Anyone looking to take a cannabis company public in Canada has probably heard of Roger Dent or met the microcap specialist in person. The CEO of Quinsam Capital Corporation has spent decades researching and investing in the country’s smallest publicly-listed companies, and has recently turned his attentions exclusively to cannabis. Mr. Dent spoke with Cannabis Professional about where exactly he is putting capital to work and how he identifies potential investments before the larger bankers have a chance to pounce.
Cannabis Pro: How would you describe Quinsam to someone who has never heard of it before?
Roger Dent: We are a cannabis-focused exchange-traded corporate vehicle. We are somewhat like a closed-end fund, the parallels for us would be, say, Difference Capital or Pine Tree, where you’ve got a listed investment company. The beauty of it as a manager is I’m not in the business of selling with mutual fund units or dealing with redemptions of mutual fund units, so I have a stable base of investments to work with. That certainly makes my life easier, but what it allows us to do is to make investments in the cannabis space in things like private companies that are in the process of going public and being able to do that without worrying, as you do in mutual funds, about getting redemptions that are going to cause trouble since you can’t redemptions with private company investments because you can’t really sell them. That has allowed us to build a portfolio that has a very significant component in pre-public cannabis stocks. At this stage, we probably have about half our portfolio in those sorts of investments.
CP: The focus then is on cannabis companies already in the planning stages of going public via IPO or RTO?
RD: Typically. I’d say when we buy, we are typically looking for visibility to liquidity in three to six months. They don’t all work out that way, sometimes the market conditions don’t permit it and other times we find a company that we think is particularly interesting and we will make an exception, but that is the core focus. Another area that we put some pretty heavy emphasis on is buying convertible debentures because they get the downside protection of the debenture and also the upside. Most of the debentures, even if they are public company issuers, the debentures themselves are not listed so being in the structure that we are in allows us to buy those without having to worry about whether we are going to have to sell something because an investor has made a redemption.
CP: What is in your portfolio now?
RD: At this point we probably have 75 investments. We often buy companies where there is a unit offering where you are getting shares and warrants so in some instances after a company has gone public we might sell the shares and keep the warrants so we will have what I call “stub” investments like that, but then we have between 50 and 75 core investments.
CP: Any names we might know?
RD: Last spring we put about a million dollars into Acreage, which we bought for well under ten dollars Canadian and it is trading in the twenties now. After it listed there were some resale restrictions on people who bought it before it was listed so we still have basically that entire holding, it is probably at this point our biggest holding approaching 10 per cent of our assets. Another that isn’t as high profile is West Leaf, it is an integrated western company with cultivation and retail so it is a Canadian LP with a western focus. That is one where we put in half a million at fifty cents and the stock listed and it is now trading for three dollars and sixty cents or so, that is between five and ten per cent of our assets. One of the ones that we own quite a lot of that is still private but is about to list is Harborside. They are about to file to go public in Canada under the name Flourish. That is a company where we have, in Canadian dollars, what is approaching a two-million-dollar investment and we think it is going to be a really strong performer in the next couple of months.
CP: How are you able to identify new investments in such early-stage companies?
RD: We have been doing cannabis since early 2017, but before that Quinsam existed doing general Canadian small caps for about five years and before that I ran small cap mutual funds at Matrix Funds for 10 years, and before that I did small cap investment banking and research for about 15 years. So I’ve been doing this in the Canadian market for getting close to 30 years. I’ve been in the space forever. On the whole one of two things happen to people in this sector, they either get tired of the volatility and the stress of the microcap world, or they just lose all their money. I have a very long-term history of doing this so I certainly know everybody who is in the microcap stock business and also separate from that, we’ve got this deal with the Foundation Markets people and their team has a very active cannabis business.