The following Guest Post comes from Equity.Guru. It was written by Lukas Kane. Gaia Grow Corp. has a C$14 million market cap, (200 million shares at C$0.07). It has about C$3M in cash, so its enterprise value is C$11M. The views and reported facts contained in this Guest Post are those of Lukas Kane and equity.guru. Peter Epstein, of Epstein Research, owns shares of Gaia Grow purchased in the open market.
Snap quiz: Name a hemp company with the following characteristics:
- Less than 3 weeks old
- Veteran cannabis CEO
- More than 1,000 acres of planted crop
- Market cap under $20 million
Meet Gaia Grow (GAIA.V) a little-known, new entry to the hemp space, with 1,494 acres growing in southern Alberta.
If you believe in omens, GAIA received an early agricultural blessing when its first crop experienced warm intermittent rains, accelerating the growth rate of the juvenile plants.
Hemp – and its expensive derivative CBD – may be stored in your cerebral Tupperware along with “all-things-hipster”.
CBD has experienced an accelerated consumer adoption-cycle – moving from health fad, to accepted medicine, to mainstream usage in the flutter of a humming bird’s wings.
The hype-cycle reached its nadir when Kim Kardashian West had a CBD-themed baby shower” and ABC co-host Michael Strahan asked, “Is it true that CBD is harvested through Willy Nelson’s tears”?
In fact, hemp is older than Larry King, older than coffee, older than democracy.
Archeologists in Turkey have found hemp fabric dating back to 8,000 BC. Rembrandt and Van Gogh painted on hemp canvas. From 1631 to the early 1800s, hemp was legal tender (money) in most of the Americas. In Virginia (1765) hemp was considered so important that you could go to jail for not growing it.
In December 2018, hemp got important again when the U.S. Congress and Senate approved an $867 billion farm bill, legalising hemp and opening the floodgates to hemp and CBD companies. In the last 18 months, a green-rush of companies have entered the space. Here’s a snapshot of the Canadian industrial hemp licences.
I once asked the CEO of a lithium company to state his qualifications and he replied guilelessly: “I read a book on lithium”.
When I stared at him stone-faced, he added, “It was thick”.
As micro-cap investors, we need to play close attention to the resume of the CEO. When asbestos-miners suddenly become experts in organic vertical growing – it’s a warning sign.
Gaia’s CEO Frederick Pels is renowned in the cannabis community for setting up “The Green Room” – an early leader in medical cannabis supply, education and cannabis industry best practices.
He knows the weed business financially, legally, medically and logistically.
Pels is also a major stakeholder in GAIA (that means when you make money, he makes money).
A restaurant owner can mitigate risk by:
- Choosing a good location
- Installing comfortable seats
- Purchasing delicious raw ingredients
- Employing a red seal chef
- Hiring charismatic servers
When a farmer tries to mitigate risk, he gets down on his knees and prays that God wakes up in a good mood.
The praying doesn’t always work.
Late season rains caused cherries to split. This summer, BC cherry growers were forced to spend $1,200/hour to blow the rain off the cherry trees with helicopters.
On August 20, 2019 – Gaia Grow announced that its current 1,494-acre hemp crop is insured for the 2019 growing season.
“We can confirm that Gaia has crop insurance in place on the 1,494 acres of hemp planted in Rockyview County, Alberta,” stated Pels, “Rockyview is a region that can be affected by hail throughout the year.”
The Gaia team believes that “financial prudence and risk management are of paramount importance for the start-up harvest.”
Last week, Gaia entered into a consulting agreement with Edge Innovations. This strategic relationship will be instrumental in obtaining final approval for building-out Gaia’s various facilities in 2019 and 2020 including:
- Planned indoor medical cannabis grow facility
- hemp processing facility
“Gaia’s 2019 crop is planted and off to a great start,” stated Gaia’s President James Tworek, “We will continue to monitor progress and work with our farmers, contract harvesting team and agronomy team to optimize timing towards harvesting, currently estimated to be around the end of September/early October.”
Right now Gaia is just a bunch of plants in the ground. But the planted area is equivalent to 1,100 football fields.
And the crop is hemp. Which contains CBD. Forensic analysis of the Gaia management team suggests they are capable of growing hemp, extracting CBD and getting it to market at a profit.
The company is currently developing contracts with off-take partners “to ensure a successful sale and extraction process of the harvest.”
BDS Analytics forecasts a 49% CAGR in CBD demand, bringing the market size to $20 billion by 2024.
Gaia is a 3-week old company with a market cap of $14 million.
# of warrants = zero. # of options = zero.
Full Disclosure: Gaia Growth is an Equity Guru marketing client. Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.