|
Tormont Group |
|
|
October 15, 2018 Issue |
||
|
CEOCFO MAGAZINE |
||
|
|
||
|
Q&A with Patrick Wood, Founder and CEO of Tormont Group helping Smaller Cannabis Companies Gain Exposure across the US and Canada with Institutional Investors through their Tormont 50 Platform and through their Advisory Arm |
||
|
Founder and Chief Executive Officer
Tormont Group
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – October 15, 2018
CEOCFO: Mr. Wood, would you tell us about Tormont Group? Mr. Wood: Tormont Group, is a boutique advisory that works extensively across border in Canada and the US. Our mandate is to help smaller companies, one gain exposure with institutional investors through our Tormont 50 Platform, and then two through our advisory arm. We also help U.S. based private companies go public in the Canadian market space - list their shares IPO, attract funding and research coverage- all the great things that come with being a public company.
CEOCFO: Are you taking a position in these various companies? What is your relationship with the companies you are shepherding? Mr. Wood: Generally we do, it depends on the company. Our compensation structure with these companies was always based on some equity ownership within the company, and as such we are aligned with the company and investors and the success of the company.
CEOCFO: What do you look for when you are engaging with a company? Mr. Wood: On the advisory side, we are extensively focused on companies which operate in the US, in the auxiliary space through the cannabis industry. These are federally compliant and legal companies and industries such as software, branding, distribution, and other verticals. They are companies that have a very high growth model going forward and to have some very good exposure to what we think is going to be an incredibly explosive space down the road. On the blockchain side, we are focused on companies that use blockchain or cases of blockchain technology in their own tech and their own businesses, and that goes back to them being very high-growth companies that double their revenues every year. We are always interested in companies that are at or near cash-flow positive. On our Tormont 50 Platform highlights up to fifty small and microcap companies to institutions. We really are agnostic to industry. We are really more focused on identifying small and microcap companies that have great growth drivers going forward which are relevant and credible institutional investors.
CEOCFO: What do you understand on a very fundamental level that allows you to discern not just from what is on a sheet of paper, whether or not a company is going to make it? Where does gut-feeling come in? Mr. Wood: I have two partners and we are all 25-year plus veterans in capital markets on Wall Street in the U.S. and Bay Street in Toronto. We have all worn different hats in this industry – buy side, sell side and research, etcetera. The one thing that stands out clearly with discerning whether or not a company is solid beyond the financial state and beyond the business, is its management and board. Look very closely at the management in business and if it has been successful in the past. Is it a credible management, is it a board and management that is ready to go and be exposed to the capital markets and to investors? That is a big thing for us and it is years of experience seeing companies and management teams fail for various reasons. More often than not, when we see a company fail, it is from the lack of experience in management and board and that lack of experience can lead to a lack of liquidity in a company, so companies frequently run out of funding especially in the small microcap space and various other things between board and management. These are generally managements that do not have a wealth of experience in running the ship so to speak.
CEOCFO: When did you recognize where you should be going in cannabis? Have investors realized they should not be chasing the shiny bubble or the fly-by-nights that keep jumping into this space? Mr. Wood: If you read about the gold rush many years ago, the people who chased the gold were not really making any money and very few of them every found gold. I would compare that today to the producers in cannabis. I would look more at Levi Strauss who sold blue jeans and compared to the people exploring for gold, they made a killing. I think right now if you look at mature markets like Washington State, who has been active in recreational cannabis for many years, and if you look at the sales figures in Washington State in 2017, all the cannabis sector together did about $1.5 billion in sales and of that only $67 million was at the producer level. Right now in the capital markets, it is the producers who are achieving almost all of the capital and there are very few companies who are attracting capital and who are even actually public quite yet in the ancillary space. We are looking at cottage industries around cannabis - the people who sold the pick axes, the shovels, the jeans during the gold rush; those are the companies that we are clearly looking for and those are also the companies that happen to be federally compliant and legal in the US. That is a big thing because of the Schedule 1 (Class 1) listing still in the U.S. However, it is important to play by all the rules and I think that is going to become more of an issue moving forward. It already is, especially for Canadians looking to across the border into the U.S. If you have exposure in cannabis, it better be federally compliant and federally legal. To be quite frank, not much of it is right now.
