Tennessee-based hemp producer Blühen Botanicals announced on Monday a $30.6 million investment from cannabis company SOL Global Investments.
For SOL, the investment represents an opportunity to deepen its reach into the U.S. hemp and CBD industry through its own business HeavenlyRx Holdings, whereas for Blühen, it’s a chance to scale, develop products, and access global markets. SOL's investment gives it 50.1 percent of membership interests in Blühen, valuing the Tennessee company at roughly $60 million.
"There are bigger companies out there, but what attracted me and our entire team to the Bluhen team was they have an eye towards the long-term goal of scalability," SOL Global CEO Brady Cobb said. "They see the long game in this which is scaled up processing and extraction capability ... as well as the ability through their relationships to contract farms throughout the tobacco belt, which is largely converting to cannabis and hemp."
Blühen Botanicals is a vertically integrated grower, processor, and supplier of hemp, which is essentially cannabis that contains almost undetectable levels of the psychoactive cannabinoid THC. The company has earmarked its funds for scaling up production and rolling out new products. But Blühen CEO and Co-Founder Joe Fox said the company is also keen to tap into SOL’s global supply chain.
“For us, the reason that we chose to engage in this partnership with Sol Global and HeavenlyRx was the ability to plug into the global supply chain,” Fox told Cheddar. “Exactly where this brand will go is to be determined.”
That global network, however, entangled SOL in scandal in December. Short sellers accused the company, which has investments in various cannabis companies and a research partnership with the University of Miami to study CBD, of insider self-dealing and overvaluing Latin American assets it sold to cannabis company Aphria ($APHA), according to Bloomberg.
The short allegations dropped just one day after Fox said Blühen signed a letter of understanding with SOL. Fox called it a “damning report,” but said that, ultimately, after conducting due diligence, Blühen decided to move forward with the agreement.
“Short sellers, I am familiar with. Their goal is to short a stock,” Fox explained, adding that the company has had plenty of offers from investors looking to enter one of the “sexiest” new spaces, but decided to stick with SOL.
"This to me was a short report that was replete with falsehoods and misstatements, we've moved on ... and the market has spoken on that when you look at our share price," Cobb said.
Blühen Botanicals has an unusual set-up ー a Knoxville, Tenn.-based hemp processing facility smack dab in the middle of the Bible Belt, and agreements with a wide network of farmers across the Southeast United States. But Fox said the Knoxville community has been surprisingly welcoming.
“I expected a lot more stigma, just the nature of our region. We are in the Southeast, we are in the Bible Belt,” Fox said. “We took an educational approach ... and in taking that approach and that strategy, we were met with very little resistance.”
Knoxville also happens to be right in the middle of tobacco country, where farmers have struggled in recent years from waning demand. Hemp represents a significant opportunity for farmers in the region who already have the right climate and mostly the right infrastructure for the plant to flourish. It’s even been referred to as a new “cash crop” of the American South.
It’s shaping up to be quite the cash crop for Blühen, as well. When Fox initially conceived of the company, he said he envisioned a high-end, boutique operation, but the demand was such that he decided to dream a lot bigger ー and that dream still includes retail.
Blühen has plans to launch a retail store in Knoxville on May 17, and, later in 2019, one in Fort Lauderdale, Fla. In-store and online, it will sell Blühen-branded full spectrum hemp- and CBD-based tinctures, salves, and capsules. Fox said the company also has a line of pet products planned.
It may seem like a risky time to be in the CBD industry, considering some states, like New York, have cracked down on products with unsubstantiated therapeutic claims and CBD in food in accordance with guidelines set by the Food and Drug Administration. But Fox said the company welcomes regulation.
“There are a lot of snake oil salesmen, folks making unsubstantiated claims,” he said. “For us, we welcome regulation ... it will only legitimize the industry.”