I’ve written about Sundial Growers (NASDAQ:SNDL), a Calgary-based producer of cannabis, once before in November. I concluded that Sundial Growers stock was a speculative bet and only suitable for very aggressive investors.
I’ve been asked to write about Sundial a second time.
And while I could tell you all kinds of reasons to buy or sell its stock — SNDL is trading at 50 cents as I write this — I’d prefer to tell readers about a potentially lucrative investment in another Canadian stock that can only be purchased on the TSX Venture Exchange at the moment but should see over-the-counter action before too long.
I’m talking about WeCommerce (TSXV:WE), a holding company that’s buying up Shopify (NYSE:SHOP) partners that are growing like weeds.
The people behind WeCommerce want to turn it into the Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) of the internet. While it’s a little off the beaten path, sometimes you have to get off the main road to find investment success.
I believe this is one of those times. Here’s why.
We Commerce Already More Valuable Than Sundial Growers Stock
Looking at the WeCommerce quote from the TSX Venture Exchange at the time of this writing, it is trading for CAD$19.30. Based on 37.6 million shares outstanding, that’s a market capitalization of CAD $725.7 million (US$570 million).
WeCommerce came to be publicly traded through a reverse merger with Brachium Capital Corp., a Vancouver-based capital pool company (CPC), the Canadian version of a special purpose acquisition company.
The two companies began their dance in August when WeCommerce entered into a binding letter of intent to complete a reverse takeover of the CPC, providing the blind pool with a qualifying transaction.
At the end of November, the relationship went from letter of intent to definitive amalgamation agreement, to completion of the reverse takeover on Dec. 9.
Concurrent to the completion of the combination, WeCommece did a private placement that raised CAD$60 million (US$47 million). WeCommerce intends to use the proceeds to acquire more Shopify partners in addition to the existing six it has under its umbrella holding company.
“Completing this Qualifying Transaction is a milestone achievement,” said Chris Sparling, CEO of WeCommerce. “With the proceeds raised, we will continue to position ourselves as the acquirer of choice for software companies within Shopify’s partner ecosystem.”
I don’t know about you, but owning a piece of a company that’s laser-focused on successful Shopify partners seems like a much better speculative bet than on one of the many cannabis producers in the U.S. and Canada.
Bill Ackman Connection
Nowhere in the press release announcing the completion of the WeCommerce/Brachium combination do investors see anything about Bill Ackman.
You do learn that the new board of directors includes Sara Elford, a former research analyst with Canaccord Genuity for almost 17 years; WeCommerce CEO Chris Sparling; Shane Parrish, who runs Farnham Street Media and invests in small businesses; well-known Canadian investment manager Tim McElvaine; WeCommerce chief financial officer Evan Brown, and Andrew Wilkinson.
That last name is the connection to Ackman.
Wilkinson started Tiny Capital in 2015 after building a web design firm that created interfaces for companies like Pinterest (NASDAQ:PINS), one of my favorite social media companies.
“I was operating at very high margins and my bank balance kept getting bigger,” Wilkinson said. “I didn’t really know what to do with the money and all I knew how to do was start businesses.”
So, he acquired many internet companies and then decided that the SPAC IPO was too tempting not to go ahead and become a public company.
Wilkinson met Ackman when he won a lunch with the hedge fund billionaire. They hit it off to the point that Ackman invested in WeCommerce. I think I read somewhere that Ackman owns 15% of the company, although I’ve been unable to confirm this from any legitimate news source.
While sales figures haven’t been released, the Shopify ecosystem of partner companies is estimated to be valued at more than $1.7 billion. WeCommerce intends to acquire a significant chunk of that.
The Bottom Line
At the very least, if you’re willing to follow Sundial Growers stock, you ought to be able to add WeCommerce to one of your watchlists.
It might not be cannabis, but its growth potential is real. As speculative bets go, WeCommerce is a much better option in my opinion.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
