Article by James West, Midas Letter
James West: Okay, so let’s talk a bit about your bought deal financing, $60 million, what are you going to use that for?
Bruce Linton: Yeah. So the concept we have is that we made an acquisition in Germany, Quebec and Ontario. And each of these locations has the opportunity to now, once acquired, grow organically, meaning increase what they are from the point of acquisition. So that means in Quebec, building a facility; it means with the ones in Ontario, expanding facilities. It means in Germany being prepared to create what’s necessary to enter the market on that property.
So 60 mil seemed about the right number so that you can commence all that, and then in Canada, once we spend it all, there’s some possibility that the Tier Two banks will then lend back to us, but it’s not a generally available instrument to say ‘lend me the money so I can build it’. The best you can hope for is, ‘I’ve built it, will you give me some of the money back in the form of a mortgage’.
James West: Interesting. So, in the same press release, you announced that you had engaged Cowen and Company LLC as financial advisor in the United States. Are we to read into that that you might be on a shopping trip in the United States?
Bruce Linton: No. So we aren’t. It is illegal to participate in touching the cannabis crops in America, at a Federal level. The reason that matters is, public companies who want to provide audited financial statements to their investors have a problem when you enter America, in my opinion and that of Deloitte, which is, if I were doing anything else that was federally illegal – moving around materials that the government didn’t agree with it would be pretty hard to have an auditor give you a clean audit on that.
So if we do any acquisitions in America, it won’t be related to production or illegal activities. That doesn’t mean there aren’t a number of products that have been evolved in that market that may not be a fit, but specifically nothing which is currently involved in production, distribution or touching Canada’s plan.
James West: Okay. So is there any insight you can shed as to why you’ve retained Cowen?
Bruce Linton: I think Cowen, if you look back at the history of Cowen, they’ve had a primary position in the activities of GW in terms of their listing in the US. They seem to have been the first US investment bank of any size which has put an analyst dedicated to the topic. They’ve initiated tours that brought parties to Canada, and they’re now creating a plan to institutionally introduce cannabis to America. So it seems to me that they have occupied the leadership position in America as far as analysts and investment bankers based at a real bank, and so whatever they do, we’d like to work with them.