The most-anticipated marijuana “IPO” of the year is here and it’s shaping up to be a major disappointment.
But it may not be a lost cause altogether and could be an excellent buying opportunity very soon.
Acreage Holdings (CAN:ACRG.U) began trading today and immediately fell 20% from its IPO price.
Acreage is the major U.S. marijuana company which made headlines when it added Former Speaker of the House John Boehner to its Board of Directors.
The New York-based marijuana company is a behemoth in U.S. marijuana industry.
In its first four years of operations it now has cultivation, marketing, and sales operations in 13 states including the populous states of California, New York, and Florida.
Acreage raised more than $119 million in its last round of financing.
It was initially targeting raising about $200 million when it when public and ended up taking $314 million.
That’s good, but it’s also where the problems begin.
This IPO round was raised at $25 a share.
The stock is trading under the symbol ACRG.U (the “.U” means its priced in US dollars) on the Canadian Securities Exchange which is the primary place for marijuana companies with U.S. operations to list.
Acreage shares opened at $23.50 a share (6% below its IPO price) and immediately fell into a trading range between $19 and $20 a share (more than 20% below its IPO price).
By any measure that’s a disappointing IPO. Basically $60 million+ goes went up in smoke.
But that doesn’t necessarily mean it’s a complete disaster.
Historically speaking, it’s usually quite the opposite.
The Seed Investor Take:
We love a disappointing IPO.
The more disappointing, the better.
Curaleaf (CAN:CURA / US:LDVTF) was the most recent major U.S.-focused marijuana play to raise a lot of money when it went public.
It raised almost as much as Acreage with C$400 million (a little over US$300 million) at C$11.45 per share.
It closed its first day of trading down 36% from the IPO placement price.
It bounced right back though. Within three trading days it was back above its IPO price.
Acreage shares haven’t dropped quite as much, but if they do, Acreage should be a good buy.
As mentioned above, Acreage has operations in California, New York, and Florida.
The latter two states have only legalized medicinal marijuana, but if that changes and either one or both legalize recreational use marijuana, each will be major new markets for marijuana with growth potential of $10 billion or more.
On top of that, major marijuana IPO’s tend to very well regardless of how good or poorly they trade out of the gate.
So if you see the change to get on Acreage Holdings for $15 or $16 a share, as thing stand today, that's the time to seriously consider it.
Next year is set to be a pivotal year for U.S. marijuana and Acreage Holdings’ massive nation-wide footprint puts it in a lot of the right places at the right time.