💰🏀🌿 Chris Webber and JW Asset Management —Launch $100M Cannabis Impact Fund
Verano (CSE: VRNO) begins trading. HEXO acquires Zenabis in $235M all-stock deal. Agrify prices $75M follow-on. The Parent Company gets new CFO.
🌿Industry
Chris Webber and JW Asset Management — Launch $100M Cannabis Impact Fund. Chris Webber, entrepreneur, five-time NBA All-Star and Founder of Webber Wellness, announced a partnership with Jason Wild and JW Asset Management, LLC to launch a $100M private equity cannabis fund that will invest in companies led by entrepreneurs of color pursuing careers in the cannabis sector. Webber Wellness and JW Asset Management will collaborate to invest in underrepresented entrepreneurs in the cannabis industry and provide them with an ecosystem of business resources that will facilitate research and development (R&D), cultivation, retail licensing, distribution, branding and marketing. JW has been an active investor in the cannabis industry since 2014 with over $2B in AUM, investing in numerous industry leaders spanning multi-state operators, technology and retail companies.
Feds plan to charge former Eaze CEO in Cannabis Bank Fraud Case. Manhattan federal prosecutors will charge the former Eaze CEO in a case accusing two businessmen associated with the company of tricking banks into processing $100M worth of cannabis credit card payments. Jim Patterson, who stepped down as CEO of Eaze in 2019 and later departed the company, will be charged February 19. There is no indication as to what charges the former executive faces but suggests he will plead guilty, as it says he plans to waive indictment and move straight to a plea hearing. Eaze has not been charged, denies wrongdoing and says it cooperated with investigators.
Retail prices for recreational Cannabis flower rise in response to record demand amid pandemic.
Retail flower prices in California, Colorado, Nevada and Washington state collectively grew 17%, with the price of pre-rolls also increasing 15%. The rise in prices is good news for cannabis retailers, because wholesale flower prices continue to increase because of robust consumer demand. Colorado’s wholesale flower price reached its highest level since 2016, with the average market rate per pound of flower jumping 31% from the beginning of October 2020 to the end of January of this year. While the retail price of smokable adult-use marijuana products rose in California, Colorado, Nevada and Washington state, the retail price of other product categories were a mixed bag depending on the market. Nevada experienced a 25% increase in retail flower prices over the past 90 days versus a year earlier, but all other categories fell. Prices in the state’s infused beverage category declined 31% over the same period last year, while the tincture and sublingual category tumbled 51%.
Harborside — Final Resolution in San Jose Wellness 280E Case. The United States Tax Court, ruled in favor of the Commissioner of Internal Revenue with respect to Docket Nos. 12313-15,12353-15, and 15714-18 to disallow all of SJW's deductions pursuant to I.R.C. sec. 280E for all the years at issue. The Company's accrued liabilities in connection with its SJW dispensary will now be less than the provision previously set aside. Harborside must pay ~$4.2M in back taxes and penalties after losing a case in U.S. Tax Court. The San Jose Wellness case is separate from a larger, ~$11M Harborside tax case pending in the 9th Circuit Court of Appeals in San Francisco.
NFL explores how Cannabis & CBD can be used as Opioid alternatives for players. The NFL and NFL Players Association are launching an effort to learn about the potential of Cannabis and its components like CBD as alternative treatment options for pain. They’re also more generally interested in discovering how cannabis use affects athletic performance.
The notice lists three areas of interest:
The potential therapeutic role of medications and non-pharmacological interventions that are considered to be alternatives to opioids in routine pain management of NFL players. Medications may include, but are not limited to, cannabinoids such as cannabidiol (CBD)
The impact of cannabis or cannabinoids on athletic performance in NFL players
The potential therapeutic role of medications and non-pharmacological interventions that are considered adjunctive to routine post-surgical orthopedic pain management in NFL football players.
