3 Sixty goes public, struggles in first day of trading

HIGHLIGHTS

1. 3 Sixty shares closed 40 per cent below the price of its most recent public placement, in first day of trading
2. New public company combines 3 Sixty Secure and David Hyde’s Total Cannabis Security Solutions. 
3. Company plans expansion into the U.S. in the coming months.

One of the Canadian cannabis industry’s most prominent security companies, 3 Sixty Risk Solutions Ltd., got off to a rocky start as a public firm on Tuesday, closing 40 per cent below its most recent private placement share price after the company’s first day of trading.

The company is a combination of 3 Sixty Secure Corp., which specializes in transportation and guarding services for licensed producers and cannabis retailers, and Total Cannabis Security Solutions Inc. (TCSS), a security consulting firm led by well-known industry consultant David Hyde. The merged companies went public on the Canadian Securities Exchange through the reverse takeover of an oil and gas shell after raising $17.5-million in a private placement in October. It did the October raise at $0.85, but began trading around $0.79 on Tuesday, closing the day at $0.51.

Thomas Gerstenecker, a former Canadian special forces member and former chief security adviser for the United Nations, founded 3 Sixty in 2013 to provide security services for industrial clients and training for the Canadian government. The company began working with cannabis firms in 2014, but has seen most of its growth over the past year after shifting focus from consulting to on-the-ground security and transportation for licensed producers.

“In January we had less than 10 staff, and now a year later we have more than 250 staff,” Mr. Gerstenecker told Cannabis Professional on Tuesday.

Much of this growth followed 3 Sixty winning a security contract last January with Canopy Growth Corp., which accounted for more than 50 per cent of the company’s revenue last year. In November, however, 3 Sixty lost the secure transportation part of the contract to The Brink’s Company. It still maintains a guarding contract for Canopy facilities, according to Mr. Gerstenecker.

In addition to Canopy, 3 Sixty works with 45 other LPs, including Tilray Inc. and Aphria Inc., and employs over 160 full-time guards and a fleet of over 50 vehicles. It reported $2.5-million in revenue for the first nine months of 2018, 70 per cent coming from guarding contracts, 30 per cent from transportation contracts.

Mr. Hyde’s company TCSS brings the regulatory expertise to the combined entity. According to the 3 Sixty listing statement, Mr. Hyde advised more than 300 MMAR or ACMPR applicants over the past five years and more than 75 cannabis retail applicants. TCSS, in combination with Mr. Hyde’s private firm, which it acquired last summer, reported roughly $1.3-million in revenue in the first nine months of 2018.

“I can safely say that we're the only seed-to-sale security services firm that deals with everything from A to Z,” said Mr. Gerstenecker. “You have some consulting firms, you have armoured transport out there, but no one else that does everything.”

While the company is heavily focused on Canada, it has begun consulting in Nevada, and is planning a push into the U.S. in the coming months, according to Mr. Gerstenecker.

"Our interests certainly lie on the West Coast [of the U.S.], and also in some parts of Northeastern U.S.A. What we’re planning is [taking]... a blueprint of our seed-to-sale security services from Canada, and blueprinting that into the U.S. in terms of consulting, integration, guarding and secure transport,” Mr. Gerstenecker said.