Cannabis Growth Opportunity Corp. (CSE: CGOC) announces updated net asset value
Cannabis Growth Opportunity Corporation (CSE: CGOC) announced an updated net asset value (NAV) per common share of $2.96 as at August 15, 2019. This represents growth of 28% since the Initial Public Offering (IPO) on January 26, 2018, and 7% year to date. CGOC is invested in companies operating in Canada, the U.S., Europe, Latin America, Jamaica and Israel, with an investment split across the private and public portfolios of 39% and 61% respectively. CGOC's top ten public investments as of August 15, 2019 (in alphabetical order) are: Bhang Inc (CSE: BHNG), Grassroots Cannabis, (not yet listed), Heritage Cannabis (CSE: CANN), Indiva Limited (TSXV: NDVA), Indus Holdings Inc. (CSE: INDS), (Jushi Holdings Inc (NEX: JUSH.B), Next Green Wave (CSE: NGW), Nextleaf Solutions Inc. (CSE: OILS), TerrAscend Corp. (CSE: TER), and VIVO Cannabis (TSX-V: VIVO).
There are a few points worth noting:
Although the NAV has declined for the past four months, this performance and the 28% gain since the IPO exceeded the return from benchmarks.
In the early months, the public company portfolio provided most of the return. Since early 2019, the private company portfolio has made a positive contribution to the NAV. The diversification in the portfolio between public and private companies has worked in the period under review.
Although the cannabis stocks are obviously in a bear market, they are rapidly approaching a low point. A very attractive way to participate in the long term growth in the cannabis industry is by purchasing CGOC at a 45% - 50% discount to NAV.
A $1.00 investment directly into a cannabis company today would have to increase 75% to provide the equivalent value of the same $1.00 invested in Cannabis Growth Opportunity Corp. shares assuming the discount to NAV declines to 10% at some point in the future.
Conclusion: I think in this time of cannabis stock price declines driven by uncertainty and scandal, the nearly 50% discount from Net Asset Value means CGOC represents an attractive way to participate in the long term, above average growth expected from the cannabis industry.