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Poda Holdings (CSE:PODA/OTC:PODAF), the maker of biodegradable, heat not burn (HNB) capsules, has announced it is selling all its assets and properties to a subsidiary of Altria. This will include patents to its HNB technology along with licenses and royalty agreements. Altria is paying US$100m for the multi-substrate, heated capsule technology.

Poda Holdings said it will carry on on its ‎business pursuant to its existing royalty agreements and the company and the ‎owners have agreed to allocate US$55,275,000 of the Purchase Price to Poda (being 55% of the purchase price), with the balance to the ‎owners.‎

“This agreement represents a significant milestone for PODA and its employees,” said Ryan Selby, PODA’s Chief Executive Officer, Director and Chairman of Poda’s board of directors. “Our teams have worked diligently on this technology since the company’s inception, and we believe these agreements maximise its value for the company and its shareholders.”

Poda expects to make a cash distribution to holders of Poda’s shares equal to approximately C$0.40 per subordinate voting share and C$400 per multiple voting share‎, representing a 167% premium to the closing share ‎price of Poda as of May 12, 2022. Poda expects to retain approximately C$1 million in cash to explore ‎new business opportunities, subject to the terms of the Asset Purchase Agreement.

Upon completion of the transaction, Poda will no longer have any material property or ‎assets ‎other than cash-on-hand plus the cash proceeds of the transaction, which are expected to amount to ‎approximately C$70 million, after satisfying Poda’s obligations and ‎liabilities.

Why we liked the look of Poda Holdings

‎The Armchair Trader first flagged Poda Holdings as an interesting company to follow in November last year. We liked the fact that it had developed proprietary heat-not-burn technology, including closed-ended pods for which it was seeking protective patents in both the US and Europe. CEO Selby told us at the time that he was scaling up the business, with over 500,000 Beyond Burn Poda pods scheduled to come onto the market in Europe and Asia.

The ‘Beyond Burn’ Poda Pods contain a tobacco-free blend of pelletized tea leaves infused with synthetic nicotine. They have been developed as a reduced risk alternative to traditional smoking products, and to mimic the sensory experience of traditional cigarettes, but without the smoke, the ash, the smell or the tobacco.

Selby said the Pods have a unique design, as they are “the first and only cigarettes to have a completely closed end, resulting in a zero-clean experience. What this means to consumers is a consistent quality product that provides a pleasurable experience each time the PODA system is used.”

Technology edge

“Our competitors cannot achieve the same experience level, given the open-ended cigarette ashes on the heating element, requiring cleaning after only a few uses,” Selby told The Armchair Trader. “We strongly believe our technology is disruptive in the multi-billion HNB space. Our focus is now on increased capacity and distribution, and we continue to utilize the capital raised as a public company to achieve our objectives.”

With Big Tobacco now looking for new ways it can sell into its existing market, as restrictions on tobacco products increases, proprietary technology begins to look much more interesting. Technavio, a market research company, says the HNB tobacco products market has the potential to grow by $26bn during 2021-25, with a CAGR of 26.4%. More widely, a report by Grand View Research finds that the global nicotine replacement therapy market size (including both HNB tobacco and e-cigarettes) is expected to reach $148bn by 2028, growing at a CAGR of 16.3% from 2021 to 2028.

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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