Editorial Coverage: While the huge increase in U.S. consumer
demand from hemp extracts and hemp product is largely credited as
the reason for the boom in the number of hemp acres under
cultivation, there is a significant additional part of the
hemp-growth story to tell.
With a pending acquisition in the cultivation supply market,
Sugarmade Inc. (OTCQB: SGMD) (SGMD
Profile) appears to be well poised to become a strong
pick-and-shovel provider to the hemp industry. Even the large
cultivators and suppliers are now getting in the hemp market. One
of the first companies of the larger players to make the move into
hemp cultivation was Cronos Group Inc. (NASDAQ: CRON) (TSX:
CRON), which just a few days ago announced that it would
invest $300 million to enter the hemp market. Not to be outdone in
the hemp gold rush, Greenlane Holdings Inc. (NASDAQ:
GNLN), which began trading on the NASDAQ, and The
Green Organic Dutchman (TSX: TGOD) (OTCQX: TGODF) (TGOD
Profile) have both entered the fray. KushCo
Holdings Inc. (OTCQX: KSHB), another industry supplier, is
also seeming to benefit for the strong growth in the hemp
- USDA reports indicate that hemp is by far the crop with the
fastest growth in acres, planted at nearly a 400% increase.
- Many in farming communities now see hemp cultivation as an
- Consumer demand for hemp extracts continues to grow with little
letup in sight.
To view an infographic of this editorial, click here.
An increasing number of U.S. farmers affected by low prices and
reductions in Chinese agricultural purchases are now seeking
economic refuge by planting hemp. And in many cases, hemp is saving
farmers from bankruptcy.
In many farming areas — in particular Western Kentucky and
Tennessee — the movement to hemp will restore many farmers to
economic viability. Not only is there a strong demand for hemp
biomass, but prices are significantly higher compared to other
crops with many Kentucky farmers last year realizing tens of
thousands of dollars in profits per acre compared to well less than
$1,000 per for other crops.
The numbers are in from the U.S. Department of Agricultural on
the number of acres of hemp planted this year. At 128,320 acres,
those numbers are up from only 27,424 acres last year, with even
more growth expected next year. With such growth, it is no wonder
that both supply and cultivation companies are realigning their
businesses to take advantage of the huge market growth.
In part, this growth stems from the hemp industry making rapid
headway into mainstream acceptance. Recent reports indicate that
two-thirds of all Americans now favor legalizing recreational
cannabis use, up from 25% support two decades ago. And what may be
most telling is that support for the crop is increasing among seniors (aged 55 and older) as well as the
Republicans — both traditionally known for their conservative
views regarding hemp.
In addition, medical marijuana is now legal in 33 states, with
10 of those states actually legalizing recreational use as well.
And Canada overturned an almost century-old tradition when it
legalized use of the drug countrywide last year. The trend is
clear, and the continued increase in positive public acceptance
Savvy companies in the sector, including brand-development
company Sugarmade Inc.
(OTCQB: SGMD), are seeing the window of opportunity
and are positioning themselves to make the most of their areas of
expertise. For Sugarmade, that area is hydroponic systems, which
give cannabis cultivators greater control over how their plants are
Sprouting hemp indoors provides an array of benefits, including
protection from changing weather, such as sudden frosts or
unseasonal heat, which can harm crops. Indoor cultivation also
protects crops from contaminants, infections and chemicals.
Hydroponics offers even greater advantages. When farmers feed
their plants with carefully balanced nutrient baths instead of soil
and fertilizer, they harvest a cannabis crop with higher CBD
content, making their plants more valuable.
In addition, when hydroponics are used, hemp often more easily
passes the stringent quality tests that are applied to plants in
this sector, tests that are likely to become even firmer now that
the federal government is officially allowing and regulating hemp
production in the United States. This is yet another reason
hydroponic experts such as Sugarmade may see significant benefits
as the hemp industry grows.
And the hemp wave doesn’t appear to be ebbing anytime soon.
Industry forecasts differ, depending on which source is cited.
Grand View Research says the global legal market is expected to
reach $66.3 billion by the end of 2025, with an
anticipated CAGR of 23.9% during the forecast period, while
Business Wire projects the market will reach $89.1
billion by 2024, with a CAGR of 37% during the forecast
While the numbers may differ a bit, everyone appears to agree
that growth seems certain. And that growth may indicate that
companies involved in the sector are almost certain to grow as
well. At least a portion of the growth for some of those companies,
including Sugarmade, will come from careful and strategic
acquisition within the industry.
Last year Sugarmade announced the creation of the
industry’s largest publicly traded cannabis and hydroponics supply
The announcement was made after the signing of a master market
agreement with industry leader BZRTH LLL, a highly successful
manufacturer and distributor to the hydroponics and cannabis
markets. The acquisition is expected to be highly accretive for
Sugarmade is also in the process of acquiring Sky Unlimited,
LLC, which through its AthenaUnited.com operations and website
offers several popular hydroponic brands to a variety of growing
agricultural cultivation sectors. This planned acquisition has
prompted Sugarmade to raise its revenue guidance for calendar 2019
from $30 million to $70 million.
