This $3 Billion Dollar Cannabis IPO is a Warning Shot

I see an exciting cannabis stock IPO on the horizon that investors need to know about. One of the largest and fastest-growing U.S. cannabis companies is set to begin trading on a major exchange in the next few weeks. Not only is this the most exciting cannabis stock IPO in two years, but it also signals an important new phase for cannabis stocks.

Back in 2018, cannabis IPOs were all the rage. A flurry of U.S. cannabis companies went public in late 2018, including Cresco Labs (CRLBF), Curaleaf Holdings (CURLF), and Trulieve (TCNNF).

However, after cannabis stocks plunged in 2019, Wall Street lost its appetite for cannabis IPOs and the market contracted sharply in 2019.

According to Bloomberg, “In the first 48 weeks of the year (2020), US$2.1 billion was raised by pot-focused publicly traded companies, less than half of the US$5.6 billion raised in the same period a year earlier, according to Viridian Capital Advisors, a cannabis advisory firm.”

Now, after cannabis stocks launched a furious rally off the COVID lows from March, the cannabis stock IPO market is back in a big way.

The first big warning shot will happen in the next few weeks.

One of the largest privately-owned U.S. cannabis companies is scheduled to go public. The offering has the company valued at around $3 billion.

This $3 Billion Dollar Cannabis IPO is a Play on the U.S. Cannabis Industry

Verano Holdings is one of the largest privately-owned cannabis companies in the U.S. Headquartered in Chicago, Illinois, Verano operates in 14 states, owns and operates 46 dispensaries and eight cultivation facilities. This portfolio of cannabis businesses is generating impressive results. Verano recently said that it expects to generate as much as $380 million in revenue in fiscal 2020.

Investors will soon have a chance to buy shares. Verano recently announced plans to take the company public and list shares on a stock exchange. Here are some more details from Bloomberg.

U.S. multi-state cannabis operator Verano Holdings LLC is planning to go public this month with a valuation of nearly US$3 billion, a sign that capital markets are warming up again to the marijuana industry following a chill in investment over the past year.

According to a term sheet distributed to investors, Verano is planning to offer up to US$75 million in shares through a reverse takeover of Majesta Minerals Inc. – a shell company listed on the Canadian Securities Exchange – that would value the company at US$2.88 billion. Canaccord Genuity and Beacon Securities are joint book runners on the deal.

If Verano completes its RTO and lists on the CSE, it would immediately become the third-largest cannabis operator in the U.S. by revenue, and the fifth-largest by valuation behind such rivals as Curaleaf Holdings Inc. and Cresco Labs Inc.

This should be an exciting cannabis stock IPO, and I see three reasons I expect Verano shares to do well.

#1 – U.S. Cannabis Market Leader

Verano is already an established market leader with operations in 16 states. With more states going legal in 2021, the size of the U.S. cannabis market is expected to grow sharply in the next five years.

Verano should be able to expand its market share and grow sales and earnings for years. Take a look at the chart below from Marijuana Business Daily.

#2 – Direct Play on Illinois $1 Billion Cannabis Market

Illinois has quickly grown into one of the largest and fastest-growing cannabis markets in the U.S. In its first year of legal cannabis sales, Illinois sold more than $1 billion.

Looking forward, sales should continue growing for years and Verano is already an early leader in Illinois, with its headquarters in Chicago.

#3 – Sentiment for Cannabis Stocks is Red Hot

Enthusiasm for cannabis stocks is running red hot right now.

The sector has seen an incredible rebound in the last nine months and many cannabis stocks are trading more than 1,000% off the 52-week low. Investors are eager for hot new cannabis stocks and Verano definitely fits the bill.

The Big Picture on Cannabis IPOs and Verano

After going into a deep freeze in 2020, the cannabis stock IPO market is back. The warning shot is Verano, one of the largest privately-owned cannabis companies in the world, set to go public in a few weeks with a $3 billion valuation.

I believe that Verano shares will do well. The company is an early industry leader with impressive sales growth and enthusiasm for cannabis stocks is running red hot right now.

About the Author & Cannabis Stock Trades

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.