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The Parent Company is coming to conquer California’s cannabis market - with some big-name help

Snapshot

Backed by entertainment mogul Shawn "JAY-Z" Carter, The Parent Company runs the largest vertically integrated cannabis operation in California and has big plans to grow

The Parent Company -

Quick facts: The Parent Company

Price: 10.1085 USD

OTCQX:GRAMF
Market: OTCQX
Market Cap: $930.01 m
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  • The company runs the largest vertically integrated cannabis operation in California
  • Backed by global icon Shawn “JAY-Z” Carter and the Roc Nation Empire
  • Aggressive M&A strategy with $575 million cash-in-trust to build market share in California
  • Social Equity Ventures arm that will invest up to $10 million in Black and other minority-owned cannabis business

What The Parent Company does:

TPCO Holding Corp (The Parent Company) (OTCQX:GRAMF) (NEO:GRAM) is about to become one of the cannabis industry’s most-watched stocks.

Part of the reason is due to its ambitious strategy to build market share in highly competitive California, where even the biggest companies are lucky to amass around 1% or 2%. The other reason is thanks to its big-name backing: entertainment mogul Shawn “JAY-Z” Carter is a key shareholder and holds a seat at the executive table as the company’s chief visionary officer. With him comes Roc Nation, a premier entertainment organization representing some of the world’s most recognized artists and athletes from Rihanna to Kyrie Irving, whose influence reaches around 1.5 billion followers across the globe.

The Parent Company’s envious combination of top cannabis operators and cultural cache has already shot the firm to over an estimated $185 million in revenue from operations in 2020. Most of that stems from more than 17 owned and licensed brands offering over 250 SKUs in over 20 form-factors like flower, pre-rolls, vaporizer cartridges, concentrates, gummies, chocolate, beverages, capsules, tinctures, lozenges, topicals and body care products. A couple of standouts include Monogram, JAY-Z’s luxury cannabis brand, and Caliva, a San Jose-based brand that grows, manufactures and sells its own branded products in more than 250 dispensaries across California.

A key factor in The Parent Company’s success will be its ability to gain a strong foothold in California. In order to do that, the firm has a three-pronged strategy: vertical integration, omnichannel expansion and brand awareness. It plans to be aggressive on the acquisition front – with up to $575 million cash-in-trust, there is plenty in the bank to fuel its growth. The firm will build organically as well through its robust brand and product selection and extensive manufacturing footprint that includes over 50,000 licensed square feet of space.

Led by CEO Steve Allan and backed by a strong team of business veterans, The Parent Company’s ethos is to give back as it grows. JAY-Z and chief social equity officer Desiree Perez will lead the firm’s Social Equity Ventures, a fund of up to $10 million that will invest in Black and other minority-owned cannabis business.

How is it doing:

In January 2021, Subversive Capital Acquisition Corp completed its qualifying transaction to acquire CMG Partners Inc (Caliva) and Left Coast Ventures Inc, creating The Parent Company and becoming the largest vertically integrated cannabis operation in California. Shares and warrants began trading on the NEO Exchange under the symbols GRAM.U and GRAM.WT.U, respectively, in addition to its OTCQX listing.

The nearly $3.6 billion California market is home for now. It has a wide-reaching distribution footprint in addition to its eCommerce efforts at Caliva.com and three brick and mortar retail locations in San Jose and Bellfower.

Unlike multi-state operators (MSOs), which have capex-heavy models, The Parent Company plans to grow its brand equity in California and expand to new states via asset-light licensing or co-manufacturing partnerships.

It has its eyes sharply focused on the Tristate area of New York, where the brand is expected to benefit from Brooklyn native JAY-Z’s outsized influence, plus neighboring New Jersey and Connecticut. New Jersey, which legalized adult-use cannabis in November, is expected to be a $1 billion market, and there are sure signs that New York is expected to follow suit in 2021. Collectively, The Parent Company estimates that the Tristate area could represent a $8.9 billion market opportunity by 2025, given its nearly 32 million-strong population, high cannabis consumption rates, and high household income in the NYC metro area.

On a corporate level, The Parent Company recently beefed up its executive team with the addition of former Origin House executive Mike Batesole as CFO.

The firm is targeting around $334 million in revenue in 2021.

Inflection points:

  • Ten new storefronts opening in 2021/2022 in the Bay Area, Los Angeles, Central Valley and four additional locations
  • Growing presence throughout US, starting with the Northeast coast
  • Expand from six delivery depots to more than 20
  • Direct to consumer footprint expected to grow to around 15 retail and 20 delivery locations by end of 2022
  • Further M&A in California

What the boss says:

The Parent Company's CEO Steve Allan told investors upon the closing of the group's qualifying transaction in January: "With both the most comprehensive vertically integrated platform and brand portfolio in California, and the healthiest balance sheet in cannabis, we will reshape the industry in the world's largest cannabis economy."

The firm's chief visionary officer, JAY-Z added: "This is an incredible time for this industry. The end of cannabis prohibition is here, and The Parent Company will lead the charge to a more expansive and inclusive cannabis industry. We are paving a path forward for a legacy rooted in dignity, justice, care, and consistency. The brands we build will redefine growth, social impact, and social equity. This is our time. I'm proud and excited to lead the vision of The Parent Company."

Contact Angela at angela@proactiveinvestors.com

Follow her on Twitter @AHarmantas

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