Armed with $12M in credit, Ottawa marijuana firm CannaRoyalty eyes pot investments

Pot investment

An Ottawa company that finances and invests in marijuana enterprises says it plans to use a new $12-million credit facility to acquire stakes in pot-producing and processing firms.

On Monday, CannaRoyalty (CSE:CRZ) said it had signed an agreement with an unnamed Canadian institutional investor for $12 million in financing and to form a new joint venture.

The new corporate entity will focus on investment opportunities in the Canadian cannabis market, about one year before the federal government is expected to legalize marijuana for recreational use in this country. The joint venture will be funded and managed by the institutional investor while CannaRoyalty is expected to “leverage its relationships and investment pipeline to identify and refer attractive Canadian opportunities such as production assets, property and equipment,” the Ottawa-based company said in a statement.

“This joint venture gives us a vehicle to participate in these opportunities,” stated CannaRoyalty CEO Marc Lustig, calling it a “first in the cannabis sector.”

In an earlier interview with OBJ, Mr. Lustig said he sees many cannabis entrepreneurs in North America who have great ideas but are inexperienced in raising capital. He also sees banks avoiding the risks of the industry, unwilling to dive into the market until they’re sure the majority of investment conditions and risk calculations fall in their favour.

CannaRoyalty aims to solve that problem by enabling investors to hold equity stakes in marijuana companies while providing cannabis companies much-needed capital.

The financing announced Monday is expected to be comprised of a revolving $12-million secured credit facility bearing an annual interest rate of 10 per cent. The investor will also receive the right to nominate a director to CannaRoyalty's board.

The company's shares were up 4.88 per cent, or 10 cents, to $2.15 in midday trading Monday on the Canadian Securities Exchange.