Specialist investment company Hygrovest Ltd (ASX:HGV, OTC:MMJJF) has made a follow-on investment in cannabis company Weed Me Inc, the largest unlisted Canadian licensed producer of cannabis products for the recreational market.
HGV focuses on generating capital growth for shareholders over the medium term from investments in listed and unlisted equities and debt securities and says that the cannabis outfit is the best-performing investment in its portfolio.
The company has converted C$1 million of its unsecured convertible note into 598,802 Weed Me shares at the contracted conversion price of C$1.67 per share.
Discount to valuation
As at March 31, HGV had ascribed to Weed Me shares a valuation of C$2.06 per share, making it attractive to convert at a material discount to that valuation.
HGV has also agreed to extend the maturity date of its remaining C$1 million unsecured convertible note from April 29 to October 29.
The extension will allow Weed Me to bring forward the acquisition of plant and equipment designed to increase both productivity and sales.
Weed Me has also announced its maiden dividend to shareholders totalling C$1 million. HGV will receive a total dividend of around C$100,000.
Future capital growth
“Weed Me is the best-performing investment in HGV’s portfolio,” said HGV chairman Peter Wall.
“HGV remains optimistic for future capital growth from its investment and is working with the company to maximise exit value with the option of realising a material portion of HGV’s investment during the next 12 months.
“HGV’s follow-on investment in Weed Me and the extension of the remaining note’s maturity date will assist the further expansion of Weed Me’s sales and generate value for HGV.”
About Weed Me
Established in 2016, Weed Me runs a complete product line of dried flower, pre-rolls, vapes and gummies, taking a significant slice of key Canadian provincial markets.
Net sales growth continues – in the vicinity of C$45 million last calendar year, with the company generating substantial growth in EBITDA from C$1.4 million to C$4.9 million in the same period.
In the current financial year, the company has seen net sales of around C$11.2 million in the March quarter, with growth in EBITDA from C$0.2 million in PCP to C$1.8 million in that time.