When I say “world's largest cannabis company” you may think of Tilray or Canopy Growth, or maybe you're familiar with the big US cannabis companies like Green Thumb Industries or Curaleaf. Well, those companies have all been dwarfed by a new giant in the space, Bright Green Corporation (BGXX).
At a staggering market cap of $7.6 billion, BGXX has nearly triple the market cap of the existing leaders in the US cannabis space (Green Thumb $2.3B, Trulieve $2.4B, Curaleaf $3.34B) despite these companies each selling over $1B of cannabis in the US each year and growing at 20-40% annually, several of which are even free cash flow positive despite 80% tax rates.
So what has BGXX done to warrant such a huge market cap? Are they raking in record revenues or growing super rapidly? Well, none of those actually, in fact, they have $0 in revenue and no real plans to generate any revenues anytime soon. All that they have is a conditional agreement to produce cannabis for the DEA for research purposes. The facility they plan to do this in has yet to even be built. They just have a plot of dirt and agreement from the DEA.
This means BGXX is operating with the approval of the federal government, which enables them to be listed on the NASDAQ. Meanwhile, the other US cannabis companies that are actually selling cannabis in the US states where it's legal cannot list on the major US exchanges.
So what's the takeaway from this? Well there is clearly a demand for investor access to US cannabis companies on the major exchanges given the nearly 400% run up of GBXX since it IPOed earlier this week. For GBXX specifically, I plan to short it to the ground when options become available. This is clearly a cash grab from the early investors. In fact, I wouldn't be surprised if they end up never even producing any cannabis for the DEA and just shutting their doors or “pivoting” after such a large cash grab.
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