Canopy Growth Spinout Canopy Rivers Readies to Join the Cannabis Revolution

James West
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Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) made a smart move back in 2017: they launched Canopy Rivers Corporation, originally conceived as a streaming platform that would finance newcomers to the cannabis industry, but quickly became an investment platform to capitalize on and differentiate select opportunities in the space.

As it happened, the well-capitalized boys at Rivers, as it is affectionately referred to by insiders, discovered that limiting themselves to just cannabis applicants was, well, limiting. They decided to finance many cogs in the great cannabis industry wheel, which has now resulted in a portfolio of holdings across cultivation, extraction, consumer-facing brands, distribution, medical and recreational products, as well as media and agri-tech.

Rivers has raised a total of about $75 million to date, GMP of which just under a third was provided by Canopy Growth Corp, resulting in the mothership owning 29 percent of the outstanding shares of Rivers, and its employees, partners and Canopy Growth collectively controlling 46 percent.

Rivers has 8 investee companies currently, of which some are public and some may go public in the future. The table below lays out the type of structure and stake.

(Source: GMP Conference presentation April 2018)

Canopy Rivers will seek a public listing in what will be the first chartered bank-led IPO in the weeks ahead, a clear indication that the cannabis industry is approaching a level of maturity.

The management team of Canopy Rivers includes a team of institutional players with deep experience in valuation, and who have a reputation of being tough with management teams who might think they walk on water.

Rivers today announced that it was beefing up its board with some heavy hitters, including Joe Mimran, the founder of Club Monaco and Joe Fresh, as well as being one of the original Dragon’s Den “Dragons”.

Bruce Linton will be on the Board, who has driven the success of Canopy Growth Corp since its beginning, and Daniel Pearlstein, former analyst with Eight Capital (formerly Dundee) and M Partners fleshes out the team.

“Canopy Growth has been able to establish, execute and operate an investment platform to better capitalize on the global cannabis market opportunities through its un-paralleled board and management,” said Pearlstein during a phone conversation on June 1st.

Rivers is supported by Sean McNulty and Peter Hatziioannou of XIB Consulting, who have been instrumental in raising capital and identifying opportunities in the cannabis space since its onset. They will continue to be an integral part of the business of Canopy Rivers.

I do not personally own shares of Canopy Rivers (yet), and so I can say somewhat objectively that I think this is one emerging cannabis industry provided that I expect will provide a positive experience for investors.

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James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

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