Cannabis streaming and royalty companies give investors a chance he risko invest in multiple companies within the cannabis sector that they would not have access to otherwise. There are similarities and differences between the two models that will be outlined in this piece.
The cannabis streaming and royalty business models are attractive for a few different reasons.
One being diversification, meaning lower risk. If a company is getting product or revenue from multiple investments or sources it spreads the risk out to multiple bodies. If a company has one different companies paying it and one of the five goes into bankruptcy, there are still four revenue generating streams.
Royalty vs. Streaming
FinCanna (CALI.C) has royalty deals with producers and retail and software companies. Investors like this model is it potentially gives them access to different areas within a sector. FinCanna have designed their royalty agreements to protect themselves from potential poor performance of the companies they invest in.
FinCanna’s setup allows them to take gross royalties off the top, which differ from net royalties that are paid after expenses. .
Streaming on the other hand is similar in its risk diversification, but differs in its structure. Where royalties are taken off the top in the form of cash payments, streaming deals involve payment in the form of product.
Best Value & US Growth Potential
Market Cap: 21.5126 Mil
Shares Outstanding: 75,482,777
FinCanna is arguably the most diversified cannabis royalty company in the US as it has deals with software, retail, production and dispensaries.
FinCanna is also an early stage company who has done $479,000 in revenue in 2018. FinCanna is projecting just $7 million revenue for 2019 as the projects it has invested in are also early stage. One of the most exciting aspects to FinCanna’s portfolio is CTI’s Coachella brand operating out of California. CTI has the naming rights to use Coachella as a brand, FinCanna has given CTI $3 million in funding as of August, 2018.
Current Royalty Agreements:
Cultivation Technologies Inc. (CTI) – FinCanna is providing funding to CTI for its planned 111,500 sqft indoor medical cannabis facility in Coachella, California. They also established a medical cannabis extraction facility on the Coachella Property through CTI’s Conditional Use Permit. The lab is also producing and selling licensed medical cannabis products. FinCanna will provide $3M USD in funding for a 14% royalty on revenue. FinCanna projects the royalty will earn them $1.6M USD per year beginning six months post funding.
Green Compliance Inc. – FinCanna is providing funding for Enterprise compliance and point-of-sale software solution (“ezGreen”) for licensed medical cannabis dispensaries and cultivators. FinCanna will provide $3M USD in funding in July/August, 2018 for a 10% royalty on revenue. FinCanna projects the royalty will earn them $3.2M USD per year beginning six months post funding.
Gram Co. – FinCanna is providing funding for Gram Co., a cannabinoid research and refinement facility based in Oakland, California, focused on the medical cannabis industry to provide B2B and B2C products and services to licensed medical dispensaries to be operational by end of 2018. FinCanna will provide $1-3M USD in funding in July, 2018 for a 7.5-14% royalty on revenue. FinCanna projects the royalty will earn them $2.24M USD per year beginning six months post funding.
2. Auxly (XLY.V)
Most Well Known Streaming Co.
Market Cap: 694.8680 Mil
Shares Outstanding: 573,652,046
Auxly expects to see 8,000 kg’s per year from ABCN, part of their expected 230,000 kg’s per year, making them larger than any LP in Canada.
Auxly offers a wide variety of services for emerging cannabis companies. This includes branding, construction, consulting, licensing and legal affairs.
For example, Auxly (formerly Cannabis Wheaton) will still be receiving cannabis from VIVO (VIVO.C) long after we are all deceased. Auxly funded a VIVO facility and now in return gets 50% of VIVO’s (VIVO.C) cannabis production yields from that property for the next 99 years. In exchange for this, Auxly will invest 55 million CAD between 2017 and 2019.