Moving to the Majors
With such impressive growth, it’s little wonder that hemp
companies are eager to uplist to either the NASDAQ or NYSE
exchanges. Such a move can mean reduced volatility, added trading
volume and improved liquidity, along with the simple credibility
that comes from being listed with alongside major players from a
wide range of industries.
For many companies, that credibility translates into increased
awareness and investment opportunities. Since not all financial
institutions are allowed to invest in or cover companies that trade
on the OTC exchange, uplisting may increase investment
opportunities for companies moving their way forward in the
burgeoning hemp space.
The fact that the major exchanges are approving cannabis
companies’ uplisting applications is another strong indication that
the industry has arrived. Since February 2018, 8 of the 11 pot
stocks that now list their common stock on either the NYSE or
NASDAQ have uplisted from the OTC exchange. The acceptance of these
initial companies may clear the path for subsequent hemp movers and
shakers, such as Sugarmade, which are hoping to follow suit.
Not all hemp companies are eligible to make the uplisting move,
however. Because U.S. federal regulations still categorize
marijuana as a schedule I drug, companies that directly deal in the
U.S. cannabis industry are ineligible to list their shares on
either of the major exchanges. In addition, both the NASDAQ and
NYSE have a fairly stringent list of requirements —based on
trading, average daily volume and minimum share price— that must be
meet before a company’s application for uplisting is accepted.
The stringent application and approval process mean that
companies currently trading on or exploring the uplisting option
should be some of the most viable in the industry. Sugarmade is
committed to meeting that standard. In only a few years, the
company has moved from being a small, innovative supplier to the
quick-service restaurant industry to its current status as a
multi-divisional, multi-product company in various market sectors,
with a special focus and presence in the world of cannabis.
Value of Trading Up
Sugarmade isn’t the only company that recognizes the significant
value of trading on the major exchanges.
One of the first cannabis companies to uplist, Cronos
Group Inc. (NASDAQ: CRON) (TSX: CRON) has traded on the
NASDAQ exchange since February 2018. The company recently announced its Q2 numbers, reporting that net revenue
was $10.2 million in Q2 2019, a 202% increase from $3.4 million in
Q2 2018. The increase was primarily driven by the launch of the
adult-use market in Canada. Net revenue increased 58%
quarter-over-quarter from $6.5 million in the first quarter of
2019, primarily driven by increased sales in CBD oil. “During the
second quarter, Cronos Group expanded its R&D capabilities,
innovation expertise and global infrastructure network in what has
been a year of tremendous growth,” said Cronos CEO Mike Gorenstein.
“We opened Cronos Device Labs, our new global R&D center in
Israel, announced the acquisition of our new state-of-the-art
fermentation facility and added Dr. Todd Abraham as Chief
Innovation Officer to our executive leadership team.”
A leading distributor of premium vaporization products and
consumption accessories, Greenlane Holdings Inc. (NASDAQ:
GNLN) common shares began trading on the NASDAQ exchange
in April. Greenlane customers include more than 6,600 independent
smoke shops and regional retail chain stores, which collectively
operate approximately 9,700 retail locations and hundreds of
licensed cannabis cultivators, processors and dispensaries
throughout the United States and Canada. Greenlane also owns and
operates two of the most-visited North American,
direct-to-consumer, e-commerce websites in the vaporization
products and consumption accessories industry, VaporNation.com and
VapeWorld.com, which offer convenient, flexible shopping solutions
directly to consumers.
KushCo Holdings Inc. (OTCQX: KSHB) is another
supplier to the growing hemp industry. A premier producer of
ancillary products and services to the cannabis and hemp
industries, KushCo awaits approval of its application to uplist on
the NASDAQ exchange and is eager to satisfy all applicable listing
and regulatory requirements. “Listing on the NASDAQ Global Select
Market, the highest and most prestigious NASDAQ tier, will raise
the company’s profile by diversifying our shareholder base and
enhancing share liquidity in support of our company’s long-term
goals and objectives,” said KushCo chairman
and CEO Nick Kovacevich.
The Green Organic Dutchman (TSX: TGOD) (OTCQX:
TGODF) is also awaiting a determination by the NASDAQ that
it has satisfied all applicable listing requirements. Subject to
approval for listing, the company’s common shares will continue to
trade on the TSX Exchange (TSX) under ‘TGOD,’ which is also the
reserved symbol for the NASDAQ application. “This is an important
step in the growth of TGOD, one that will broaden our investor base
and increase access for international investors as we build the
leading global organic cannabis brand,” said TGOD CEO Brian Athaide. “Our team remains focused
on executing our business plan and creating value for our
As more hemp companies make the uplisting move, they may see
added benefits from being traded on the major exchanges.
For more information on Sugarmade, visit Sugarmade Inc.
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