📈 Cannabis Stocks Rally on Federal Marijuana Legalization Bill being introduced by U.S. Rep. Nancy Mace and Better than Expected Earnings

Springbig x Tuatara SPAC. Curaleaf acquires Tryke ($286M). Verano enters CT with two acquisitions. Fyllo $40M Series C. Rx Green Technologies raises $9.75M. Pure Beauty adds CMO, Shryne new CLO.

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We’re looking for an intern to work with me on the Cannabis Investment Banking team at Arlington Capital Advisors — send anyone who might be a fit my way please.


🌿Industry

American Cannabis Stocks Are Rallying on Massive ETF Inflows.

The cannabis sector just put together back-to-back weekly gains after nine consecutive weekly declines. One of the hardest hit parts of the market in 2021 has been the American cannabis companies, which has been evident in the performance of the US Cannabis ETF—MSOS, but it looks like interest has surged in November. Just six days later, though, MSOS has soared 24.8%. What’s driving the MSOS higher is likely the talk of the pending introduction of the States Reform Act by Republican Representative Nancy Mace, a bill that would legalize cannabis federally with less FDA involvement and lower taxes compared to the Democratic legislation, the Cannabis Administration and Opportunity Act. Another factor is that financial reports from some of the leading multi-state operators weren’t as bad as feared.

No joke: Comedians, cannabis companies push pot legalization. Big cannabis companies are backing a new, celebrity-infused campaign to enlist marijuana users to pressure members of Congress to legalize pot nationwide. Federal legalization has advanced somewhat but still faces strong headwinds on Capitol Hill. The “Cannabis in Common” initiative launched Tuesday aims to change that. A website makes it easier for supporters to email or call their congressional representatives and push for making marijuana legal. State-licensed pot companies also plan to email their customers, put up posters in shops, add information to their apps and otherwise encourage consumers to get involved. “Legalizing cannabis is long past due, and if we make enough noise, we can make it happen,” actor Seth Rogen, co-founder of a cannabis company and enthusiastic user of the drug, says in a kickoff video. Comedian Sarah Silverman voices another, animated promo.

RNBW Cannabis is Shaking Up Music Festival Substance Culture. To celebrate the return of live music, premium cannabis brand RNBW launched a full-line of products in conjunction with Electric Daisy Carnival in Las Vegas. Backed by Insomniac, EDC's music festival parent company, RNBW's launch is ushering a new era of responsible and thoughtful consumption. Nestled in-between stages, RNBW's interactive art installation took users inside premium cannabis, from photo-ops to educational programming about the world of weed. The move is destigmatizing and demystifying drug use at festivals, eventually leading to a full-scale pick-up plan the brand hopes to implement in the future. Rather than sneaking substances in or buying potentially laced strains at the event, RNBW is set to launch a revolutionary buy-and-go system in the future, offering customers the option to pre-order flower, vapes, and edibles to later be picked up inside festival grounds.

Adult-Use Purchases Lead Michigan Cannabis Sales Up 1.3% M/M and 59%Y/Y in October to $163.5M.


💵Deals

Springbig — Merge with Tuatara Capital Acquisition Corp. (TCAC), resulting in $300M TEV / $500M Market Cap. The estimated post-transaction market cap. of the combined company is ~$500 million ($300M TEV after ($198M) in Net Cash), assuming $10 per share price and no redemptions by TCAC stockholders. Additionally, a $13 million PIPE investment has commitments from Tuatara Capital and existing investors, including TVC Capital, Key Investment Partners, and springbig's Founder and CEO Jeffrey Harris. The transaction is expected to close in Q1 2022. I wrote about the deal in detail earlier this week in case you miss it / caught up with CEO, Jeffrey Harris.

Curaleaf — Acquires Tryke Companies (AZ, NV, UT) for ~$286M. Curaleaf will pay $40M in cash at closing, with a remaining $75M in cash to be paid in equal installments on the first, second and third anniversaries of the closing. The stock portion of the transaction, which consists of 17M shares of Curaleaf, will also be paid in three equal installments on the first, second and third anniversaries of the closing. An incremental earnout of up to 1M Curaleaf Shares may be paid in 2023 based on the business exceeding certain EBITDA targets for the year 2022. Tryke currently owns and operates six dispensaries under the Reef brand, with two retail stores in Arizona and four in Nevada. Tryke is expected to record nearly $110M (2.6x 2021E EV/Revenue) in full year 2021 revenue with EBITDA margin in excess of 35%. Curaleaf expects the acquisition will be immediately accretive to the Company's EBITDA margins and free cash flow generation.

