Clarus is an idea shop. We don’t cover all sectors and we don’t cover all the names in a space. By being very select in a sector, we try to deliver the best ideas that generate the best absolute returns to investors. We have been helping our clients with ideas like these lately:
We got involved in the medical marijuana space early, some 2 ½ years ago, and have delivered extraordinary returns to investors by way of names like Aphria (APH), our first idea in the space in July 2014 had an equity value of $41 million (share price $0.78/sh) and is now $750 million (recent price $6.70/sh). We have been publicly involved with multiple cannabis related companies and have become a go-to player in the emergent space.
Our mining group has been outstanding at generating ideas like: Endeavour Mining, a deep value turnaround story, whose market cap when we initiated in February 2015 was $223 million ($5.40/sh) at writing was $2,374 million ($25.39/sh) ; Golden Predator (GPY), a new exploration play in Canada’s Yukon that is proving up a potentially major new play and Cardinal Resources (CDV-ASX) which is delineating the large Namdini play in Ghana.
In special situations we identified: CRH Medical, a gastrointestinal company in early 2015, trading at $3.62/sh ($250 million) it recently surpassed $11.00/sh (equity value $800 million); Polaris Infrastructure, a geothermal energy turnaround and growth story, in January 2016 traded at $8.05/sh ($125 million) and recently traded at $14.30/sh ($225 million) having traded as high as $18.80/sh.
Our focus on oil and gas explorers like Leucrotta Exploration whose recovery from $0.83/sh (EV $98 million) to a recent $2.40/sh ($354 million) or Yangarra Resources trading from $0.48/sh ($85 million) in January 2016 to a recent $2.64/sh ($276 million), have strongly outperformed the sector because they are not commodity price calls but fundamental reserve growth stories.
Emergence of World Leading Financial Market in the Cannabis Space
While cannabis companies predominantly focused on the Canadian market were the first to emerge in the financial market, we are now seeing US focused players accessing capital on Canadian markets. Liquor companies, beverage companies, tobacco and pharma companies have begun to think about how they can play in the cannabis space. Clarus remains deeply involved having brought two new companies public (totaling $102 million IPO values) and advised another on a $300 million M&A transaction.
And let’s not forget the gold mining market. Clarus raised funds for exploration related companies and played a major role in the annual Denver Gold forum hosting multiple events with a total of 12 companies and 15 money managers.
In total, some $523 million of value was raised or advised on.
What's Happening at Clarus...
While uncertainty continues to roil most segments of the market due to trade concerns, the passage of cannabis legislation in Canada removed the final legal uncertainty for this dynamic new industry. Capital market activity in the cannabis space was widespread in June and Clarus was once again one of the leaders raising or advising on $294 million in three transactions in June alone. We also continued to be active helping to raise $50 million for new and emerging businesses in modular construction and potentially the massive new LNG market; and $10 million for a new gold mining venture. Total capital raised was $354 million for the month. (6/29/2018)
Greater Volatility but Investment Themes Resonate
Markets have taken a more volatile turn resulting in more cautious and less committed trading activity. Clarus has been able to remain active in important investment themes with some highly targeted financings in the cannabis, blockchain, technology, specialty healthcare segments. M&A has emerged in the Gold sector as larger players are driven to enhance productions levels, meanwhile Clarus has been busy at the other end of the spectrum as it helps fund exploration and mine restarts. Through May 2018, we have participated in $717 million of financings of which $295 million were as lead or co-lead. Reflecting the growing needs of our clients, we were also involved as strategic advisors or offering fairness opinions on $641 million of transactions.
Recently we initiated on People Corp, one of Canada’s largest players in employee group benefit consulting and third-party benefits administration (PEO $6.90, TP $8.50). Liberty Health Sciences is also new coverage for us. Focused on the Florida medical cannabis industry as an integrated player offering growing through dispensary services. LHS has a strong early mover position in this potentially huge market (LHS $0.87, TP $2.00).