Cannabis Investment Club

[JohnCM]

Cannabis Real Estate Lender AFC Gamma Rises 21% on First Day of Trading

The company makes for a unique marijuana stock.

Eric Volkman
The Motley Fool
Mar 19, 2021

The world of cannabis stocks was broadened on Friday with a new arrival. AFC Gamma (Nasdaq:AFCG), a company that specializes in real estate financing for the marijuana industry, started trading on the Nasdaq following its initial public offering (IPO).

It was an auspicious debut. The company's IPO price was $19 per share, and at Friday's close the stock had risen to $23.

AFC Gamma had timing on its side, as cautious optimism has returned to marijuana stocks. Investors are cheered by the recent legalization of recreational cannabis in certain states (Virginia being the latest example), plus speculation that the famously dysfunctional New York state government will manage to flip the recreational switch there. On the national level, several top senators last month indicated they would soon push for cannabis reform at the federal level.

Compounding this is the success of Innovative Industrial Properties (NYSE:IIPR). While not directly comparable as a business with AFC Gamma -- it's a real estate investment trust (REIT) and as such invests directly into properties -- Innovative's habits of making a profit and raising its dividend has made it extremely popular with pot stock investors.

AFC Gamma (the AFC stands for Advanced Flower Capital) describes itself as "a leading provider of institutional loans to high-quality cannabis companies nationwide in all aspects of production." It's a very young company, having commenced its current operations last July. In its IPO it floated 6.25 million shares of its common stock; it said it will use the issue's proceeds to retire debt, fund its lending activities, and "for working capital and other general corporate purposes.

Despite its numerous challenges, this is an exciting time for the marijuana industry. It's a good sign that diverse companies within the sector are landing on the stock exchange.

Cannabis legalization is sweeping over North America – 15 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.