CEO Rodrigo Gallardo’s phone has not stopped ringing.
Ever since his Xebra Brands (XBRA-CSE) won an injunction in Mexico’s Supreme Court on Dec. 1, allowing them—and just them—to produce cannabis and cannabis related products, he has been fielding calls from EVERYBODY.
US MSOs—Multi-State-Operators—are calling, looking for a way into Mexico. Canadian service companies are calling, wanting to sell equipment and expertise. Mexican government officials, large landholders and big conglomerates all want to work with Xebra.
“Since the title was granted on December 1st, we have been flooded with opportunities,” Gallardo said in a phone interview yesterday.
“They all want a piece of the cake, but the cake hasn’t even been baked yet. But huge companies, they want a piece of the cake, and they are willing to do something with us.”
The “cake” is their unique position as being the only company who can develop cannabis products. A twist of Mexican law is that a judgement from the Mexican Supreme Court only counts for the plaintiff; nobody else.
Xebra Director Robert Giustra says it will take at least a couple years for any competitors to get where they are are—and by then he says Xebra will either be sold to a big conglomerate or be enjoying huge Year-over-Year revenue growth.
As the lead Canadian director, his phone never stops ringing either. Right after the Mexican Supreme Court injunction was granted, he was interviewed by The Wall Street Journal.
The next week he was interviewed by Reuters, a newswire service that is likely the largest on the planet. Yesterday he was interviewed by CNN.
Xebra is Big News; it’s not everyday a 130-million-person market opens up to one of the fastest growing industries in the western world.
Gallardo says all that Tier 1 publicity makes his next few steps very important. He says the tricky part right now is two-fold.
One is picking the right opportunities, which also means picking the right partners. The other really important thing is managing expectations—it’s not like they will be selling cannabis or cannabis products soon.
But Gallardo says he has been heartened by the helpful tone of would-be competitors in Mexico.
“We need to be very careful with everything we do, because we’re setting up the bar for whoever comes after us.
“All the associations and many, many companies that would be considered as peers or rivals in the past—they now want to share their expertise.
“Because everybody’s very interested that we get it right, right from the beginning because that will set the tone for them. And for all the companies that are going to follow us.”
Gallardo wants to do everything right, and he understands that investors want him to do everything right now. He says the key to speeding up the cannabis sector—to take advantage of what is essentially a 2-3 year monopoly on the Mexican cannabis market and all its derivatives.
He says that means bringing in the right partners with the right expertise.
“In the cannabis industry, a lot of companies believe that they can do everything by themselves. What we at Xebra have learned since Day One is that everybody has an expertise
“So we are willing to do joint venture with experts. Experts on every aspect of the business, and we can share these new industry that we have just detonated in Mexico. So, we’re reaching out to several groups.”
I love that word—detonated. He used it a couple times in our interview. He says that overnight on Dec 1 when the ruling came down, entrepreneurs and Big Business immediately started the process of setting up infrastructure to serve upstream (cultivation), midstream (extraction/processing) and downstream (retail brands).
A multi-billion-dollar industry is being born right in front of our eyes. And Xebra is at the heart of it. Nobody can go around them; they are in a unique and strong position.
Come early 2022, the deals will start to happen. News flow—material news flow—will keep investors at attention—what’s next?
Whatever happens in the next two years, Xebra shareholders will be the first to benefit.
DISCLOSURE: XEBRA has been a paying client of the OGIB Corporate Bulletin in the last 12 months