Despite the fact that Sunniva (USOTC: SNNVF) management has never given anyone cause for doubt, we are in a Missouri “Show Me” style market. On May 29, 2018, SNNVF issued a “show me” Press Release.
First, it reports that wholly owned subsidiary Sunniva Medical Inc. (SMI) has received its Confirmation of Readiness letter - its COR letter from Health Canada (HC). In the early days of licensing, there was a “Ready to Build” letter in which HC said, in essence, we approve the plan you submitted and if you build the facility you have described, we will issue you a license to produce cannabis. As part of the effort to streamline the licensing process referenced in ‘Improving the Licensing of Production of Cannabis for Medical Purposes,’ the COR letter became the new Ready to Build letter which is crucial because it removed a bottleneck that was known as the pre license inspection (PLI) that had become a long last step that delayed receiving a license.
The COR letter means an applicant can send ‘proof’ of readiness using data, photos, video, verification from experts, and other supporting information so a cultivation license can be issued without a PLI that will happen weeks after the license has already been issued. Changing location of the facility was also a major problem in the early days of licensing. It meant, in effect, that your application went to the bottom of the pile to start all over again. This is clearly not the case any longer. This announcement means Sunniva can now receive a Licensed Producer’s license for the Canadian Campus at Okanagan Falls without waiting for a final inspection.
I also note the wording of the reference to the construction financing should put another matter to rest. The news release says, “Sunniva is currently finalizing the financing via bank and subordinated debt for the planned state-of-the-art 740,000 sq. ft. facility….” I have emphasized the word “finalizing” that is perhaps the first formal acknowledgment the construction will be financed with a non-dilutive combination of bank and subordinated debt. I have also emphasized the word “bank” that I interpret to mean a loan provided by one of the “big five” Canadian chartered banks. In this market, skeptics have questioned SNNVF’s ability to finance this stage of construction of the Canadian Campus in a non-dilutive fashion by avoiding a substantial issuance of shares that other companies have experienced. Management said they can do it and I think we will soon see that promise fulfilled.
The following is a rendering of the planned Canadian Campus at Okanagan Falls.
The recent news release is important because I think it will result in a significant step up for Sunniva management’s credibility with the market. For example, in this report Dr. Anthony Holler says, “It is our intention to forward sell an additional 30% of our production capacity in Canada.” I think the time has come for investors to believe what Dr. Holler (CEO), Leith Pedersen (President) and David Negus (CFO) have to say.
In my most recent Seeking Alpha article (see Sunniva: The Story Gets Better and Better) I said, “We can expect a strong flow of news from SNN in the near term.” This is part of the news flow I was expecting and it isn’t over by a long shot. So when Holler says SNNVF intends to forward sell more of their Canadian capacity, his words now carry more weight.
When Holler and Negus said during my interview, “We think the biggest change in our thinking of late is the Trump administration seems to have decided to leave the states alone….Recent developments make us even more confident. California is huge, it’s fragmented and many operators are short of capital. We see this as an ideal opportunity for Sunniva to more aggressively pursue our strategy of growing rapidly to become a major entity in the market. Acquisitions will certainly be a part of that when the opportunity arises. We think all of a sudden, it’s a different world in California and perhaps the U.S. Other people don’t have as much to offer as they aren’t as developed as we are. So we happen to be in an ideal situation to take advantage of the changes and we plan to.”
I remind readers that this probably means a fairly steady flow of news from California related to growing, oil production, distribution agreements, presales of production and now, acquisitions. As these are published, investors will begin to see Sunniva as we see it. A great opportunity led by a strong and capable management team.
Readers have wondered why the stock market doesn’t recognize the strengths and potential of Sunniva that I have been describing. I have asked investors to be patient because building that following is a process and not an event. This latest news release is a big part of that process and it will only get better from here. For those you who are shareholders, I think your confidence will be rewarded. For those of you who are not, I don’t think it's too late because the stock price is very attractive right now.