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Why the Latest Move from Green Organic Dutchman Holdings Ltd (OTCMKTS:TGODF) Represents Such an Interesting Strategy

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Canopy just spun off Canopy Rivers, which is effectively like a publicly tradeable private equity firm that seeks value by holding major investments in other cannabis-related business opportunities. And now Green Organic Dutchman Holdings Ltd (OTCMKTS:TGODF) has made a similar move in spinning off its TGOD Acquisition Corporation.

Specifically, the company just announced that, along with its wholly-owned subsidiary, TGOD Acquisition Corporation, they have entered into a definitive arrangement agreement pursuant to which the Company will, subject to the terms and conditions of the Arrangement Agreement, effect the previously announced spin-off transaction whereby TGOD will distribute to TGOD shareholders unit purchase warrants of SpinCo by way of a court-approved plan of arrangement. This move has implications that we will discuss below.

Green Organic Dutchman Holdings Ltd (OTCMKTS:TGODF) is a research & development company licensed under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) to cultivate medical cannabis.

The Company carries out its principal activities producing cannabis from its facilities in Ancaster, Ont., pursuant to the provisions of the ACMPR and the Controlled Drugs and Substances Act (Canada) and its regulations.

The Company grows high quality, organic cannabis with sustainable, all-natural principles. TGOD’s products are laboratory tested to ensure patients have access to a standardized, safe and consistent product. TGOD has a funded capacity of 116,000 kg and is building 970,000 sq. ft. of cultivation facilities in Ontario and Quebec.

The Company has developed a strategic partnership with Aurora Cannabis Inc. (TSX:ACB) whereby Aurora has invested approximately C$78.1 million for an approximate 17.5% stake in TGOD. In addition, the Company has raised approximately C$290 million dollars and has over 5,000 shareholders. TGOD’s Common Shares and warrants issued under the indenture dated November 1, 2017 trade on the TSX under the symbol “TGOD” and “TGOD.WT”, respectively.

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As noted above, TGODF just announced that, along with its wholly-owned subsidiary, TGOD Acquisition Corporation, they have entered into a definitive arrangement agreement pursuant to which the Company will, subject to the terms and conditions of the Arrangement Agreement, effect the previously announced spin-off transaction whereby TGOD will distribute to TGOD shareholders unit purchase warrants of SpinCo by way of a court-approved plan of arrangement.

The implications here suggest, more than anything, something about the cannabis space in general: Established industry players own an asset called “expertise”. Very few people in the world have expertise in the nuts and bolts of making money in the cannabis industry because it is still in its infancy.

Companies that possess such expertise can profit most by letting new investors fund a vehicle that is founded upon that expertise without polluting the predictable cash flows that come from the basic business of cultivating cannabis.

The solution is to own a large stake in a separate publicly traded company that is dedicated to making such investments and capable of raising capital from the open market. Hence, TGOD Acquisition Corporation.

At this time, carrying a capital value in the market of $804.36M, TGODF has a significant war chest ($261.8M) of cash on the books, which compares with about $14M in total current liabilities. The company is pre-revenue at this point. This is an exciting story, and we look forward to a follow-up chapter as events transpire. Sign-up for continuing coverage on shares of $TGODF 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 $TGODF, either long or short, and we have not been compensated for this article.

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