Global Cannabis Capital, a fund that invests in Latin American cannabis companies, is planning to raise funds to expand with the sale of security tokens to private investors.
As Cannabis users around the world light up to celebrate 420, a different campaign to help future investment in the industry is gathering momentum with crypto tokens.
GCC is planning to raise more capital with crypto tokens rather than the traditional offering of shares, as reported on Bloomberg on April 18.
The reports stated that the company is about to sell tokens on the Ethereum blockchain. Unlike most cryptocurrencies, the tokens in these offerings are backed by the assets or equity of the issuer.
This token offering could set a new precedent for other cannabis companies, particularly those based in countries with limitations on banks supporting marijuana-related businesses (MRBs).
“The tokenization route provided us a significantly more efficient option than the traditional IPO process. Both in terms of time and costs. The cannabis industry will grow exponentially over the next year, so from our perspective timing is everything.” said Chief Executive Officer Andres Israel to CryptoSlate.
He continued saying,
“With tokenization, we can reach thousands of investors in a short period of time. And that has always been our objective, to provide as many investors as we can with a vehicle that represents the cannabis industry”
The tokens are also designed to allow investors to expand their portfolios into a growing number of start-ups within the industry.
“With our token investors can now own equity participation of a growing number of startups, and propel the growth of the cannabis industry (since 100% of the proceeds are used for investing in more cannabis companies which will generate an increase in the portfolio valuation),” says Isreal.
With the offering, GCC intends to issue capital stock in the form of 100,000 tokens, through which the fund will likely sell up to 6% of its equity over the next three years.
Accessing funds for Cannabis businesses
Thirty-four states within the US already allow some usage of cannabis. Funding for existing businesses has mostly come from venture capital and other sources like wealthy individuals and individual shareholders.
As Banks continue to be reluctant to accept marijuana-related businesses as customers, investors like GCC look at alternative ways to invest in the industry. This move is encouraged by dealing with problems from the traditional banking system and making payments for cannabis-related endeavors.
From IPO to Blockchain security tokens
While GCC had initially planned to do an IPO, it has since moved to a security token offering. The STO will take place in Luxembourg, where regulations are marijuana-friendly and open to issuing securities with blockchain technology.
More than 100 investors committed to buying some of those tokens in a presale last month that valued the company at $25 million.
The report said the company is about to start selling tokens on the Ethereum blockchain platform, which show its equity, instead of a traditional IPO.
GCC has invested $700,000 in 28 cannabis companies in Latin America by providing services to startups in exchange for equity or buying stakes in promising firms.
GCC will use the proceeds from the token offering to expand its portfolio to about 40 companies this year, focusing on Switzerland, Canada, and the U.S. states of Colorado and California, Israel said.
According to Cryptoslate data, Cannabis coins have been down by over 10% in the last 24 hours.