Cannabinoid biotech specialist SciSparc (NASDAQ:SPRC) is enjoying a much-needed boost on Wednesday thanks to a key investment deal. This morning, management announced an equity purchase agreement with a private-equity fund, reflecting confidence in the otherwise embattled business. In response, SPRC stock is shooting higher. Shares may also be benefiting from broader interest in the potential of cannabis-related pharmaceuticals.
According to a press release, SciSparc — which is under the clinical-stage pharmaceutical category — has entered into a standby equity purchase agreement (SEPA) with YA II PN. YA is a fund managed by Yorkville Advisors Global, which specializes in structured debt and equity investments.
Under the terms of the SEPA, YA inked a commitment to purchase up to $20 million of SPRC stock over the next 36 months. This agreement is “subject to a beneficial ownership cap of 4.99%” of the share capital of SciSparc. Further, SciSparc has agreed to sell its ordinary shares to YA at a price that is 3% lower than the average daily price of the shares over the three days following its notification to YA.
The press release clarifies that SciSparc “will have the right in its sole discretion to sell shares to YA from time to time upon the issuance of an advance notice, which has no right to require the Company to sell any shares.”
SPRC Stock Rises on Renewed Interest in Cannabis Pharmaceuticals
Naturally, the primary catalyst for SPRC stock centers on the underlying credibility boost. Essentially, if YA believed that SciSparc lacked any upside potential, then a deal probably wouldn’t have been made. However, the 36-month agreement implies that the investment fund sees potential for future growth here rather than merely near-term fluctuations.
On a broader level, the underlying SEPA also provides a credibility lift for the cannabis-related pharmaceuticals space. As a natural product, cannabis has long attracted interest as a possible therapeutic. However, as a 2005 National Geographic article points out, a debate rages over the possible health benefits of cannabis versus its potential for abuse or even harm.
According to Harvard Health Publishing, the most common use for medical marijuana in the U.S. is for pain control, which falls in line with SciSparc’s product pipeline. In addition, the company is also focused on drug development programs “based on THC and/or non-psychoactive CBD” aimed at the treatments of Tourette Syndrome, Alzheimer’s disease and ASD and status epilepticus.
Estimates across research firms vary in regard to the potential of cannabis-related therapeutics. For one, data compiled by Statista indicates a projected market value of $29.61 billion by 2028. Meanwhile, Precedence Research forecasts that the global cannabis pharmaceuticals market will hit $430.51 billion by 2032. Finally, Market Research Future believes that the segment may land at $432.65 billion by 2032.
In the three forecasts mentioned above, the respective compound annual growth rates (CAGRs) are well into double-digit territory. Generally, that could bode well for SPRC stock.
Why It Matters
Despite the enthusiasm for SciSparc today, investors should still realize the enormous risks involved. Specifically, SPRC stock has lost more than 75% of equity value in the past 52 weeks. Also, medical marijuana itself features both pros and cons, with Harvard Health Publishing warning about the possibility of cardiovascular risks, for example.
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On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
