Public markets often show benefits of association in the cannabis industry — particularly when the sector crosses paths with a market one might expect — which seems to be the case after a new partnership was unveiled between a specialty coffee manufacturer and an operator of marijuana care centers in Canada.
On Thursday (April 12) National Access Cannabis (TSXV:NAC) revealed a strategic association with The Second Cup (TSX:SCU), a retailer of specialty coffee that operates franchise cafes of its brand, to create an entirely new network of recreational cannabis dispensaries in Western Canada.
The two companies announced there could be an expansion of these new dispensaries to additional provinces in Canada as the laws advance regarding the sale of cannabis.
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National Access Cannabis indicated it plans to apply for licenses to dispense cannabis products and — if the company obtains said licenses — will “leverage Second Cup’s extensive Canadian retail footprint to construct retail stores carrying leading cannabis products.”
Shares of both companies make significant gains
This new partnership proved to entice the investor market as both companies enjoyed a high volume of trading and a significant increase in share prices.
Second Cup’s gamble to enter the cannabis space with this deal has proven worthwhile based on early returns. After the markets closed on Thursday shares of SCU increased 28.73 amounting to a C$0.79 gain per share for investors.
At one point of trading, Second Cup’s shares reached C$3.74, its highest price per share of the year so far. The previous close for the company was C$2.75.
National Access Cannabis enjoyed a more moderate growth to its stock based on Thursday’s announcement. The company’s shares on the TSX Venture exchange increased 9.89 percent in value.
By the times the open markets closed National Access Cannabis’ shares were valued at C$1.
Second Cup’s real estate appears to have played a key part in the decision to execute this new partnership, according to Mark Goliger, CEO of National Access Cannabis.
This relationship allows us to quickly expand our footprint in proven high-traffic retail locations across Canada,” Goliger said.
As part of the agreement, National Access Cannabis issued a set of warrants to Second Cup for the option to purchase 5,000,000 of its own common shares. The company said these warrants hold an exercise price of C$0.91 per common share and will last until the year 2023.
“This strategic relationship provides Second Cup with a great opportunity to leverage our select real estate assets to increase value for shareholders and franchisee partners,” Garry Macdonald, Second Cup’s President, and CEO.
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National Access Cannabis’ busy year so far
The company made a splash in the industry on February when it obtained one of the four coveted retail licenses in the province of Manitoba and has become a key option for a variety of cannabis partners, including CannaRoyalty (CSE:CRZ,OTCQX:CNNRF), Cannabis Wheaton (TSXV:CBW) and private marijuana producer Tilray.
Winning these licenses means National Access Cannabis will be allowed to build, develop and operate cannabis stores in approved municipalities. However, the number of locations the company is allowed to construct will be evaluated with the province.
In March CannaRoyalty revealed deals in place to bring its brands and products to Canada if the regulations ever allow it to be. CannaRoyalty plans to bring those products to the National Access Cannabis stores, as permitted by the laws.
CannaRoyalty acts as an operator focused on the US cannabis market and therefore has not obtained a licensed producer (LP) or applied itself for a license. Afzal Hasan, executive vice president for corporate development with CannaRoyalty, told INN this deal is meant as a preemptive measure.
“[CannaRoyalty’s] deep experience successfully supplying branded cannabis products to the Californian marketplace will serve us well as we look to grow our retail footprint outside of Manitoba, to Alberta, British Columbia and beyond,” Goliger said in a statement.
Hasan previously told INN that CannaRoyalty wanted to secure distribution channels before announcing any introduction of their products to the Canadian market, given the fact he’s unsure if it will ever be allowed for them to do so.
National Access Cannabis has been able to pique the interest of the market with significant deals on paper. The key for them will be to capitalize on these partnerships if they are allowed to develop.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.