"Mr Brochstein now considers Full Circle a mainstream investor’s proxy for the sector."
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Last week, Full Circle Capital, a closed-end business development company, authorised a $30m credit facility for Advanced Cannabis Solutions, which buys marijuana growth facilities in Colorado to lease back to licensed operators.
Fundraising for these companies has been constrained tightly, and until now it was provided entirely by private backers, according to Mr Brochstein.
ACS launched only last year, and it closed on its first, and only, property on December 31. Even so, it ranks as the sector’s fifth-biggest company by market capitalisation. Over the past month, its shares have climbed more than 600 per cent, though since the Full Circle announcement, the stock’s price has actually fallen.
“The reaction in the marketplace is not unique to our company,” says Robert Frichtel, ACS chief executive. “Given that we are a fully reporting company in the space – and there are very few of us that are – I suspect the market is reacting to the fact that we are as transparent as we can possibly be.”
ACS’s appeal to Full Circle lies in the intense demand it stands to serve, the competency of its management and the collateral built into its property portfolio, says Gregg Felton, Full Circle president and co-chief executive.
“Our financing arrangement is very much orientated to teaming up with a company that we believe could be the standard in this industry,” Mr Felton says. “You want the right management team, the right culture, the right compliance infrastructure and of course the right investment opportunity.”
Drawn by what Mr Felton calls a compelling supply-demand mismatch, Full Circle scrutinised a variety of companies in the legal marijuana sector before settling on ACS. He declines to say if further investments are likely.
ACS plans to branch out into consulting and the marketing of marijuana nutrient lines, and intends to expand beyond Colorado as well. Consequently, Mr Frichtel says, it will continue to seek funding.
“We see opportunities here in Colorado that will probably take us beyond what we have available, and as we expand into other strategic markets, we know that we’ll have huge, huge demands for capital,” he says.
Mr Brochstein now considers Full Circle a mainstream investor’s proxy for the sector.
“It’s going to be the next marijuana play,” he says. “Everybody is always looking for a lot of upside without a lot of risk to the downside, and all these penny stocks could be shut down overnight; you never know.”
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