Booming. Evolving. Complicated. Three words that aptly describe the Canadian cannabis market.
Redfund Capital is positioning itself to jump headfirst into that market, and beyond.
The goal? To help solve one of the most significant obstacles faced by cannabis related businesses: accessing much-needed funds to succeed in a rapidly changing market.
The merchant bank, which will focus on the funding of companies operating in the cannabis sector, reversed into Parana Copper Corp, with the Canadian Stock Exchange (CSE) approving the company’s proposed change of business.
It provides debt and equity funding instruments to cannabis companies that require project-specific funding. It will also provide services to companies, to help them move towards being publicly listed.
“We have assembled an amazing team of banking industry experts positioned to build Redfund into a formidable merchant bank focused on the quickly maturing cannabis industry,” said chief executive officer, Meris Kott.
“Cannabis 2.0 is here. Our clients are innovative, responsive and already revenue generating.”
Equity-type financing the norm, debt-financing harder to find
The company – designed by bankers and entrepreneurs – provides both debt and equity financing to companies to allow them to expand, without prematurely releasing equity early in the growth cycle.
Kott says that many companies face challenges when it comes to the types of financing available to them.
"We have designed a company with a debt facility to provide bridge financing to companies who are starting to build their revenues and have low valuations, so they don't give up equity prematurely before they are ready."
Redfund's investments will be deployed to companies that have demonstrated success in the cannabis industry.
“Redfund is committed to project specific funding solutions providing a steady growth avenue for our shareholders,” added Kott.
Kott has spent 25 years building global bridges for public companies. Her experience is widespread, with a focus on targeting companies for investment and acquisition purposes for large multinational corporations. She has been involved in cannabis since Amendment 64 launched in Colorado in 2012.
Legalization on the horizon
Devising effective equity/debt financing strategies will undoubtedly be beneficial for backers and the Canadian cannabis industry overall.
Canada is on the doorstep of a multi-billion industry, and there is tremendous opportunity for debt/equity financiers to capitalize on early market participants seeking funding to help expand.
With legalization on the horizon (reportedly summer 2018), customers will soon be able to buy from government-approved dealers.
Recreational pot sales in Canada are forecast to reach C$6bln by 2021, with the medical marijuana market estimated to reach C$1.3bln.
Indeed, since the 2015 federal election in Canada, over C$1.8bln has been raised through equity offerings and the industry market cap now exceeds C$24bln.
Redfund signs agreement with RxMM
Medicinal cannabis cultivator RxMM Health Capital has signed on with Redfund as its first project. The British Columbia based company intends to list on the CSE and the US OTC exchange.
“We are excited to welcome RxMM as our first medical cannabis project. In the next few weeks we are expecting to fund their company and help fuel their expansion plans, and commence our trading on the CSE,” said Kott.
RxMM has signed a two-year financing facility with Redfund in the form of a promissory note. Interest will be compounded and paid monthly and Redfund has right of first refusal on financings to RxMM. Redfund has a right of first refusal on financings to RxMM.
Looking beyond borders
But Redfund is also looking beyond the Canadian border.
One such country is Colombia, where medicinal cannabis is legal, and has allowed the country to become a global player, while fostering an environment for the country to become a significant player in the international market.
Redfund recently signed up Biominerales Pharma Corp as a client. Biominerales has been granted global extraction and exportation licenses for medicinal cannabis oil.
Colombia has excellent year-round growing conditions and long history of a strong agriculture industry.
According to Kott, the Canadian public markets have embraced Colombia as one of the few South American countries with completed legislation and cannabis licenses granted.
"As we expand our clientele, our goal is to work with companies who have revenues and have shown they are leaders in the cannabis industry globally," said Kott. "BMP’s cannabis licenses, ability to export globally, near term revenues on their cultivation, make them an immediate leader in Colombia."