Hi johnp12, as you probably guessed I wouldn't call it a "complicated and costly process". The cap raising set aside funds to buy the MJ license, I'd guess it will be similar to the Hanson buy out, but also including some cash. The risk of attaining a license is already mitigated because whoever they have their eyes on, already have the license. Yes the buildout will cost money. Assuming they rent a building, the remainder of the buildout would be done in house at cost. My $10 price for MJ was very conservative, even if it halved, when the cost per gram is only $1, the profits would still be huge. I'd assume they'd use a combination of debt & equity financing.
With regard to fresh foods, yes obviously lower returns, but a much bigger scale. You'll notice unlike MJ, they don't plan on owning any outright, just an equity share. I personally believe they'll make most of their money in this space, selling machines, management of, and the ongoing fertigation contracts etc. Having an equity stake does lock clients in to using Rotogro.
As Dynamic posted a while back about the Gibio facility, at say a $16m cost, 50% debt & government grants, RGI would need $4m for their 49%. Now of the $16m cost, a good $10m would be for the rotogro machines, fertigation etc etc. Even if they made 50% profit, they've earnt $5m, and get 49% equity for $4m, so they've made $1m profit & now own 49% of the operation. Seems like a win win investment to me. Of course they'd probably make closer to 100% profit on the machines etc and they don't have to invest to 49%, just have the option. I have no idea as to the profitability of fresh foods in Quebec, but assume they'll do their DD, if it looks good go for 49%, if marginal - invest no more.
Yes, agree there are no botanists etc on the board, remember, these people have been involved in the MJ space, improving their machines for 10 years now. Very few MJ companies would have personnel with that length of experience. It looks like they are employing the right people, look at the recent Botanist vacancy ad.
btw, looking at your profile I notice you hold FDM. As you would know I was a long time holder of that stock, regularly posting on HC expounding their virtues, buying most of my holdings in the 6 cent range exiting in the 30s, still think it's a good story. Is it a coincidence you also hold RGI? Stick with it, I think you'll be better rewarded with this one.
RGI Price at posting:
36.0¢ Sentiment: Buy Disclosure: Held
