leading team. Retrieved from http://www.marketwired.com/press-release/cannabis-wheaton-worlds-first-marijuana-streaming-company-announces-appointment-industry-tsx-venture-cbw-2214512.htm
Cloutier, F. (2014, September 4). Liberal CFO a pot multimillionaire. Toronto Sun. Retrieved from http://torontosun.com/2014/09/04/liberal-cfo-a-pot-multimillionaire/wcm/9bb2ddcf-ec38-44b3-81d9-52f01fb04bed
Dimatteo, E. (2018, January 29). Who’s making a killing on weed? Now Toronto. Retrieved from https://nowtoronto.com/news/cops-politicians-cashing-in-on-cannabis/
Helmer, A. (2015, October 29). Liberal CFO could rake in money with legislation. Ottowa Sun. Retrieved from http://ottawasun.com/2015/10/28/liberal-cfo-could-rake-in-marijuana-money-with-legalization/wcm/7f3593dc-eca5-4def-8a19-f8fd5a2e1a78
Lift. (2017, October 12). Canadian cannabis – the second inning. Mr. Chuck Rifici. YouTube. Retrieved from https://www.youtube.com/watch?v=pTB0179i6do
Parry, C. (2017, May 8). Chuck Rifici resigns from Aurora, Supreme as Cannabis Wheaton debuts. Equity Guru. Retrieved from https://equity.guru/2017/05/08/chuck-rifici-resigns-from-aurora-acb-v-and-supreme-sl-c-as-cannabis-wheaton-cbw-v-debuts/