MMJ Group Holdings Ltd (ASX:MMJ, OTC:MMJJF) has increased its investment holding in unlisted Canadian cannabis company Weed Me Inc with the completion of a follow-on investment of C$1 million in the form of an unsecured convertible note.
The extra funds are intended to support Weed Me’s business plan rollout and position the company for a liquidity event (either public listing or sale of business).
The key terms of the convertible note are:
- Cash yield of 8% per annum;
- Maturity date of May 9, 2023; and
- Conversion at MMJ’s option prior to maturity.
MMJ has also been issued 230,415 warrants convertible into 230,415 Weed Me shares each at C$2.17 with an expiry date of October 29, 2024. The investment was made from MMJ’s existing cash reserves.
Maximising exit value
“The follow-on investment in Weed Me demonstrates MMJ’s expertise to secure a private negotiated investment in unlisted businesses which are not generally available to Australian retail and institutional investors,” MMJ Group chair Peter Wall said.
“The investment in Weed Me will assist the further expansion of Weed Me’s sales growth and maximise the value on the ultimate exit of MMJ’s investment.”
MMJ’s investment in Weed Me now has a current book value of C$10.5 million and comprises:
- 3.64 million shares representing approximately 13% of Weed Me’s current issued capital;
- 230,415 warrants each convertible at C$2.17 with an expiry date of October 29, 2024; and
- C$1 million convertible note which is unsecured, bears interest at a rate of 8% per annum and is repayable on May 9, 2023.
As of October 31, 2021, MMJ had generated a total return of 3.4 times on its investment in Weed Me.
Weed Me
Established in 2016, Weed Me is the largest unlisted Canadian licensed producer of cannabis products for the Canadian recreational market.
The Weed Me brand consists of a complete line of dried flower, pre-rolls, vapes, and gummies products, which have significant market shares in its key Canadian provincial markets.
Weed Me has successfully expanded its operations with net sales of C$6.9 million in the 2020 financial year compared to FY19 net sales of C$2.6 million.
This rate of growth has increased in FY21 with net sales of C$14.1 million in the nine months ended September 30, 2021, compared to C$4.1 million in the nine months ended September 30, 2020.
MMJ Group Holdings
MMJ Group Holdings is an Australian-listed specialist investment company which concentrates on producing capital growth for shareholders over the medium to long term from investments in listed and unlisted equities and other financial assets.