The Green Organic Dutchman TGOD
Well if you have been following me on twitter you may seen that I bought into the TGOD private placement. This is my first time ever doing a private placement. Took some leg work to get done but eventually I completed it.
A private placement in layman’s terms is investing in a private company. You are basically buying stock in a company even though you can’t really sell it. You buy in with the expectation that the company will eventually go public at which time you could sell your shares.
Normally a private placement is only open to accredited investors (people with high net worth, income etc) Luckily this private placement was also open to non accredited investors. I had to sign a bunch of waivers saying I understand the risk etc.
Also learned there are different levels of investors. Accredited, eligible and non eligible. Basically accredited is 200k per year income and a lot of equity (million dollars or so). Eligible is 75,000 per year income and about 400,000 equity. No guidelines for the non eligible. If you are an eligible investor you are only supposed to invest a max 30k-100k over a years time. Non eligible investors aren’t supposed to investor more than 10k over a year.
Details of Purchase
I bought $5,000 worth to TGOD shares for $1.65 a piece. This also comes with an equal amount of 1/2 warrants. You can’t exercise a half warrant so really you get 50% of your purchase shares in warrants. So i got 3030 shares and 1515 warrants. The warrants are good for 3 years and exerciseable at 3.00, so the stock has to go above that price for the warrant to be worth anything. I would have to buy each warrant for the 3.00 and then sell them at market price. Basically I have the option to buy the stock at 3.00 for 3 years. The warrants will be free trading on the market at IPO time, I think this means you can’t exercise them, but you can sell them to others. Similar to how I bought CBW warrants.
Remember though, share price doesn’t mean much. The total shares out standing vs the share price is what matters. Currently there is about 190 million shares/warrants/options. This would value the stock at about a 313 million market cap.
TGOD Expansion Plans
So TGOD appears to be a 300 million market cap company. Compared to ACB at 1.5 billion, APH at 1.25 billion. Their expansion plans put them on par with ACB and APH with 100,000+ kg of production capacity. Looks like money raised during the IPO will be used to fund some of the expansion and they may have to sell some more shares for the final stage. Most of the companies are doing these type of fund raising currently.
TGOD looks to be going public in the first Q of 2018. Even then my shares are locked up for 6 months after their IPO. Depending when they actually go public my money could be locked up for 10-12 months, if they go public near the end of the quarter. So private placements can lock up your money for long periods of time. Earlier investors got their shares for cheaper than me, but have had their money sitting with TGOD for a longer period of time. Obvious I’m investing money that I do not need to have access to.
TGOD is building most of the expansion in Quebec, one of the largest provinces and least amount of LPs for such a large province.
TGOD already has their sales license, the received it August 11 2017, so not that long ago. This reduces a lot of risk and allows the company to start making money. Most likely they are selling wholesale to other producers who have patients locked in.
They are currently working on getting their oil sales license.
I played it safe investing the bare minimum of $5,000 as required by TGOD. I probably could have gone up to 10k but wasn’t to sure on the valuation of the company. When looking into the PP, there wasn’t any info on how many shares were outstanding, eventually I emailed and they provided me with the info. When I signed up, I also wasn’t sure just how quickly I need to come up with the cash, I didn’t have much on hand at the time. Ended up taking a month or so before they actually asked for the money. They worked on getting the accredited investors done first before going on to the non accredited.
Some fees involved as well- had to send a wire transfer, cost 30 bucks. Questrade charges a fee to receive the shares and a holding fee while they are not tradeable, $75 per quarter.
With the planned expansions I believe TGOD will be valued at least 1 billion by the time they come to market. I was more concerned about a month ago when the sector was still pretty depressed. Now that most of the companies have come back up in value, chances are this company should be valued pretty high. By the time TGOD comes to market we could be 1-2 months from full on recreational legalization so the value could go up a lot by then. It would make sense to be offering the PP at a discount as investors have to hold the shares for extended periods of time before selling, need to reward us! I hope it works out this way.
Thanks for reading, some of my assumptions may not be 100% correct.