Here at Insider Financial we've spent the last week or so attempting to uncover and highlight some of the top cannabis exposures ahead of what is possibly the biggest binary event to ever hit the sector – the ballot out of California that will determine marijuana's recreational legality in the state.AGRITEK HLDGS INC COM USD0.0001 (OTCMKTS:AGTK) has made our top picks list.The company is up nearly 600% on its October open alone, but just pulled back around 15%. We think this is speculators taking profits off the table, and we think it's a great time to load up an exposure in anticipation of further gains as the November California vote looms.For those not familiar with the company, here's a quick introduction.Agritek develop and manufactures hemp/cannabis based products, primarily thorugh the processing of cannabis plants into cannabis oil, and the introduction of this oil into saleable consumables.It kicked off its operations in the electronic cigarette space, with its Mont Blanc range, but has – across the last twelve months or so – pivoted to meet what analysts anticipate is going to be a massive increase in demand for hemp consumables.There's lots of different descriptions of what this company does/is doing right now, but we are going to summarize like this: Agritek has prepared, and is preparing, a suite of commercial consumable products that it intends to put on shelves in California when recreational legalization comes in to play. These products are basically everyday snacks, drinks etc., things like popsicles, and through various distribution channels and agreements, the company has a network in place to get these products on the shelves as soon as the California government gives the industry the green light.
"With over 200 dispensaries in the Los Angeles area alone, which is about equal to the amount in the entire state of Colorado, we have deals in place to be able to introduce, license and sell products with the help of celebrity branding that this market has never before seen."
The company's CEO, B. Michael Friedman, has set its CFO the task of bringing its financials in line with that of a fully reporting company, a process that is set to be completed over the next few weeks, meaning Agritek will be one of the only fully reporting public companies in the recreational marijuana space in California to have pre-arranged distribution deals in place for these sorts of consumables. Demand is going to be huge, and Agritek is going to be there to meet it.Earlier this year the company embarked on a debt restructuring effort, targeted at eliminating bad debt, and is well on its way to successfully meeting this end. It's got a grow facility in Colorado that just received a license that will essentially allow Agritek to grow an unlimited amount of marijuana at the facility, and there's a second facility (also in Colorado) waiting on licensing to go through.$500,000 in non dilutive capital just hit the balance sheet, which will go towards the above mentioned Colorado efforts, which will – in turn – provide a base ingredient facility for Agritek's recreational sales items in both Colorado and, assuming a green light come ballot day, California.So, what's the downside? Well, it's very much a binary event. If California says yes, companies like Agritek are going to soar. If the state says no, these companies are going to take a real hit. Which begs the question, what is the likely outcome? We think there's very little chance Californian's will vote no, especially in light of Colorado and Oregon already having voted in favor.Taken from a recent Forbes article on the matter:
"California is the biggest potential market in the country and the passage of Prop 64 will create an explosion in the value of compliant medical marijuana dispensary and cultivation licenses in good standing… That's the precedent we've seen in Colorado, Oregon, Washington State, Alaska and D.C., … I have no reason to believe California will be any different."
The recent cash injection takes some pressure off shareholders near term, but we expect some degree of dilutive raise to take place if and when California votes in favor. This raise will go towards pushing products, however, so we expect a quick turnaround on value add fro the funds picked up.We will be updating our subscribers as soon as we know more. For the latest updates on AGTK, sign up below!Disclosure: We have no position in AGTK and have not been compensated for this article.
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