During a question-and-answer session, a young presidential hopeful was navigating the usual political waters when a searingly blunt question arrived. “When I was in England,” stated Bill Clinton, then the Governor of Arkansas, “I experimented with marijuana a time or two and didn't like it. I didn't inhale, and I didn't try it again.”
Even at the time — almost 30 years ago from today — the response stretched credulity. However, Clinton couldn’t risk going off-script. While history will remember him as the 42nd President of the United States, his road to the Oval Office was appropriately circuitous, tainted with poor polling results and tawdry controversies. A direct admission to smoking cannabis could have ended Clinton’s budding political career cold.
Fast forward to 2006 and then-Senator Barack Obama offered a contrasting view on the subject of personal liberties. “When I was a kid, I inhaled,” Obama told an audience of magazine editors, adding for emphasis, “That was the point.” Such fresh candor represented one of many calculated gambles, and it worked due largely to shifting social mores.
Moving forward, Silver Spike Investment Corp., an investment firm focusing on cannabis companies and businesses specializing in alternative health and wellness, hopes that the market will be even more receptive to botanical persuasion.
What is Silver Spike Investment?
A newly organized closed-end management investment firm, Silver Spike Investment recently elected to be treated as a business development company, per its press release. According to the statement, Silver Spike’s investment objective “will be to maximize risk-adjusted returns on equity for its shareholders,” primarily through investing in “secured debt, unsecured debt, equity warrants and direct equity investments in middle-market cannabis companies and other companies in the health and wellness sector.”
Although the Agriculture Improvement Act of 2018 legalized hemp or cannabidiol (CBD) at the federal level, cannabis products that contain more than 0.3% delta-9-tetrahydrocannabinol (THC) still represent a controlled substance. Due to vagaries between various state laws and federal regulations, many mainstream institutions are unwilling to touch cannabis-related businesses, potentially presenting an opportunity for Silver Spike.
When is the Silver Spike Investment IPO Date?
A popular focus area among younger investors, Silver Spike Investment may help reestablish the spotlight on the business side of the cannabis industry with its upcoming initial public offering (IPO), or the first time a private enterprise releases its equity shares to retail investors. Shares will make their debut on the Nasdaq exchange under the ticker symbol SSIC.
Based on the terms of the deal, Silver Spike will raise $125 million through the distribution of 8.93 million shares at a price of $14 each. Per Benzinga staff writer Nina Zdinjak, the company intends to use the net proceeds to make investments in accordance with its investment objectives and strategies and for general corporate purposes.
Stifel Financial Corp. (NYSE: SF) and Piper Sandler Companies (NYSE: PIPR) represent the joint book-running managers for the IPO. Canaccord Genuity Group Inc. (PINK: CCORF) and Cantor Fitzgerald & Co. are the co-managers. The underwriters may have the option to purchase an additional 1.4 million shares of SSIC stock.
Assuming no unforeseen obstacles, Silver Spike will ink its name on the IPO calendar on Feb. 2, 2022.
Although an exciting market debut, analysts will watch SSIC stock with a careful eye because of the complexities of the underlying company’s timing. On the optimistic front, Silver Spike is entering the arena at a favorable juncture. For instance, the Agriculture Improvement Act — colloquially known as the farm bill — passed under the Trump administration.
Even more significant, an April 2021 report by the Pew Research Center revealed that “Americans overwhelmingly say marijuana should be legal for recreational or medical use.” Among the many highlights, a majority of every age group except the 75-and-older respondent base stated that marijuana use should be allowed for any use.
Though a powerful backdrop for SSIC stock, the market got off to a shaky start this year, with Wall Street nervously casting glances toward the Federal Reserve. While the central bank previously signaled that it would raise benchmark interest rates three times in 2022, some experts anticipate that this figure could be bumped to five times — possibly up to seven times.
If that were to occur, investors may rotate aggressively out of risk-on assets, which would likely not bode well for SSIC stock.
Silver Spike Investment Financial History
Structured as a business development company, Silver Spike is distinct from most other IPOs in recent memory in that the organization does not have underlying operations nor is it seeking to merge with an enterprise that does, à la an IPO via a special purpose acquisition company (SPAC).
Instead, Silver Spike is similar to a venture capital fund, seeking out opportunities within a particular industry (in this case, cannabis) and capitalizing viable enterprises, typically through equity, debt and hybrid financial instruments. However, a key difference is that Silver Spike must focus on small-to-middle-market corporations; otherwise, the firm would run afoul of regulations governing business development companies.
According to Silver Spike’s Form N-2 registration statement with the U.S. Securities and Exchange Commission (SEC), the development firm intends to “generate revenues primarily in the form of interest income from the investments” it holds. Additionally, SSIC may “generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights.”
In short, speculators may find SSIC stock appealing as it involves the entrustment of botanical experts to find the most compelling middle-market cannabis opportunities. In return for the high risk, stakeholders may receive a higher-than-average dividend yield.
Further, management declared on its N-2 document that it will seek to provide robust returns through targeting subprime (below investment grade) companies for capitalization purposes, as well as deploying leverage (or borrowing the money SSIC will invest or loan to the targeted companies). Though such tactics can accelerate profitability, they can also ruin your portfolio should circumstances go awry.
Therefore, prospective investors must conduct due diligence, not only on SSIC stock but also the concept of investing in business development companies. Due to the nature of the beast, risk-averse individuals may want to consider a more reliable financial vehicle.
Silver Spike Stock Potential
Easily one of the biggest tailwinds bolstering the case for Silver Spike Investment is expanding social acceptance of cannabis products. In November 2019, the Pew Research Center revealed that two-thirds of Americans supported marijuana legalization. Over the trailing two decades, public sentiment for the historically maligned plant has flipped on its head.
Perhaps even more importantly, legalizing cannabis at the federal level would likely translate to job growth. Prior to the disruption of the COVID-19 pandemic, multiple sources reported that the cannabis industry was the fastest growing in the U.S. Further, a recent paper from the Economic Policy Institute revealed that positive legislative momentum could potentially yield a network of good jobs.
At the same time, no sector is without risk. Politically, while Democrats and Republicans have worked together on cannabis-related initiatives, the heightened divisiveness in Washington could stymie progress. After all, no party would want to accept blame if legalization results in poor societal outcomes, as some contrarian researchers have argued.
In turn, the presently ambiguous legal structure of cannabis might negatively affect Silver Spike’s growth ambitions, especially if the political environment prevents across-the-aisle negotiations.
How to Buy Silver Spike Investment IPO (SSIC) Stock
Those interested in acquiring SSIC shares must do so at the open, necessitating knowing how to buy stocks. Below is a quick guide.
Step 1: Pick a brokerage.
Because the best brokers compete on similar terms, focus your time on finding the platform that holistically suits your needs.
Step 2: Decide how many shares you want.
Any IPO features significant risks because of myriad unpredictable variables. Therefore, choose a balanced share count.
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).
SSIC 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 information.
Unfortunately, no pre-IPO opportunity is available for SSIC stock.
Opportunity Via Careful Cultivation
Though speculative markets can potentially yield tremendous gains, they’re also incredibly dangerous. Thus, a business development company like Silver Spike could allow you to outsource time spent analyzing each individual opportunity by entrusting industry experts. Still, the focus on subprime companies and the use of leverage means that only risk-tolerant investors need apply.