Investors Can Now Buy Shares Of A Marijuana Dispensary
By Debra Borchardt
Investors can actually buy shares in a publicly traded marijuana dispensary that handles the product from cultivation to storefront. TerraTech, an agriculture company with a focus on cannabis has acquired Black Oak Gallery, known as Blüm Oakland, a retail medical cannabis dispensary located in Oakland California.
TerraTech paid 1.5 x the 12 month forward revenue, which is expected to be over $14 million, making the purchase price approximately $21 million. However, 80 percent of the equity will be held in escrow subject to performance adjustments at the end of that 12 months. So, the price could rise. Blüm Oakland services roughly 1,000 patients a day and has over 42,000 registered patients. It has been operating since November 2012 and houses an onsite cultivation facility, proprietary strains and a retail storefront.
“Today, we can proudly claim the title of the only US-based, publicly-traded company that touches every aspect of the cannabis lifecycle—from cultivation, to extraction, to branding, and now, with the acquisition of Blüm, to retail sale,” said Derek Peterson, CEO of Terra Tech. “In addition to enhancing our cash-flow, this merger positions us to capitalize on the new regulatory landscape in California, which will change significantly with the implementation of the Marijuana Regulation and Safety Act in 2016.”
Peterson is referring to new legislation in California that aims to regulate the market and is expected to cause many businesses to close when they are unable to meet new business conditions. The state is also allowing marijuana businesses to operate for a profit. While California hasn't legalized recreational marijuana, many expect that it is only a matter of time before that happens and with such a large population of marijuana customers, it's considered to be one of the largest markets.The deal is expected to close by March 31, 2016.
“We have always prided ourselves on working with those at the forefront of the legal cannabis industry and this new partnership with Terra Tech is an exciting step forward for the Blüm team,” commented Salwa Ibrahim, Executive Director of Blum. “I have been fortunate to work with Terra Tech over the past couple of years, primarily in securing the Nevada permits. It is our hope that we can continue to secure permits and to develop sustainable but successful operations in new markets opening up.
TerraTech is a penny stock and is currently traded in the Over-The-Counter market. The stock has tumbled 65 percent over the past year from a high of 28 cents to a recent 9 cents. It has a market value as of January 8, 2016 of $25 million according to the OTC profile page. 2015 was not a very good year for marijuana stocks in general. The MJIC Marijuana Index of U.S. Reporting companies fell from a year's high of 207.16 to a recent level of 67.41.
TerraTech is better known for it's legal crop grown through Edible Garden and sold in stores like Shorite, Wal-Mart and Krogers. Edible Garden products are also now available through Fresh Direct. The hydroponic farming is also well-suited for growing medical marijuana and the company has been focused on the Nevada market. Two years ago the state of Nevada passed laws allowing regulated dispensaries for medical marijuana. They only recently began opening around the state. The state is expected to have legislation on the November ballot that would legalize recreational marijuana.
“As we continue to develop our long term strategy in Nevada, it has always been our goal to also focus on near term acquisitions that have immediate value to our stockholders,” explains Mike Nahass, Director of Terra Tech. “For this transaction, most of the merger payments are to be made in Terra Tech stock and we are valuing the deal on a forward looking basis. This structure ensures that Terra Tech will only pay for the performance it realizes in the coming year. In addition, if Blüm Oakland achieves all of its sales benchmarks, the number of our shares should only increase by roughly 60% but our expected total revenue is expected to grow by over 175%. We believe this is an extremely accretive transaction not only for Terra Tech but also for our stockholders as we continue to successfully execute on our business strategy.”