The cannabis industry’s challenge with financing is creating some creative solutions. Donald McInnes from Green Stream Finance took a page from the mining industry to help Maricann (OTC: MRRCF) raise money without giving up shares in the company.
“Instead of Ben (Maricann CEO Ben Ward) selling shares to raise $42 million dollars, which at today’s price he would have to sell 25 to 30 million shares to raise that much money,” said McInnes. “That would dilute his shareholders ownership of the company by maybe 35-40%. What streaming is doing is we’re giving him the capital he needs and giving up only 20% of the production.”
Maricann has agreed to giving up ownership of 20% of the production of its German facility for 10 years. The deal is for cost plus 10%, so if the cost of production rises, Maricann will not be caught short or lose. The investor gets to participate in the cannabis industry with little fuss other than putting up the money. The investors never take delivery of the product, even though they technically own it so that they can’t potentially compete in the marketplace. Maricann handles the sale and the investor gets a check.
The barrier to entry in the industry is high in Germany because only companies with three years of experience can apply for a license. In this scenario, the investor doesn’t have to operate a facility and it’s a purely financial relationship. “It’s an easy way to get into the industry,” said McInnes.
“We see Green Stream as better than Cannabis Wheaton, which would have taken some of the ownership of the company,” said Ward. “It doesn’t dilute our shareholders ownership.” Ward is very excited about the property in Germany, which is an old Cargill facility. It had a previous life processing meat, so the building already had clean rooms which could be adapted to cultivation and an HVAC system that works well for cannabis. “We only had to spend 940,000 euros to fit the building out for cannabis,” said Ward “While others are spending 20 million euros to build a similar footprint.”
Mining companies have been using this type of financing for years. Usually an investor purchases a part of the metal production at a fixed price. It is a method pioneered by Silver Wheaton and used by mining companies when traditional equity financing slowed.
McInnes, who came from the mining industry, created Green Stream to finance the Maricann deal, but he’s looking at doing other deals in Germany, Canada and the U.S. “It’s purely about the financial engineering. We can operate anywhere,” he said. McInnes stated, “It’s finite. It’s not forever. It derisks Maricann’s business plan and it allows them to raise capital without diluting their shareholders interest.”