As political, economic, and other factors contribute to an increasingly volatile stock market, one small-cap agtech company could still be an attractive bet for investors.
Vancouver, British Columbia-based AgriFORCE Growing Systems Ltd. AGRI recently entered into a definitive agreement for a convertible debt facility of an initial principal amount of $14.025 million and up to an additional principal amount of $33 million with accredited institutional investors.
AgriFORCE expects to receive an initial $12.75 million less fees and can get up to $33 million in multiple tranches.
AgriFORCE develops and acquires intellectual property (IP) to improve farming and food systems. The company states that its proprietary approach integrates crops, operations, facilities, systems and environments designed to allow plants to reach their full genetic potential.
The convertible debt facility is intended to finance the previously announced acquisition of Delphy Groep BV, a European agtech consultancy that reports being focused on optimizing agricultural production by driving innovation and operational expertise in agriculture, horticulture and controlled environment agriculture.
Traditional farm equipment companies also are getting into agtech, with Deere & Co. DE and Caterpillar Inc. CAT opening divisions devoted to it.
Rising food prices seem to be among the reasons agtech companies are thriving now. The agtech market was expected to grow by up to $35 billion by 2020, according to a recent report from Bain & Co., which said the growth is fueled by progress in crop yields, farm productivity, plant and animal health, sustainability, waste reduction and scalability.
AgriFORCE says it is at the forefront of being a solution to the problem. The company aims to transform agriculture by providing solutions addressing the key challenges growers grapple with.
It reports that its proprietary facility design is an environmentally friendly and clean way to grow high-value crops using the European Union’s good manufacturing practices in nearly any extreme weather environment, and the investment banking community is starting to take notice.
Roth Capital Partners initiated coverage of AgriForce in April with a Buy rating and a $5 per-share price target. Brian Wright, Roth’s Managing Director and the report’s author, said he believes AgriFORCE is creating a next-generation agtech company.
“We view the agriculture and food ingredient sectors as ripe for disruption by innovative and aggressive companies,” Wright wrote in his report. “We see AgriFORCE as possessing these important characteristics and have been impressed by its business development capabilities and early capital allocation efforts.”
Wright said the Delphy acquisition will provide a central component in developing an innovative agtech ecosystem and will give it a testing ground for the latest technological advances in the industry.
“Young technologies with meaningful promise can be further advanced by this ecosystem and other partnership opportunities can be established,” Wright wrote.
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