Marijuana Business Magazine - April 2018

MONEY MATTERS ¬nvesting & Finance ¬nsight Sean Stiefel and John Kaden Q&A with the principals of Navy Capital T oo much due diligence is possible. That’s what Sean Stiefel and John Kaden, the principals of cannabis- focused hedge fund Navy Capital, say about their entry into marijuana investing. “We spent six months studying the volumes and how we would risk manage the space, and some of it was valu- able,” said Kaden, who joined New York-based Navy Capi- tal shortly after Stiefel founded it in 2014. He added: “We were trying to be dili- gent. But we took too much time stressing the numbers and thinking about whether the market was deep enough for us to run an institutional fund, when in fairness we probably should have just started, and gotten into it, and figured those things out along the way.” Both men hail from traditional invest- ment institutions. Stiefel’s resume includes stints at Barclays Capital and Northwoods Capital Management Partners, among other places. Kaden began his career as a strate- gist for The G7 Group, a global consult- ing firm, and later worked for Blackrock Capital Investment and Northwoods Capital Management. He also founded and managed Cynthion Partners, a global hedge fund. Since launching Navy, Stiefel and Kaden have invested in roughly three dozen cannabis businesses. They cur- rently have 25 in their portfolio. About 80% of those are plant-touching and about 60% are Canadian. Navy Capital has $75 million under management. Q What’s the best cannabis investment you’ve made and why? A Kaden: I think our best public market investment has been Ontario, Canada-based CannTrust, which was at $1.68 (CA$2.17) about three days after they listed last summer, and it’s sitting right now at $6.94 (CA$9). One of the other places where we’ve seen the most upside is on the deal side. We were the biggest investor in Nuuvera’s IPO in January. We had more than a million shares in that deal. It IPO’d at CA$2.50 and then was acquired at a price that amounted to CA$8.50. Q What did you like about these companies? A Stiefel: The biggest opportunity we see is where we think the market is either misunderstanding a busi- ness model or mis-sizing an opportunity. And with John Kaden Sean Steifel 12 • Marijuana Business Magazine • April 2018