The share price of Israeli medical cannabis company InterCure Ltd. (TASE: INCR-L) continues to soar, along with most of the shares in the sector listed on the Tel Aviv Stock Exchange (TASE). The new surge was set in motion by the cabinet's decision in principle on Sunday to approve exports of medical cannabis from Israel. The decision is scheduled to take effect in nine months. InterCure's market cap has now reached NIS 950 million, reflected a 3,000% return on the share since the company entered the cannabis field last June.
InterCure, whose activity amounts to only a few million shekels a year, now has a higher value than established and profitable companies like Meitav DS Investment House Ltd., Castro Model Ltd. (TASE: CAST), Victory Supermarket Chain Ltd. (TASE:VCTR), non-banking finance company Nawi Brothers (TASE: NAWI), YH Damari Construction and Development (TASE: DIMRI), Africa-Israel Residences (TASE: AFRE), Azorim Investment, Development and Construction Ltd. (TASE: AZRM), and Israel Land Development Corporation (TASE: ILDC).
The billionaire, his wife, and paper profits
The extraordinary rise in the share price in recent days is also due to a purchase of shares by Yael Fegel, the Israeli wife of US billionaire Garry Fegel, who led a $17 million financing round in InterCure last October. Fegel has already made a 150% return on his investment, even though it was made at a 37% premium on the market price at the time.
Yael Fegel began buying InterCure shares on the TASE last month, increasing her stake to 12% and becoming the second largest shareholder in it after CEO Alex Rabinovich (39%), the architect of the company's entry in the cannabis sector. Rabinovich's holdings are now worth NIS 350 million, the Fegels' stakes are worth NIS 110 million, and the 7% holding of another shareholder, former Paz CEO Modi Ben-Shach, is worth NIS 60 million. Incidentally, Ben-Shach never planned on being a party at interest in a cannabis company; he invested in InterCure when it was a medical company.
InterCure's shareholders will meet tomorrow to approve an allocation of 4.5 million share options for former Prime Minister and Minister of Defense Ehud Barak, the company chairperson. Barak's options are already worth NIS 35 million on paper, and a third of them can already be exercised as soon as they are received. The rest are exercisable 36 months after the allocation date.
Barak has been working 40 hours a month at InterCure since October. In addition to the options, he receives a $10,000 monthly salary. He has already proved useful to the company by mediating the financing round led by Fegel, in which Adam Neumann, cofounder of shared workspaces company WeWork, also participated. Barak is also doing excellent public relations work for the company in Israel and worldwide, and is probably responsible for the company leading the cannabis session at the World Economic Forum in Davos.
Next in line: Overseas and Nasdaq
InterCure began its cannabis saga by merging Canndoc, one of the cannabis growing pioneers that already operated in Israel under the old regulations, into itself. Canndoc, an old and experienced company, but not one of the largest in the Israeli market, had NIS 5.4 million in revenue in 2017 and NIS 2.7 million in the first half of 2018. The revenue multiple at its current market cap is obviously absurd, but is not very different from that of large international companies (mainly Canadian) in the global cannabis industry.
InterCure is not relying on Canndoc's activity in the Israeli market. According to its announcements in recent months the company plans overseas activity and an offering on Nasdaq. In an interview this week, Barak said that the offering was slated to go through in the next six months.
With cabinet approval of exports, InterCure announced that it would step up the pace of increasing its production capacity, including construction of another facility meeting the standards of the new reform in Israel and export standards. Canndoc this week signed a memorandum for a joint venture for construction of a facility for growing medical cannabis in Canada, based on Canndoc's know-how. Canndoc will own 51% of this venture. Canndoc also signed a memorandum for a joint cannabis growing venture in Europe.
Before it began operating in the cannabis sector, InterCure was not a stock exchange shell; it was a medical holding company with two interesting holdings: Regenera Pharma, which tries to prevent nerve degeneration in treatment of first-stage blindness, and cancer diagnosis company NovellusDx. Although these products are regarded as interesting in the medical field, and money was raised for them from other private fund specializing in medical companies, InterCure's market cap was only NIS 50 million. Its breakthrough began only with its entry into the cannabis industry. InterCure was the first company listed on the TASE to merge an active cannabis company into it, the first to raise a substantial amount of money, and the first to recruit big names like Barak, Fegel, and Neumann.
Published by Globes, Israel business news - en.globes.co.il - on January 30, 2019
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