In February, the Australian government issued its first license for cultivation of medical cannabis. It also expedited importation of cannabis from countries where it is already approved (mainly Canada and the Netherlands). This is great news for AusCann (OTCPK:ACNNF) and other medical marijuana companies based down-under. Although the company does not have a timeline to start domestic production, expect to see companies start to get their licenses in the coming weeks and months. In the meantime AusCann does have other projects already started and a relationship with Canopy Growth Corp (OTCPK:TWMJF) that will benefit them while they wait licensing
AusCann went pubilc very recently in a reverse takeover with TW Holdings (no relation to Tweed). Months before the company had negotiated a deal with Canopy Growth Corp - parent of Bedrocan and Tweed - to exchange equity for Canopy's expertise. Canopy initially had about 15% of AusCann, but it has been diluted some in the reverse takeover.
This deal should help AusCann in two ways. One is Canopy will lend their knowledge and expertise in regards to everything from licensing to growing to branding. The second benefit will be that Canopy can supply AusCann with product in the interim period between when Australia starts to allow for importation and when AusCann's first harvest is ready for sale. It will also lend them an air of legitimacy in the market place.
AusCann's other significant differentiator is their 50/50 joint-venture agreement with the Daya Foundation in Chile. Daya was the first company in Chile legally allowed to grow medical cannabis. Chile also allows for exportation, giving AusCann a foothold in the South American market. When combined Chile and Australia's population is about equal to the population of Canada, meaning ACNNF has a sizeable domestic market they can address.
Given these circumstances, Canopy's recent buying spree, and Canopy's desire to dominate the world-cannabis industry I would not be surprised at all to see them make an offer for AusCann. Canopy has recently bought two Canadian licensed producers, Mettrum (OTC:MQTRF) and Vert Medical (not actually licensed at time of purchase), as well as their German distributor. With their stock riding high, Canopy feels secure in using it as currency in these transactions.
The only thing stopping them from buying AusCann might be the price. Right now ACNNF is valued at over $60M USD. With little in the way of revenues - at the moment - and no license in their home country some might think that price tag is a bit steep. In contrast, Canopy only paid around $7M CAD for their German partner/distributor. But they also just paid over $400M CAD for Mettrum.
Even if Canopy does not make an offer for AusCann, they will share their expertise and networks - greatly benefiting the Australian partner. On their own, AusCann seems capable of making the right moves - as demonstrated by the Daya collaboration - and is likely to emerge as a leader in Australia's maturing medical marijuana market.
AusCann did not respond to requests for comment on this article. ACNNF trades OTC in the US, while AC8 trades on the Australian Stock Exchange and has significantly higher trading volumes.
Disclosure: I am/we are long ACNNF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.