The international hemp market is heating up. As the industry impatiently awaits passage of the 2018 Farm Bill and pending removal of hemp from the Controlled Substances Act, companies are quickly moving to position themselves as leading suppliers of hemp-based CBD products, and investors are all too happy to help foot the bill.
Two companies that have been particularly aggressive in their pursuit of the hemp-based CBD market have been Elixinol Global Ltd. (ASX: EXL) and MariMed Inc. (OTCQB: MRMD).
Elixinol is comprised of three main branches: Elixinol LLC, which distributes hemp-based CBD products; Hemp Foods Australia, which manufactures and distributes hemp-derived food products and skin products; and Elixinol Pty, which focuses on CBD-based medical cannabis exports in Australia.
At the start of the year, Elixinol began trading on the Australian Securities Exchange through an oversubscribed A$20 million (USD $14.52 million) initial public offering (IPO); with the hope that the IPO would grant the company the financial flexibility to leverage its stake in the hemp/CBD market.
Shares for the IPO were sold at $1.00 AUD per share ($0.73 USD), but the stock quickly climbed to $1.82 AUD ($1.32 USD) within the first week of trading. Since opening at the start of the year, Elixinol’s stock has grown by approximately 8.79%, trading at around $1.98 AUD ($1.44 USD) as of November 16.
In September, Elixinol was able to raise an additional $40 million AUD ($29.03 million USD) through an institutional placement. Over the next several months, the company hopes to use these funds to ramp up its hemp-based CBD production capacity, and to increase its sales and marketing efforts — especially in the European market.
MariMed, on the other hand, is a cannabis company that only recently started to pivot towards the hemp-based CBD market. Earlier this month, the company announced that it had formed a strategic partnership and long-term supply agreement with GenCanna Global, Inc.
GenCanna is an agriculture-technology company with a focus on producing hemp for CBD extraction purposes, and was one of the first companies to sign up with the Kentucky Department of Agriculture’s Industrial Hemp Research Pilot Program. In addition to possessing a portfolio of CBD-rich hemp strains, GenCanna also touts company procedures which meet FDA and its Current Good Manufacturing Practice (CGMP) standards.
Under the agreement, MariMed will invest $30 million in GenCanna, which the company will use to increase its hemp CBD production capacity. GenCanna will supply MariMed with high-quality CBD, and the companies will work cooperatively to develop hemp-based CBD products and branding.
To keep their hemp and cannabis operations separate, MariMed will create a new business unit that is solely focused on hemp CBD products. Additionally, MariMed will be the distributor for the CBD products, which will not be made available in MariMed dispensaries.
Since MariMed began trading on the OTC Markets, its stock has hovered around $0.10 to $0.20 USD per share. However, over the last year MariMed’s stock has been on an upward trajectory, rising from $0.62 USD per share on November 21, 2017, to around $4.34 as of November 20.
Precipitating its climb in stock price has been MariMed’s solid growth in revenue in the past year. In the third quarter alone, which ended on September 30, 2018, MariMed saw a 98% increase in revenue when compared to the same period last year, rising from $1.7 million to $3.4 million USD. Year-over-year, MariMed’s revenue has increase by 88%, to approximately $8.4 million.
Although neither Elixinol’s $60 million AUD in funding nor MariMed’s $30 million USD investment is anywhere near the size of Charlotte’s Web Holdings’ (CNSX: CWEB) monstrous $100 million IPO, the significance of the deals cannot be understated.
Just like Charlotte’s Web, MariMed is a company that initially started in cannabis, only to begin pivoting toward the hemp CBD market. Similarly, Elixinol continues to post positive revenue growth quarter after quarter, and given enough time could become a fierce competitor with Charlotte’s Web.
Regardless, the developments of both MariMed and Elixinol represent the growing demand for hemp-based CBD, and the significant market potential that could be realized whenever Congress decides to enact the 2018 Farm Bill.