Featured Investments , Spotlight

A Clever Royalty Company Taking a Leaf Out of the Mining Sector Playbook

22 Feb 2021 | by: Mark Sheridan

FINCANNA CAPITAL (CSE:CALI | OTC:FNNZF)

The First Firm of its Kind, FinCanna Capital is Poised to Take Full Advantage of the Next ‘Green Wave’

To understand one of the most interesting and exciting opportunities in the cannabis market right now, we must first look to a more traditional area of investment…

Mining.

When it comes to investing in precious metals, most assume there are just two options…

One is buying the metal itself. And the other is backing one of the companies getting it out of the ground.

The former is perhaps the safer of the two, but the potential gains (if it goes your way at all) are much lower.

On the flipside, a mining company itself can provide huge, outsized returns, but the risk is often just as high. 

Still, despite what people may think, there is a third option,

You can invest in what are known as mining royalty companies.

During boom times, such companies have seen huge growth, with many rivalling mining giants themselves in terms of scale.

But thanks to their structure, they can also make money even when underlying metal prices are falling.

We’ll explore how in a moment.

But first, what has this got to do with the cannabis industry?

Well, this is where FinCanna Capital comes in.

You see, this exciting Canadian small cap offers investors the massive benefits and risk coverage of a mining royalty company…

But it is doing it in the fast-growing US cannabis market.

The Only Cannabis Royalty Company of its Kind

Though some companies might have a cannabis royalty element, FinCanna Capitalis currently the only one that is built exclusively around the model.

And, having already been hard at work setting up a selection of potentially profitable royalty deals with a number of private cannabis start-ups, it has already set itself well-ahead of the competition.

To that end, FinCanna Capital has already started to receive royalties from one of its investees, and more streams are in the imminent pipeline.

But before we look at the royalties on the table here, let’s pause to look at how this model actually works.

You see, though similar to mining royalties, there is one specific way that FinCanna Capital’s cannabis model is actually better.

How?

Well, in simple terms, FinCanna Capital identifies small start-up companies in the cannabis space and provides seed capital to fund early-stage development.

But rather than take equity in the company, FinCanna Capital sets up a royalty agreement whereby the investee company will pay it a fixed percentage of topline revenues, anywhere from 10% to 20% and beyond.

As well as this, FinCanna Capital also sets up an agreement to ensure that if the investee is identified for acquisition by a bigger company (which can be likely in this booming space), it receives a significant cut of the sales price itself.

Currently, FinCanna Capital has invested in three private cannabis companies, each of which are at different stages of their development.

It’s a pretty simple thing to grasp, right?

So, let’s look at the benefits it offers, both to FinCanna Capitaland investors.


READ OUR EXCLUSIVE REPORT – TO READ MORE ABOUT HOW FINCANNA’S UNIQUE CANNABIS ROYALTY MODEL COULD MAKE HUGE RETURNS FOR INVESTORS


The Many Benefits of the Cannabis Royalty Model

FINCANNA CAPITAL (CSE:CALI | OTC:FNNZF)

Of course, on first thought, you might think foregoing equity in return for revenue seems like a missed opportunity…

But as we say, there are many advantages to the model FinCanna Capitalis pursuing.

For example, where equity is concerned, as the investee company inevitably grows, you run the risk of your stake being diluted. But with the royalty model, a percentage of revenue only increases in value as company turnover grows.

Then there’s the simple fact that FinCanna Capital gets to enjoy multiple sources of real revenue while its running costs remain at a  minimum.

This means, unlike many in the cannabis space, FinCanna Capitalcan easily run at a profit, which is naturally a huge positive for any investor.

Additionally, remember that once the initial investment is made, there are no extra costs incurred.

So, as the investee continues to grow and generate increasing revenues, FinCanna Capital enjoys increasing income at no additional cost.

And, as we mentioned, here is where the cannabis royalty model differs slightly from the mining one…

You see, for a mining royalty company, royalty payments often end when the mine has finished producing.

But this is not the case where FinCanna Capitalis concerned.

It receives royalties for the entire life of the company, or until it’s sold.

So, even ten or twenty years down the line, if the investee is still generating revenue and hasn’t been bought out, FinCanna Capitalwould still receive a royalty.

If it is sold, that’s potentially even better.

In such cases, FinCanna Capitalmakes an even higher return based on the sale price. It ranges between 25 to 70%, depending on the deal.

So, not only does the firm have a steady stream of revenue from ongoing royalties, but whenever one of its investee companies is sold on to a bigger company, it receives a significant windfall, too.

You can already see why FinCanna Capitalis such an attractive proposition.

And we’ve not even considered that…

  • Royalty revenues are calculated before the IRS enters the equation, making them highly tax-efficient.
  • Early-stage investment means investors get access to private companies that would otherwise remain out of reach.
  • Rather than being exposed to the fortunes of a single start-up, shareholders are diversified across a number of different opportunities.

This is why royalty companies have become such a big part of the mining sector, and it’s why FinCanna Capitalpresents such an exciting proposition in the cannabis space today.

Indeed, it’s important to point out that perhaps the biggest catalyst for the initial rise of any mining royalty company has been a booming metals market.

It’s the same for a cannabis royalty company—for things to really take off, the marijuana market itself needs to be moving up.

The good news is, as we speak, this space is preparing to explode. 

The New ‘Blue Wave’ Poised to Trigger the Next ‘Green Wave’

If you’re in any doubt about the fact that we’re on the verge of a global cannabis boom, let us point out two things.

First, consider that the current global cannabis market is currently estimated to be worth around US$10.6 billion.

It’s pretty big already.

But here’s the thing…

Forecasts suggest it could be worth US$ 97.35 billion by the end of 2026.

That a staggering rate over just a few short years.

Second, it’s important to remember that with the Democrats now in charge of both Houses of Congress and in the White House itself…

The road to cannabis legalization in the US just got a whole lot clearer.

In fact, the MORE Act—which looks to decriminalize cannabis —only really now needs presidential approval.

It helps, then, that new US Vice President Kamala Harris is one of the initiative’s lead sponsors.

Without doubt, the cannabis industry is set to skyrocket to a whole new level…

And when it does, with its unique cannabis royalty model, FinCanna Capitalis poised to take full advantage.

Indeed, as it stands, the company is valued at under C$20 million.

But when you consider the royalties it will soon start to receive, and the fact that a single take-out of one of its investees could bank the company over C$80 million in a single hit…

FinCanna Capitalrepresents extremely good value for smart investors who are quick to act

Read FinCanna Capital’s DISCLAIMER.


DOWNLOAD OUR SPECIAL REPORT – TO LEARN WHY FINCANNA IS POSITIONED TO SOAR AMID RAPID US CANNABIS MARKET EXPANSION.


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