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Sunday, June 13, 2021

Cannabis Wheaton Income Corp (OTCMKTS:CBWTF) Rebounds on Signs of M&A Appetite

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Cannabis Wheaton Income Corp (OTCMKTS:CBWTF) is a stock that has truly been all over the place in recent action, with shares oscillating back and forth around the $1.25 per share level several times so far in 2018. This week, the stock has managed to successfully retest its lows from mid-February, triggering a sharp snapback bounce. The catalyst for this supportive bid could potentially address one of the market’s perceived problems with the stock in the past: a lack of aggressive M&A pursuits.

Specifically, the company just announced that it has entered into a definitive acquisition agreement to acquire all of the outstanding securities of Dosecann Inc. According to the release, “Dosecann is a late-stage Licensed Dealer applicant pursuant to the Narcotic Control Regulations with a purpose-built 42,000 square foot facility located in Charlottetown, Prince Edward Island.”

Cannabis Wheaton Income Corp (OTCMKTS:CBWTF) trumpets itself as an investment company that seeks to provide investor returns through streams and capital appreciation in the Canadian cannabis industry.

The company operates as a cannabis streaming company. It provides funding for cannabis facility expansions, operations, and initial construction in exchange for minority equity interests and a portion of the cultivation production.

The company was formerly known as Knightswood Financial Corp. and changed its name to Cannabis Wheaton Income Corp. in May 2017. Cannabis Wheaton Income Corp. was incorporated in 1987 and is based in Vancouver, Canada.

According to company materials, “Wheaton Income is a collective of entrepreneurs with a passion for the cannabis industry past, present and future. Our mandate is to facilitate growth for our partners by providing them with financial support and sharing our collective industry experience. Our partners all have different visions, voices and brand values, and all share a common goal—to build a world-class industry based on ethics, diversity, quality and innovation.”

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As noted above, shares of the stock snapped back sharply to the upside on Thursday, regaining key technical support and powering back up to test the axis point of the recent lateral trading range that has been dominating the action in this stock all year. The catalyst for the move appears to be the company’s announcement of some expansion activity by means of acquisition.

As outlined in the release by Chuck Rifici, Chairman & CEO, “Pursuant to the Acquisition Agreement, Cannabis Wheaton will acquire all of the outstanding securities of Dosecann by way of a “three-cornered amalgamation”. Upon the completion of the Acquisition, Dosecann will become a wholly-owned subsidiary of Cannabis Wheaton. As consideration for the Dosecann Securities, the Company will pay the holders of the Dosecann Securities an aggregate of up to $38,000,000, payable in common shares of Cannabis Wheaton, subject to the satisfaction of certain post-closing time and performance-based milestones. As part of the Acquisition, all outstanding convertible securities of Dosecann will either be converted into Dosecann common shares and exchanged for Consideration Shares on the closing of the Acquisition, or will otherwise be exchanged for convertible securities of Cannabis Wheaton based on the exchange ratio used in the Acquisition.”

This is important news for the stock. The Canadian cannabis patch is becoming an increasingly dog-eat-dog world. As cannabis prices have fallen, and as the number of suppliers has risen, it is becoming increasingly clear that only a handful of major players are going to be left standing at the end of the day. And one must imagine that the characteristic that will define this group will likely boil down to deal-making along the way.

Now commanding a market cap of $232M, CBWTF has a significant war chest ($26.1M) of cash on the books, which is balanced by virtually no total current liabilities. CBWTF is pulling in trailing 12-month revenues of $51K. However, the company is seeing declines on the top-line on a quarterly y/y basis, with revenues falling precipitously. We will update the story again soon as further details emerge. Sign-up for continuing coverage on shares of $CBWTF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $CBWTF, either long or short, and we have not been compensated for this article.

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