One group that has started to make waves again after a long period of dormancy is the cannabis stocks. Tilray (TLRY) shares are up as much as 100% since July. We have seen big spikes higher in Canopy Growth (CGC) and Aurora (ACB) as well. Other stocks in the space have made similar moves. The ETFMG Alternative Harvest ETF (MJ) is up over 20% in the past month, making it one of the best performing industry groups across the stock market, outperforming the S&P 500 by 25% over the same period.
Remember: cannabis stocks used to be one of the most potent growth themes in the stock market. Fortunes were made from these stocks over a two-year cycle starting in 2015. Everyone was sucked into participation.
In markets, investment themes and momentum groups tend to go in cycles—they fade out and then fade back into vogue with intensity. If the cannabis group is starting to plant the seeds of its next time in the sunshine, savvy market participants will want to stock up now. And the best place to be buying is in the new emerging players, not the winners of the last cycle.
The good news is that the new players are likely going to be extremely cheap right now. Today, we take a look at one such opportunity: ECGI Holdings, Inc. (OTC: ECGI), a Nevada-based portfolio company pivoting into the legal cannabis and cannabinoid marketplace with gusto, leveraging its network of high-level strategic partnerships to connect smaller manufacturers with fresh branding and wide distribution footprints.
This model is already beginning to yield results, and with that momentum, the company is establishing itself in the catbird seat in the California marketplace as manufacturers seek out ECGI’s help to coordinate excess cannabis product manufacturing capacity with brands and distribution relationships.
The Canndis Deal
This dynamic was exemplified this week by ECGI’s binding LOI for product manufacturing and distribution with Canndis, Inc, a California Cannabis Micro License holder based in Desert Hot Springs.
That’s the face-value relationship. But the real nature of the situation is visible in a quote from the president of Canndis, Yong Qing Wang: “We have excess manufacturing capacity for cannabis-based products. We approached ECGI because of its positioning in the California cannabis marketplace and its potent network of strategic relationships. With the agreement contemplated by this LOI, we will be able to capitalize on ECGI’s relationships to drive more value for our own stakeholders.”
In other words, ECGI is quickly becoming the go-to partner for monetizing plant in the California cannabis industry. On one side, they are coordinating brands with retail-facing endpoints. On the other side, they are coordinating product manufacturing capacity with those brands. And in the middle of the spider web sits ECGI, claiming the lion’s share of the margin.
From company materials, ECGI is reorganizing as an acquisition-oriented corporation with California-based targets including undercapitalized and distressed licensed cannabis assets, properties zoned for cannabis cultivation and processing, and cannabis companies operating in market sectors with nationwide expansion possibilities.
This is what that next cohort of cannabis momentum players looks like. Sort of the Amazon of a major regional marketplace in the legal cannabis industry.
A Deeper Dive
According to the release, Canndis will be responsible for producing high-quality cannabis products in accordance with ECGI specifications and standards. ECGI or its cannabis brand customers will cover all associated manufacturing costs, including raw materials, labor, equipment, and facilities.
The release goes on to state that Canndis will facilitate the licensed distribution of ECGI’s products, or those of its cannabis brand customers, to various markets, ensuring compliance with all applicable regulations and standards. This includes managing distribution logistics, obtaining necessary permits, and ensuring timely delivery to retail locations.
“We look forward to partnering with Canndis and to helping them capitalize on their excess capacity through our high-value relationships,” stated Jamie Steigerwald, General Manager of ECGI. “At the same time, this arrangement will also drive value for our brand customers and our own shareholders as we continue to build our portfolio of disruptive high-growth cannabis brands in the California marketplace.”
