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The Next Big Canadian Cannabis IPO


Canada continues to lead the medical cannabis industry and legal recreational cannabis in 2017 should serve as a catalyst.

Licensed medical cannabis producers have significantly outperformed the S&P 500 and many are overvalued.

Emblem Corp will be going public in November and it has one of the best management teams in the cannabis industry.

Although the legal cannabis industry is in the first inning of what will prove to be a multi-decade growth cycle investors must conduct ample due diligence before investing.

From the United Kingdom to Canada, the legal cannabis industry has made significant strides over the last year, a trend that we expect to not only continue but to accelerate as new markets open and existing ones develop.

Capital Markets Become More Receptive to Cannabis

Capital markets have become more receptive to cannabis businesses over the last year and this is especially true for licensed medical cannabis producers in Canada.

The Canadian cannabis industry saw a major boost after Justin Trudeau and the Liberal Party won the Canadian general election as they have announced the intention to make cannabis legalization a priority.

The stocks levered to this growth have seen their respective share price move significantly higher over the year and even though we see further upside from current levels, investors should wait for a pullback in the sector or for a new opportunity.

An Undervalued New Opportunity

Capital markets have become more receptive to cannabis businesses over the last year. In October, Emblem Health Corp, a licensed medical cannabis producer in Canada will have its initial public offering on the TSX venture exchange.

Emblem is comprised of three distinct divisions which can create value for each other as well as improve the value proposition of the entire company.

Although the company's strategy across its three verticals of cannabis production, patient education and pharmaceutical production, will take time to execute in full, benefits will quickly materialize as the industry continues to move forward.

A Ground Floor Opportunity

Emblem is led by its founders and a management team with a proven track record of success prior to having started the company. Since its inception, management has been able to execute on its plan and put the company in a position attractive to capital markets.

The Emblem team has built and managed multi-billion dollar companies. The company's management, its founders, advisors, and employees have invested $6 million into the company.

John Stewart is the president of Emblem Pharmaceuticals, which is focused on developing new dosage forms of cannabinoid medication and revolutionizing how patients consume cannabis. Prior to joining Emblem, Stewart was the president and CEO of Purdue Pharma Canada and Purdue Pharma U.S., one of the largest privately held pharmaceutical companies in the world. Stewart was responsible for the launch of 11 new products, including OxyContin.

A Massive Growth Opportunity

Since it just recently received its sales license from Health Canada, we expect to see Emblem show consistent growth and improving fundamentals on a year-over-year basis for the foreseeable future.

Emblem's pre-IPO valuation is below $25 million and this is attractive as it is significantly lower than other licensed medical cannabis producers in Canada. Although Emblem has a long road ahead, we expect to see the company grow quickly due to its customer friendly infrastructure, premium product, and its focus on education.

By early 2017, we expect to see the market catch on with Emblem's potential. This has created an attractive investment opportunity for investors who are looking for an undervalued investment opportunity in the legal cannabis industry.

Supporting Documents

  1. Emblem_Corp_Presentation_August_2016.pdf

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.