Verano — Enters CT Cannabis Market with Vertical Integration Ahead of Adult-Use Transition. Verano consummated the acquisition of Willow Brook Wellness, LLC, which holds an active dispensary in Meriden, CT. Additionally, Verano has entered into definitive agreements to acquire both Caring Nature, LLC, which holds an active dispensary in Waterbury, Connecticut, and Connecticut Pharmaceutical Solutions, Inc., which holds an operating cultivation and production facility. The Connecticut acquisitions will expand Verano’s national footprint to 89 active dispensaries across 12 states, 10 of which are vertically integrated, while surpassing the 1,000,000 sq. ft. mark of total cultivation capacity.

Fyllo — Raises $40 M Series C to Scale SaaS Platform. Fyllo, the leader in compliance-first SaaS solutions for highly regulated industries, has closed a $40M Series C round led by Eminence Capital. New venture firms that participated in the round include Longview Capital Advisors and ArrowMark Partners. Additional participants in the round include JW Asset Management, K2 Asset Management, Ambria Capital, Arcadian Capital Management, Phyto Partners, and Salveo Capital. Concurrent with this raise, Kristopher Koka, Portfolio Manager, Eminence Capital will be joining the Company's Board of Directors. Ross Gardiner did a profile of CEO, Chad Bronstein last month for mg Magazine.

Rx Green Technologies — Raises $9.75M Led by Intrinsic Capital Partners. Rx Green Technologies (RXGT), a leading provider of cannabis cultivation inputs and services, has announced an initial closing of $9.75M of growth equity financing, its first institutional capital raise. The funding, led by Intrinsic Capital Partners, with significant participation from existing investors, is part of a larger growth financing of up to $11.5M, which will be used to invest in new manufacturing locations, manufacturing automation technology, new research and development capabilities and increased customer support. The funding also positions RXGT to capitalize on an active pipeline of acquisition targets with complimentary products and competencies.

Eaze — Acquires Santa Ana Dispensary from ManifestSeven. Eaze will pay $6.785M plus working capital and the assumption of certain liabilities.

Gold Flora — Acquires Higher Level Dispensaries. The deal includes the Higher Level dispensaries in the California cities of Seaside and Hollister. Gold Flora also has an option to purchase an additional Higher Level dispensary located in Greenfield, CA.

Ayr Wellness — $150M 12.5% Senior Secured Notes. The Company completed a private placement offering of ~$133 million aggregate principal amount of Notes at a premium price of $1,070 per $1,000. The Notes will be considered "Additional Notes" under the indenture governing the Company’s existing 4-year 12.5% Notes due on December 10, 2024 and as a single series with the existing notes under such indenture. The resulting yield-to-maturity is 9.8%.

Sundial — Share Repurchase Program. Sundial may only purchase a maximum of 102.8 million shares under the Share Repurchase Program, representing approximately 5% of the issued and outstanding shares as at the date hereof. Subject to the foregoing limitations, the Share Repurchase Program will commence on November 19, 2021 and expire on November 19, 2022. The Share Repurchase Program does not require the Company to purchase any minimum number of shares, and repurchases may be suspended or terminated at any time at the Company's discretion.


📄Company Updates / Earnings

Curaleaf — Q3 2021 Results. Revenue of $317M, up 2% sequentially and 74% YoY. Adjusted EBITDA of $71M, an increase of 69% YoY. Cash Flow from Operations of $52M or 16% of revenue. Completed on October 1, 2021, the previously announced acquisition of Los Sueños Farms. Opened two new dispensaries located in Bordentown, New Jersey and Wells, Maine bringing total retail locations to 109 as of September 30, 2021. As of September 30, 2021, the Company had $317M of cash and $342M of outstanding debt net of unamortized debt discounts.

GTI — Q3 2021 Results. Revenue increased 5.3% sequentially and 48.7% Y/Y to $233.7M. Fifth consecutive quarter of positive GAAP net income, delivering $20.2M or $0.08 EPS. Adjusted Operating EBITDA grew 2.4% sequentially and 52.6% Y/Y to $81.2M or 34.7% of revenue. Cash flow from operations of $82.8M YTD. Cash at quarter-end totaled $285.8M.

Cresco Labs — Q3 2021 Results. Revenue of $215.5M, up 2.6% Q/Q and 40.6% Y/Y. Gross profit excluding fair value mark-up for acquired inventory of $116.7M (54.2% GM), up 9.0% Q/Q and 48.3% Y/Y. Adjusted EBITDA of $56.4M (26.2% margin), an increase of 24.0% Q/Q. Net wholesale revenue of $109.3M, Retail revenue of $106.2M from 37 stores. Q3 results include a non-cash impairment charge of $291M related to changes in intangible assets originally ascribed to the third-party distribution business, customers, and brands, as a result of the strategic shift in California operations. Q4 2021 Guidance — between $235M-$245M (50%+ GM), Adjusted EBITDA margin of at least 30.0% by the end of 2021. As of 9/30/21, cash and cash equivalents of $252.8M and Senior Loan debt of $376.6M.