CEOCFO: Would you tell us about a couple off companies you are working with now? Mr. Wood: One of them is POSaBIT, based in Seattle. It is an operating company that has developed a payment function which allows people who go into recreational stores across the legal states to use their debit and credit cards to purchase cannabis and cannabis products within those stores. They have created an innovative workaround, which is compliant on all levels both state and federal. This allows at the point-of-sale, the purchase of crypto, and that crypto is then used to purchase the products in the stores. What is interesting is they have proven out that concept works, which is appealing to the stores. It is attractive to consumers as well, because at the store level it doubles their average ticket size as well as compensates the budtender in a way that in the past they were only allowed to have a tip jar. Therefore, just based on functionality of the product that is created, you are allowed to tip 15% or 20%. People tip more when they actually use credit and debit. They have proven out that concept, and they have also integrated that payment functionality with a very sleek point-of-sale system and solution, which allows stores from seed to sale, tracking integrated within that. This allows them to monitor and collect data on what their customers are looking for, what they want, what their past purchase experiences have been and it creates a better overall store experience. That software solution is very exciting because one is agnostic. It is something that does not exist out there and the recreational space in the U.S.is growing very quickly. They created the product and they have brought the management behind them that has a pedigree of doing this in the past as they were top-of-game in software development. That is a very exciting company. There is not company like that which is going to be publicly traded and that makes us excited because we are in the final stages working with them and to bring them public in Canada and so far public response has been positive toward them.
CEOCFO: Does the investment community and the general public understand CBD and hemp, or is it still lumped in with cannabis overall? Mr. Wood: I think the investment community is broken into a few different stages. At the top of that community for wealth and knowledge today are investment bankers and research analysts. The research analysts and investment bankers know this space incredibly well, particularly at the boutique banking level. I am talking about mostly Canada here because Canada is at the forefront of all this activity, although there is now more activity across the U.S., which is encouraging as well. From the Canadian investment banking point of view, especially on the boutique level, it is only recently that Canadian banks have started to get involved in funding this segment. The bankers understand all the differences and are fully aligned with what our direction is going to be. After that I would say that institutional investors are not far behind, although institutional investors have been somewhat leery of this segment just because valuations always do play a role and it is hard to justify valuations to your unit holders or the people who have their money invested with you. Therefore, there is some reluctance there to dig too deep into the space. After that, you have retail investors who understand some of the space but I believe they are chasing a lot of the flash and similar to other bubbles we have had in the past there are companies in the segment that are going to have a hard time defending their growth models going forward. That means the retail investor is chasing the trade, and they are not really aware of the real play is and cannabis is a great growth segment but there will be all of these players in the end. Producers are certainly not the ones who are going to be making the cream of the revenues, it is going to be retail, software, technology, branding in the space and all of all distribution. It is not going to be the growers.
CEOCO: What is the competitive landscape? Mr. Wood: I do not think you could go anywhere in the recreational states today and not run into a Canadian investment bank who is active and looking for opportunities in this segment in cannabis right now. We know from associations with our friends that investment banks are very strong and as such we know they are there quite often. However, from an advisory level we do not know of any advisory that is actively assisting companies who are federally legal in all jurisdictions in the U.S., who is doing what we do right now and can bring good quality companies into this segment to Canada’s list and go public. We are not aware of any other advisory in this space.
CEOCFO: What is next for Tormont Group and Tormont50? Mr. Wood: We want to continue assisting companies achieve liquidity and going public in Canada. The Canadian go public structure is very accommodating to smaller companies and we would like to continue to build that out and gain more awareness across the U.S. because it is a real win-win especially in this day of tariffs and border controls. I think what we are doing is probably one of the greatest win-wins for both countries. On our side in Canada, we are being exposed of what we are doing at Tormont to make stronger opportunities and mature markets and that is a win for investors. On the U.S. side for the companies we are representing, it is a real win for them because there is not a structure like the one we offer in Canada right now in the U.S. for smaller companies to go public, to achieve funding and all the good things that come along with that. Our goal is to increase our stable of our companies that we are working with and to continue to identify good quality companies that have great growth products behind them and that would make a compelling case to investors.
|
“Our goal is to increase our stable of our companies that we are working with and to continue to identify good quality companies that have great growth products behind them and that would make a compelling case to investors.”- Patrick Wood
Tormont Group
|
|
|
disclaimers |
||
|
|
||
|
Corporate Advisory Cannabis Companies, Tormont Group, IPO Consulting Firms, Patrick Wood, Helping Smaller Cannabis Companies Gain Exposure across the US and Canada with Institutional Investors through their Tormont 50 Platform and through their Advisory Arm, CEO Interviews 2018, Cannabis Companies, Financial Company, Capital Companies, Public Companies, Canadian Company, Technology Company, corporate advisory for cannabis companies, Cannabis Business Advisory, IPO Consultant, capital structure advisory, corporate marketing advisors, investor marketing consultants, investment advisory platform, Tormont Group Press Releases, News |
||
|
|
||
Patrick
Wood