Instead of issuing traditional shares, a cannabis startup fund is soliciting funds through the issuance of security tokens.
Global Cannabis Capital, which invests in Latin American cannabis startups, intends to raise capital by selling shares via Ethereum blockchain tokens.
While the company had planned to conduct a public offering in Canada next year, it has now chosen to conduct a security token offering in Luxembourg.
GCC wants to issue capital stock in the form of 100,000 tokens with the sale, via which the fund will likely sell up to 6% of its shares over the following three years.
According to CEO Andres Israel, while this will most likely be done through private placements, the company may later elect to publish its tokens on a public exchange.
The CEO anticipates that the first placement will be completed by early May, and over 100 investors have already committed to purchasing tokens in a presale last month, valuing the company at $25 million.
Cannabis Company Builder raised $500,000 in funding.
Until now, the company had relied solely on venture money, affluent individuals, and private shareholders for funding, rather than institutional investors. Last year, GCC’s incubator unit, Cannabis Company Builder, raised $500,000 in seed money.
Israel stated that the money will be used to expand the company’s portfolio to roughly 40 companies, with an emphasis on Switzerland and Canada, as well as Colorado and California, two U.S. states where cannabis is legal.
While the issuing of security tokens may set a new norm for raising capital, it will nevertheless conform to existing finance laws, since investors must comply with anti-money laundering and know-your-client regulations enforced by the GCC’s bank in Luxembourg.
At the same time, such a token offering might set a precedent for other marijuana enterprises, particularly in the United States, where the federal government’s cannabis prohibition bars them from obtaining loans from domestic banks.
According to Israel, the rapidity with which the GCC will be able to generate funds was also a crucial deciding factor in choosing this technique. “We cannot afford to wait 12 or 14 months for an IPO,” he stated. “It takes about three months to tokenize.”