Columbia Care — Q3 2021 Results. Revenue of $132.3M, up 144% YoY, 21% QoQ. Adjusted Gross Profit of $64.5M (49%GM) , up 205% YoY, 35% QoQ. Adjusted EBITDA of $31.0M (23% margin), up 634% YoY, 89% QoQ. Revises 2021 Guidance to $470M - $485M Revenue, $85M-$95M Adjusted EBITDA and 46% Adjusted Gross Margin for Full Year 2021. Cash balance at 9/30/21 of $116.9M.

Goodness Growth Holdings — Q3 2021 Results. Revenue was $13.4M, up 7.2% as compared to Q3 2020, including the Company's former subsidiaries in Pennsylvania and Ohio. Excluding contributions from Pennsylvania and Ohio, revenue increased 27.6%. Retail revenue excluding Pennsylvania increased 34.7% to $11.6M and reflected growth in each of the Company's retail markets. EBITDA was a loss of $2.4M, compared to a gain of $11.1M in Q3 2020. Adjusted EBITDA was a loss of ($1.9M) in Q3 2021, as compared to a loss of ($0.6M) in Q3 2020. As of September 30, 2021, cash on hand of $11.8M, which does not include $15.0M in cash proceeds from the sale of the Company's AZ licenses and Phoenix dispensary assets, which is expected to close during Q4.

Glass House Brands — Q3 2021 Results. Net Sales increased 29% to $17.2M from $13.3M in Q3 2020 and declined 8% sequentially from $18.7M in Q2 2021. Gross Profit was $2.3M (14% GM) compared to $4.9M (37% GM) in Q3 2020 and $8.6M (46% GM) in Q2 2021. Adjusted EBITDA of $(5.4M) (-31% Margin) compared to $0.2M (2% Margin) in Q3 2020 and $2.2M (12% Margin) from Q2 2021. Equivalent Dry Pound Production was a record high 28,268 pounds in Q3 2021, up 30% year-over-year and 22% sequentially. Cost per Equivalent Dry Pound of Production fell 7% sequentially to $179. Cash balance was $28.9M at quarter-end.

MedMen — Q1 FY2022 Results. Net revenue across MedMen's continuing operations in CA, NV, IL, AZ and FL was $39.8M, up 13.4% Y/Y. Net loss was $55.3M compared to a net loss of ($21.9M) in the year ago period. As of September 25, 2021, the Company had cash and cash equivalents of $78.2M.

Acreage Holdings — Q3 2021 Results. Consolidated revenue was $48.2M, up 52% Y/Y and 9% sequentially. Adjusted EBITDA was $6.5M, compared to $(6.9M) for Q3 2020. Adjusted EBITDA as a percentage of consolidated revenue was 13.5%. The company ended the quarter with $29.5M in cash and restricted cash.

WM Technology — Q3 2021 Results. Revenue increased to $50.9M (96% GM), up 9% from Q3 2020. Monthly active users (MAUs)(1)(2) increased to 13.9M at September 30, 2021 or 37% compared to the prior year period. Average monthly revenue per paying client increased to $3,817 or 7% compared to the prior year period. Average monthly paying clients increased to 4,444 or 2% compared to the prior year period. Adjusted EBITDA was $10.4M as compared to $16.5M from the prior year period. Cash totaled $77.9M as of September 30, 2021.

Hydrofarm — Q3 2021 Results. Net sales increased 28.1% to $123.8M compared to $96.7M. Gross profit increased 64.9% to $30.0M, or 24.2% GM, compared to $18.2M, or 18.8% GM. Net income attributable to common stockholders was $17.3M or $0.37 EPS, compared to $2.0M or $0.08 EPS. Pro forma adjusted net income was $7.7M or $0.17 EPS, compared to $4.3M or $0.13 EPS. Adjusted EBITDA increased 116.7% to $16.1M compared to $7.4M . Completed two acquisitions during the quarter: Aurora Innovations and Greenstar Plant Products.


