TransCanna Holdings is Rapidly Becoming a Leader in the California Cannabis Industry
TCAN Stock Bucked the Trend in Late 2019 Outperforming the Broad Cannabis Sector
Many investors thought the cannabis industry would slump in the summer of 2019 and then rally in the fall and winter. Unfortunately, the sector-wide downturn that started in the Spring persisted through the summer and got worse in the fall and winter. The North Americana Marijuana Index, which tracks the performance of 47 different American and Canadian pot stocks, started 2019 at ~210. By the time the 4th quarter started, the index had fallen to 142.98; when New Years rolled around, the index had plummeted further and started 2020 at just 119.30.
In total, North American marijuana stocks lost nearly half their value in 2019. However, not all cannabis stocks are created equal. Certain stocks beat the rest of the sector and ended 2019 on a high note.
How TransCanna Bucked the Trend
TransCanna Holdings (CSE: TCAN) (OTC: TCNAF) (FRA: TH8) is a vertically integrated producer of cannabis products operating in Modesto, California, one of the larger cities in the agriculture-rich San Joaquin Valley. TransCanna’s management is focused on the higher-margin segments of the cannabis industry, so it plans to operate as a consumer packaged goods (CPG) company. The key for a successful CPG company is establishing a popular brand and increasing the distribution of that brand. Rather than start a brand from scratch, management has decided to acquire existing brands, integrate the brands under their corporate umbrella, increase production at their new manufacturing facility and distribute throughout the state of California.
Since vertical integration is central to the company’s goals, cannabis cultivation was the first need that management addressed. Given their limited knowledge of growing cannabis, company executives made the smart decision to canvas the region for a quality cannabis grower to purchase. After much research on local producers, management decided on Lyfted Farms, which is also based in Modesto, for their popular premium brands and the experience of Lyfted Farms’ management in navigating California cannabis laws. In addition to continuing to operate their existing growing operations (which produces dried flower and pre-rolls), Lyfted Farms will grow cannabis inside the manufacturing facility itself. This cannabis will be processed into high-quality cannabis oils that TransCanna will use to produce high-margin cannabis derivatives.
With their supply of cannabis locked down, TransCanna’s next stop was acquiring high-quality edible brands. Given how health-conscious many Californians are when buying food and drinks, management knew they wished to offer an edible cannabis product that was both good tasting and good for you. After reviewing dozens of products throughout the state, it was decided that SolDaze Snacks offered just the product that TransCanna was looking for. The product in question is SolDaze’s THC-infused dried mango snacks, currently available in mango or mango-strawberry flavours, which contain 10 mg of THC per serving and come with 10 servings per bag. In late December 2019, it was announced that SolDaze CBD Edibles won 1st and 3rd place at the prestigious 2019 Emerald Cup.
SolDaze and TransCanna will work together to bring new products to market, with the Chairman of TransCanna, Arni Johannson, commenting, “We are very pleased and excited to welcome the SolDaze team into the TransCanna family. We would like to recognize their efforts, achievements and in particular their patience and dedication to this process. The SolDaze brand has a very bright future and with the support of TransCanna will be introducing a variety of new SKUs, including the much-anticipated launch of ‘Spicy Mango’. The Company is excited about the prospects of future growth that this acquisition will provide once consummated.”
TransCanna has several brands in the works, including a line of pre-rolls under the “Daily” brand. This brand is considered mid-grade quality and is targeted at everyday users. The company is also partnering with a local brewer to produce a line of non-alcoholic, CBD-infused beer.
New California Cannabis King in the Making
TransCanna Holdings is rapidly becoming a leader in the California cannabis industry. Management has been executing with great success on their plan to bring many popular brands under one corporate umbrella and it’s already starting to bear fruit. The company’s centralized manufacturing facility is allowing them to increase both production and margins, via economies of scale. Increasing distribution to more dispensaries is allowing the company to grow revenues organically instead of purchasing revenue by acquiring other companies.
In the 4th quarter, investors began to realize what TransCanna was building and proceeded to bid the stock up. After the recent dip gave investors an attractive entry point, the stock has returned to its rapid upward trajectory. As TransCanna continues to report distribution advancements, revenue increases and brand acquisition, this new uptrend should be more sustained.
TransCanna’s Great 4th Quarter
TransCanna made a number of positive steps forward during the fourth quarter of 2019. On the 6th of December, TransCanna provided a corporate update that shed light on how their business plan was playing out and detailed future initiatives. The update detailed their increased distribution capabilities, including the ability to distribute to dispensaries in San Francisco and Sacramento. The company also created a Crop Management Services division, which will manage the production facilities of other cannabis producers.
On December 9th, TransCanna management announced that the company increased its revenues from by 90% over the previous month to CAD $473,000.00 thanks to the expansion of its facilities. A few days later, TransCanna released its comprehensive 4 Phase California expansion strategy that laid out in detail how the company planned to maximize its value proposition through the expansion of sales, fulfillment and distribution. In mid-January 2020, the company reported yet another month of strong fundamental growth which featured a 20% increase in month over month revenue. The company’s total revenue for December 2019 came in at CAN $564,000. Net income from operations was CAN $91,000 or roughly 16% of revenue.
This long list of positive corporate developments led to TransCanna’s stock outperforming the broad cannabis sector in late 2019. As we mentioned earlier, the North American Marijuana Index fell from 142.98 to 119.30, a loss of 16.5%. By comparison, TransCanna started December trading at just $0.54 per share and from that point, TCAN stock soared 118% to finish 2019 at $1.18. While the rest of the industry continued its downward trajectory, TransCanna managed to more than double its share price very quickly.
TCAN stock continued to climb through the first week of January 2020 eventually peaking at $2.01 after gaining over 270% since the start of December. TCAN has since experienced a healthy correction that allowed profit takers to cash out while at the same time provided investors with an opportunity to purchase the stock at a discounted price.
In early February, TCAN stock pivoted to the upside and is once again on the rise. It’s clear the market is paying attention to TransCanna and likes what the company is doing.
TransCanna is a paid client of The Cannabis Investor.
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