Embark Ventures Managing Partner Michael Curtis talks about the company's role as the investment manager for MMJ Group Holdings (ASX:MMJ), and the Canadian and broader global cannabis markets.
Rachael Jones: Hello. I'm Rachael Jones for the Finance News Network. Joining me today is Managing Partner of Embark Ventures, Mike Curtis. Mike, now welcome to Sydney.
Mike Curtis: Thanks Rachael. Pleasure to be here.
Rachael Jones: So first up Mike, could you discuss the rationale and the strategy vision for the partnership between MMJ
(ASX:MMJ) and EBV?
Mike Curtis: So what we're really looking to create here, Rachael, is an ecosystem. That ecosystem consists of high quality investment expertise, as well as high quality operating expertise. What you see in North America, is Canopy Growth (NYSE:CGC, TSX:WEED) and Canopy Rivers have taken advantage of that.
So the rationale really is to become the best-in-class premier investor on the cannabis side. As we look further in our vision, essentially we have a portfolio now that we'd like to take down consistently to 10 to 15 positions of high quality names that really address the bottlenecks within the cannabis sector. So originally, I got involved in cannabis on the extraction side, but we believe as well brands and the front end of the cannabis sector, so whether that is cultivars or tissue culture, really the stuff that's going to go into those facilities as they're grown. When we combine all these things together, we feel like we'll have a significant advantage and we can invest in best-in-class companies as we go forward.
Rachael Jones: So Mike, how do you plan to address the current discount to NAV?
Mike Curtis: Historically, what you've seen is investment companies traded discount to their share price. Fundamentally, our first issue is to address that and close that gap or close that gap with four items.
First, deal sourcing. Because we've been in the business for quite some time, we have a variety of contacts here in North America, so we'll be at the forefront of the best highest quality transactions. The expertise of the individuals involved in Embark Ventures is generally 20 years plus, whether it's in the legal capital markets or cannabis sector. We feel like we can weed out the companies as quickly as possible to make sure that we remain with the high quality ones.
The operating platform will be very useful for many folks, because like myself, I've originally started companies and sold them and made some mistakes along the way. We can help companies quickly and efficiently avoid those mistakes and at the same time within that portfolio, they all begin to link together and it just becomes much larger than the whole.
Lastly, there's some specific financial things we could do, such as share buybacks and dividends that we've put into place and we're starting to see that reflected in the stock. Eventually those four items are going to mean that we start to trade at a premium to NAV because investors are going to understand that we're going to be consistently and rapidly increasing that NAV.
Rachael Jones: And last question now, could you describe for us your investment approach and give us some new and existing investments?
Mike Curtis: So our view of the cannabis industry is we're reaching the end of cannabis 1.0. You saw that with the departure of Bruce Linton (co-CEO of Canopy Growth) and some other things that have happened. We believe that Cannabis 2.0 is going to be focused on addressing those bottlenecks, so whether it's at the front end or at the back end within extraction brands, et cetera. So that's where we're going to focus those investments to assure that we get best-in-class.
We recently completed an investment in a Polish extraction company. We believe that Europe is a few years behind North America, and extraction will become a bottleneck there. So we're a leader on that forefront. One of our largest investments, Harvest One (CVE:HVT) is right at that far end of concentrated brands and quality distribution.
Again, we believe that this will take off as we go farther, and a variety of these companies will be acquisition targets for some of the larger entities out there. So we want to hit all of those hurdles within our investment parameters.
Rachael Jones: Mike Curtis from Embark Ventures. Thanks so much for the insights.
Mike Curtis: Thanks, Rachael. It's been a pleasure.
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