Tweed Marijuana is Canada’s newest publicly traded marijuana stock, and investors can’t seem to get enough of it. Despite its volume, blowing away anything speculators have seen in recent weeks on the TSX Venture, investors are beginning to fret over its true valuation.
Tweed Marijuana Inc. (TWD:TSXV) was up 33% to $3.45 per share Monday, after closing at $2.59 Friday.
From a dollar value standpoint, Tweed had traded more than the 20 most liquid stocks on the TSX Venture combined Monday! It had traded some $15.8 million worth by 1:05 PM EST.
This kind of domination is unprecedented on the TSX Venture. Monday was Tweed’s second day as a publicly traded company and investors could not contain themselves.
Tweed stepped into the exploding marijuana marketplace with an air of credibility due to the fact that Health Canada has approved it of being a licenced producer of medical marijuana.
Unlike the majority of medical marijuana-related publicly traded companies on the TSX Venture or CSE, which have a limited business plan or defined model for profiting from the rise of legal marijuana, Tweed is the first publicly traded manufacturer of the drug.
Operating out of the former Hershey chocolate factory in Smiths Falls, Ontario, hasn’t hurt the company’s image either.
Tweed has transformed the old factory into a state-of-the-art licensed facility for growing and harvesting medical marijuana. It has provided jobs and soon rising tax revenues to a region of Canada that desperately needs both.
The company’s Chairman, Bruce Linton, currently sits as Canada’s representative on the World Bank’s Water Sanitation Program Advisory Council as well as the Cleantech Advisory Board for Foreign Affairs, Trade and Development Canada. He brings a background worthy of confidence and investors have been less weary towards Tweed, possibly for this reason.
The majority of marijuana-related stocks were down Monday, while Tweed was up 32% to $3.44 per share. This could be a sign that a flight to quality amongst marijuana-related stocks is firmly underway.
The Huffington Post recently reported that the company’s 5,000-square-foot vault can store up to 15 million grams, or $150 million-worth, of dried marijuana. The facility itself is 180,000 square feet.
James West of the Midas Letter recently wrote that, “Tweed estimates that its average selling price will be $8.80 per gram of marijuana, which implies gross annual revenue of CA$132 million, or $3.77 a share.”
This valuation had some investors debating the true value of Tweed’s business model – especially after opening at $4.60 per share on Friday only to collapse to $2.59 by the close.
Tweed has explained that heating, ventilation, and air conditioning will be the company’s biggest expenses.
Until Tweed is publicly reporting its costs, margins and EBITDA for a few quarters, speculation will continue. The fact Tweed opted to list on the TSX Venture should embolden the exchange and start-ups that frequent it. Tweed’s market cap sat at $120 million Monday morning.
Tweed has already had to deal with red tape after a shipment of marijuana was seized at the Kelowna airport. The company is waiting on answers from the RCMP as it believes it followed protocol to a tee. With that said, the idea of large amounts of marijuana being shipped all over the country clearly has authorities on edge.