How One Company’s Roll-Up Strategy Could Unlock Value in Today’s CBD Market

The 2018 Farm Bill removed hemp from the definition of marijuana in the Controlled Substances Act, resulting in a massive uptake in hemp-derived CBD products. But the FDA’s lack of clear guidance kept many health and wellness giants out of the market. And as a result, a highly fragmented market emerged over the past few years.

After securing a $20 million line of credit, 1606 Corp. (OTC: CBDW) is executing a roll-up strategy to consolidate the fragmented market. Many CBD companies that began eight or ten years ago are looking for an exit strategy, creating an unusual level of inbound deal flow. As a result, the company is building a high-quality and synergistic pipeline.

Savvy Acquisitions

1606 Corp. recently acquired 51% of Brio Nutrition, a profitable CBD development and distribution business with six figures of existing revenue. With the acquisition, the company gains a diverse line-up of 45 products and access to key distribution channels. And the pre-commercialization work is already done.

In addition, the company signed a letter of intent to acquire 51% of Sanctum Health, maker of Coroquil, an immune-boosting formula designed to support lung health. The acquisition provides $7 million worth of inventory that the team can use to start formulating CBD-integrated product versions and selling to generate revenue.

Ultimately, the 1606 Corp. team aims to leverage its deep expertise in wholesale and retail distribution to help these acquisitions unlock value. They’re in active talks with five or six other CBD and wellness companies interested in making a deal happen, with a focus on companies involved in distribution rather than farming or manufacturing.

Eye on the Prize

1606 Corp. is a relatively new business that’s just getting started. After spending the past year going public and getting their filings in order, they secured a ticker symbol a couple of months ago and only recently became DTC eligible. And with spin-off shares non-restricted, there’s less overhead hanging over the stock from a cap table standpoint.

With these challenges out of the way, the firm hopes to roll up two or three more companies and generate about $50 million in annual revenue. After reaching those levels, the company can uplist to the NASDAQ and raise more meaningful capital to make more significant acquisitions. And these could turn it into one of the larger players in the CBD space.

Management believes that it can quickly scale revenue and EBITDA by acquiring mature CBD companies with existing products, revenue, and distribution channels. And using the synergies between these businesses, the company hopes to unlock a lot more value than the purchase price, potentially rewarding shareholders.

Looking Ahead

1606 Corp. (OTC: CBDW) is well-underway executing a roll-up strategy in the fragmented CBD industry. With plans to rapidly scale revenue and EBITDA, investors may want to keep a closer eye on the business over the coming quarters as revenue from acquired businesses flows onto its financial statements.

For more information, visit the company’s website or complete the form below to download their investor presentation.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.