Was JAY Z Worth The SPAC?

What’s a Chief Visionary Officer do anyway?

Who knew Jay-Z liked Caliva weed? Oh yeah, everyone since July 2019. See CNBC article .

Yesterday, one of the biggest cannabis deals of the year was announced. Caliva, Left Coast, and Jay-Z got into a weed SPAC!

But first, you’re probably wondering…wtf is a SPAC?

A is a “Special Purpose Acquisition Company”. It’s basic goal is to raise capital into an entity, take that entity public, and use those funds to acquire or merge with other businesses.

While little used for decades, SPAC’s have had quite the resurgence of late. In 2019, SPAC’s raised a record in IPO capital. And in 2020, more than 50 SPAC’s have already been formed and have raised appx $21.5 billion.

SPAC’s have especially been used in cannabis of late.

Take for example Akerna. Akerna was created back in 2018 as a cannabis technology focused SPAC, and subsequently went public and merged with MJ Freeway. For more deal details, check out our interview with Tahira Rehmatullah who led this SPAC process.

MJ Freeway (now MJ Platform ) is a seed-to-sale cannabis technology platform used by growers, manufacturers, and retailers nationwide.

While this Akerna SPAC sounded promising, the early results have been lacking.

For example, in October 2020 Akerna raised an additional $12 million at a $2.40 / share price. This comes after the initial SPAC investors bought in at appx $10 per share. Less than 18 months later, their shares are offering at a 76% discount. OOPS…

Let’s shift focus to this new Jay-Z, Caliva, and Left Coast Ventures created SPAC.

As a potential investor in this SPAC, you should be aware of 3 main things:

The stock should be available to buy in Q1 2021, it will be public in Canada, and traded on the OTC exchanges for US investors. IPO Price Estimate: $10 / share

Even though there are many companies involved, this SPAC is mainly just a merger between Caliva + Left Coast Ventures

• This New SPAC would be Top 10 in US Cannabis Revenue
• Pro-Forma Revenues of $185 million in 2020 and $334 million in 2021

Earn-Outs + Equity Kickers

• There are equity earn-outs within this deal for multiple entities
• If these Share Prices are hit in the next 3 years: $13, $17, and $21, then additional equity kickers are paid out

To summarize, this SPAC stock WILL NOT BE LISTED on Major US Stock exchanges to start. It will be listed as an OTC stock for US investors, and on the NEO stock exchange in Canada. And it will most likely trade for around $10 / share when it goes public officially.

This SPAC is really just a merger between Caliva and Left Coast Ventures with some other fluff + Jay-Z thrown in. But Caliva and Left Coast are the REAL DEAL. Combined revenues between just those 2 entities would make them a Top 10 US Cannabis Stock by Revenue immediately!

Jay-Z definitely has some added value to this deal, but it’s hard to know exactly what the “Chief Visionary Officer” will do. One thing to monitor is the fine print of this deal. In particular, Roc Nation, OG Enterprises, and SC Branding, LLC. These are all entities owned in some form by Jay-Z. These entities also will be getting equity kickers the first 3 years of this deal.

Year 1: $25 million worth of shares + 5 million shares

Year 2: $7.5 million

Year 3: $7.5 million

Be aware of the earnout and incentive kickers embedded in this deal. In addition, to the equity kickers mentioned above, if share prices close above $13, $17, and $21 a share during the next 3 years, you could see even more shares added, which will further dilute the value of your shares.

But all in all, this SPAC is very exciting news for the industry!

Worst case scenario for investors…this SPAC gives you access to 2 of the largest and most successful California cannabis companies. This alone probably makes this stock a worthy buy for investors.

Best case scenario for investors…this SPAC becomes the largest California cannabis company in 5 years, and enriches investors many times over.

For my portfolio, it’s a fit. I’ve wanted more access and investment in top-notch California cannabis operators for years. This SPAC should provide that, at minimum, and more.

Thanks for reading, if you’re interested in our past blog posts about cannabis stock investing, please check out:

Joe Biden, The Cannabis Savior?

Crowdfunding and Cannabis Part 1 + Part 2

Why Cannabis Investing Makes Sense For Your Portfolio

Top 3 Cannabis Stocks to Buy BEFORE THE ELECTION

And please check out our show, Investing in Cannabis , for awesome cannabis content, including founder + investor interviews, and more!