🏬Retail

Trulieve — Opens West Virginia's First Medical Cannabis Dispensary. Trulieve first announced plans to enter West Virginia in February 2021 after securing four dispensary permits from the state's Office of Medical Cannabis. In July, The Company became the first MSO to commence cultivation in the state at its 100,000 square foot Huntington facility. Over the past three months, Trulieve has strategically scaled its cultivation capacity to meet forthcoming patient demand and plans to open more dispensary storefronts across West Virginia in the coming year. As of November 4, the state Department of Health and Human Resources' Office of Medical Cannabis (OMC) had received more than 4,000 patient applications for West Virginia's medical cannabis program. The Company also opened its 108th dispensary in Inverness, FL.

Ayr Wellness — Opens New Dispensary in Montgomeryville, PA. This is the Company’s seventh affiliated dispensary operating in the Commonwealth of Pennsylvania. Montgomeryville is a northern suburb of Philadelphia, located in Montgomery County, the third most populous county in Pennsylvania, with over 850,000 residents according to the 2020 Census.

Columbia Care — Opens Third Dispensary in VA; Newest Location Now Open Under gLeaf Brand in Richmond Suburb. In the coming months, the Company will open two more locations in Carytown and Virginia Beach. Columbia Care and gLeaf are actively developing seven additional dispensaries for a total of 12. Columbia Care is also in the process of rebranding its Portsmouth location as Cannabist, bringing an elevated patient experience to the Hampton Roads area. The Company operates 147,765 square feet of cultivation and production space across Virginia, including its 82,000-square-foot indoor cultivation facility, the largest in the Commonwealth.

Lume Cannabis — Opens 27th store in Mount Pleasant, MI. Lume has opened 14 adult-use stores this year and is on track to open more before 2021 ends. The ambitious effort is part of Lume’s goal of having 100 adult-use stores open throughout Michigan by 2024.


🌱Product

Cannadips — Relaunches Across California in Exclusive Distribution Partnership with HERBL. After introducing its line of THC products in 2017, Cannadips is now re-launching a completely new cannabinoid technology and flavor lineup. The THC line is formulated using technology in partnership with Hill Street Beverage Company's DehydraTECH™, a fast-acting process that improves the way active pharmaceutical ingredients enter the bloodstream. DehydraTECH™ produces a faster onset and more predictable experience for consumers. Cannadips THC products are available in two strengths: Heavyweight and Daily Driver. Heavyweight products are available in four flavors and consist of 500mg of THC, with pouches available at 25mg per pouch. The Daily Driver variety comes in 150mg of THC per can and 10mg per pouch.

AIRO Brands x TILT — Expands Contract to Manufacture and Distribute Select Products in Massachusetts. The companies will expand their relationship beyond its current manufacturing and distribution agreement in Pennsylvania to include Massachusetts. An early client of TILT’s subsidiary Jupiter since 2016, Airo also licenses exclusive Jupiter products and collaborates on proprietary inhalation technologies.


🧔People | 💻Hiring

Pure Beauty — Names Esther Song First-ever CMO. Esther Song has 20-plus years of experience in public relations and marketing, specializing in building brand visibility through strategic communications and global marketing campaigns, prioritizing direct consumer relationships through loyalty programs, and authentic storytelling that connects and sparks conversation with the customer. Song joins Pure Beauty with three years of experience in cannabis marketing, including serving as the SVP of Marketing and Communications for MedMen, where she launched a multi-state loyalty program, delivery & curbside services as well as relaunched their print magazine, Ember, as a first of its kind digital magazine for a cannabis retailer. Earlier in her career, Song led global digital and VIP public relations at fashion brands, including Tory Burch where she was vice president of VIP public relations and partnerships, Tod’s and at PR agency BPCM, where she managed accounts such as Lanvin, Celine and Rimowa.

Shryne Group — Names Cary Berger as Chief Legal Officer. Berger joins Shryne after serving as GC and Chief Administrative Officer for Houseplant. Berger advised Houseplant in connection with its U.S. launch and was responsible for legal, finance, governmental affairs, and business-related topics in both U.S. and Canada. In 2013, Berger joined the team at Maker Studios, where he represented the company in its sale to Disney for $675M. Prior to that, Berger served as President and GC of eHarmony. Berger started his in-house career with Broadcom Corporation, before going in-house, Berger was a partner at the law firm of Irell & Manella representing corporate and private equity clients in a variety of financing and M&A transactions.

AWH — Appoints Danielle Drummond VP of Social Equity. She previously served as Deputy Chief of Community Engagement at the Suffolk County District Attorney's Office in Boston, MA.

710 Labs — VP, Finance (LA)

Sweet Flower — Creative Director (LA)


🎙️Interviews

How listening to customers helped build an industry tech leader (Dutchie)

Steven Jung, COO of PAX

Cannabis Trades in an Inefficient Market (+ why that is a good thing)


👋 Highly Objective is curated by Dai Truong. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment.  The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party.  The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.