A little over 2 decades ago, few Americans would have believed that the U.S. government would possibly be on the cusp of de-scheduling cannabis. While individual states that leaned progressively began legalizing medical marijuana, the rest of the nation was decidedly conservative on the hot-button issue.
According to data from the Pew Research Center, almost two-thirds (63%) of U.S. adults were against cannabis legalization around the late 1990s to early 2000s. Interestingly, only 31% of survey respondents felt that botanical products should be legal to access. Nevertheless, throughout the administration of President George W. Bush and accelerating under President Barack Obama’s 2 terms, opinions about cannabis virtually flipped.
Around mid-November of 2019 — just prior to the COVID-19 pandemic and during a period of rising approval for President Donald Trump — Pew reported that 67% approved initiatives to legalize marijuana. On the other hand, only 32% believed that cannabis should remain illegal. Across gender, race and educational attainment categorizations, respondents enthusiastically voiced support for giving the green stuff the green light.
The only outlier came from the Silent Generation or those born between 1928 through 1945. Still, since this demographic is mostly retired, the upcoming initial public offering (IPO) of Canna-Global Acquisition Corp enjoys one of the most favorable backdrops in business.
When Is the Canna-Global Acquisition IPO Date?
One of the last few enterprises that is scheduled to price its public market offering on the last day of November, Canna-Global Acquisition should ink its debut on the IPO calendar on Dec. 1. According to its prospectus filed with the U.S. Securities and Exchange Commission (SEC), the upcoming deal will involve the distribution of 20 million shares priced at $10 per unit.
Further, the stock will trade on the Nasdaq exchange under the ticker symbol CNGLU. Each unit consists of one share of common stock (which features a proposed ticker symbol of CNGL) and one-half of a warrant (CNGLW), exercisable at $11.50. EF Hutton represents the sole bookrunner for this IPO.
As you might guess from its corporate brand, Canna-Global Acquisition is a special purpose acquisition company (SPAC) seeking a merger with an enterprise within the cannabis industry. Management is quick to note that it takes jurisdictional authority very seriously and thus will not target businesses located in China or Hong Kong. Needless to say, the Chinese government strictly prohibits marijuana.
Despite assurances from management, prospective investors of CNGLU stock should undertake serious due diligence regarding any private cannabis firm that seeks to enter the public arena via a SPAC. Also known as blank-check firms or shell companies, SPACs have no underlying operations. Instead, their objective is to launch their own IPO to merge with a viable organization.
In some ways, a SPAC is a mutually beneficial dance. One partner brings access to the capital market while the other partner brings the business. The 2 enter a combination, thereby extracting a “backdoor” IPO. But if you think regulatory agencies are unamused at this arrangement, you would be right.
Government institutions provide ample warnings about SPAC-based IPOs, primarily observing that such business combinations don’t undergo the same intense vetting process that traditional IPO candidates face. While you must judge CNGLU stock on its own merits, most investors will probably want a stronger disclosure process for a jurisdictionally and legally controversial market segment like cannabis.
Second, SPACs have not always delivered on their hype, with market performances post-merger lagging that of benchmark indices on a year-to-date basis. Part of the problem, as Harvard Law School mentions, is that SPACs may “give shares, warrants, and rights to parties that do not contribute cash to the eventual merger.”
As always, conduct diligent research prior to making your final decision.
Canna-Global Acquisition Financial History
Because of its status as a SPAC presently in pre-IPO status, no financial information is available for Canna-Global Acquisition other than its $200 million gross raise. This blind wager is another factor to consider before acquiring CNGLU stock. You’re not going to know what the proposed target enterprise is until the SPAC discloses that information.
To be fair, pre-merger-announcement stockholders have the right to redeem shares at the initial offering price ($10) if they disagree with the proposed deal. However, even if you acquire CNGLU stock below the redemption price, the opportunity cost of holding up your capital — SPACs typically have 2 years to merge with a target enterprise — might not be worth the “risk-free” yield you would be due.
Still, the opportunity in CNGLU stock is burrowed in the numbers. Per Canna-Global’s IPO prospectus, “the cannabis industry has seen significant capital invested for mergers and acquisitions in the past several years. In 2018, the cannabis industry boomed with 324 mergers and acquisitions accounting for more than $7 billion in value — a massive jump from the 163 deals worth $1.9 billion in 2017 while 2019 contracted a bit at 249 deals worth about $5 billion.”
Further, management pointed out that approximately “$600 million was raised in the first three months of 2021 followed by five major merger announcements in May 2021, some valued as much as $2 billion and $7.2 billion,” reflecting both the booming popularity of SPACs and growing belief regarding full legalization of marijuana in the U.S. market.
While there’s no doubting that SPACs have represented one of the hottest market trends of the post-pandemic years, this choice of IPO has waned in recent months. According to Harvard Business Review, “the average rate of redemption per [SPAC] deal was 58%, with a median redemption rate of 73%. Not only that, in more than a third of the SPACs, over 90% of investors pulled out.”
No matter how you break it down, that’s a large percentage of investors taking their money away rather than following through with a deal. As for the botanical market, cannabis stocks have underperformed based on prior political reluctance to fully legalize the industry.
Long story short, the cannabis market, while offering big numbers, is a nuanced one. And it’s not as easy to succeed here as some might suggest.
Canna-Global Acquisition Potential
Ironically, in an age of rising vitriol within the political circus, the 1 issue that Democrats and Republicans tend to agree on is loosening cannabis restrictions. A few years ago, the 2 warring parties became strange bedfellows when they signed the Agriculture Improvement Act of 2018, colloquially known as the farm bill.
Naturally, the legalization of hemp and cannabidiol (CBD) — basically cannabis products that don’t impose a psychoactive effect — represented the landmark piece of legislation. Nevertheless, it’s a big stretch from approving hemp or CBD products to allowing the free interstate transportation of marijuana, which does impose a psychoactive effect.
Logically, many green advocates turned to newly elected President Joe Biden to put the final stamp on U.S. legalization. However, the nation soon observed that Biden was a moderate, frustrating some progressives who wanted him to shake things up. Investors should also note that the president might not want to have marijuana legalization as part of his legacy.
Still, U.S. Rep. Nancy Mace, a Republican from South Carolina, introduced legislation to decriminalize marijuana at the federal level, while proposing regulatory measures similar to alcohol. It’s not clear where this draft bill might end up, but it does demonstrate continued bipartisan efforts toward legalizing cannabis, a net positive for CNGLU stock.
How to Buy Canna-Global Acquisition IPO (CNGLU) Stock
As a soon-to-be-introduced IPO, most investors must acquire CNGLU shares at the open, which is straightforward if you know how to buy stocks. If not, follow the steps below.
Step 1: Pick a brokerage.
SPACs are traded just like regular stocks, so any brokerage will offer CNGLU. Therefore, you should narrow your best brokers to platforms that ideally match your needs.
Step 2: Decide how many shares you want.
Since SPAC-based IPOs have been unpredictable this year, it’s best to choose a balanced share count to mitigate risk.
Step 3: Choose your order type.
Before trading, learn these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the current rate.
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
CNGLU Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged (non-public) information.
For upcoming public market debuts, consider opening an account with ClickIPO for select pre-IPO acquisition opportunities.
A Green Flag That’s Slightly Turquoise
Thanks to a veritable flipping of the public’s opinion on marijuana, Canna-Global’s IPO commands fundamental clout. At the same time, the cannabis issue remains politically contentious despite encouraging progress, requiring careful consideration among prospective investors.