Court ruling paves way for New Jersey to expand medical cannabis market. A New Jersey appellate court lifted a 2019 order preventing the state from issuing an additional 24 medical cannabis licenses. The decision could allow for expansion of the medical marijuana industry in the state, perhaps before the launch, potentially later this year, of an adult-use market. Industry officials say New Jersey’s existing MMJ market isn’t sufficient to meet demand. New Jersey has issued only 12 vertically integrated medical marijuana licenses to date, and only 10 are operational, according to the state’s website. In 2019, state regulators requested applications for 24 new licenses: four vertically integrated, five stand-alone cultivation facilities and 15 dispensaries. But a court halted the review of those applications after a lawsuit alleged the system had technical glitches. Regulators said they investigated the issue and determined there was no problem with the system.
Other highlights:Michigan — Cannabis sales increase 7% in January to $108M ($985M in 2020 sales)
Oklahoma — medical marijuana sales surpass $800M for 2020
Pennsylvania — Call to legalize marijuana gets mixed response, failing to to convince the Republican lawmakers who control both chambers of the state Legislature
Fire & Flower — application to List on NASDAQ to attract retail and institutional investors
37 Members of Congress ask Biden to issue mass marijuana pardons ahead of Legalization
The Canadians aren’t coming (Bengal Capital)
Interview w/ Matt Hawkins (Entourage Effect Capital)
💵Deals
Verano Holdings (CSE: VRNO) Begins Trading.
HEXO — acquires Zenabis Global for ~$235M all-stock.
Transaction Highlights:
Strengthened domestic brands: The combined organization would be a top three licensed producer in terms of combined Canadian recreational cannabis sales
Foothold in Europe: The Transaction gives HEXO immediate access to the European medical cannabis market through Zenabis’ local partner, with an established facility in the European Union supplying pharmaceutical products to the European market.
Accretive synergies: Annual synergies of ~$20M within one year of close
Capacity boost with state-of-the-art cultivation infrastructure: licensed capacity to produce ~111,200 kg of additional high-quality cannabis annually, with two additional indoor facilities acquired (~635,000 sq. ft.) and access to a 2.1M sq. ft. greenhouse facility, totalling ~2.7M sq. ft. of near-term cultivation
Agrify — Prices $75M Public Offering of Common Stock. 5,555,555 shares at $13.50/share for gross proceeds of ~$75M. The offering comes ~2 weeks after it raised $54M in an IPO, clearly taking advantage of demand and an attractive capital market for Cannabis companies. The Company seems to be taking advantage of its cash position and financing facility build-outs and installation of vertical farming units for customers..at 25% APR.
Sundial — invests $22M in Indiva, a leading Canadian producer of cannabis edibles. The Investment will be completed in the form of a brokered private placement of 25,000,000 common shares of Indiva at a price of $0.44/Share, to raise gross proceeds of $11M and an $11M Term Loan. Indiva intends to use the net proceeds of the Placement and Term Loan to retire its outstanding debt in full, which includes its demand loan and promissory note, as well as for working capital and other general corporate purposes.
Green Check Verified, a regtech company focused on compliant cannabis banking solutions and services, will be announcing an over subscribed $2.4M Convertible Note Financing, led by Flatiron Venture Partners, included investments from Bravos Capital, Basecamp, as well as pre-existing investors Silverleaf Venture Partners and Fenway Summer. Green Check's product enables financial institutions to bank high-risk, cash-intensive companies that face hurdles with access to financial service. The company operates in 24 states, serving more than 400 cannabis-related businesses.
Other highlights:GrowGeneration — acquires CO-based Grow Warehouse, expands footprint in CO and OK
Choice Consolidation Corp. SPAC — completes $150M IPO
urban-gro — closes $62M Public Offering, including full exercise of underwriter's over-allotment option
Harborside — closes $28M Private Placement (C$2.55 SVS Unit & C$255.00 MVS Unit)
Cresco Labs — closes acquisition of Verdant Creations’ four dispensaries, reaches maximum retail licenses in Ohio
Vireo Health — completes expansion of AZ Cannabis Cultivation Facility with the addition of 9-Acres of Shade House
Supreme Cannabis — $22.5M Bought Deal Financing
Lucky Strike-maker British American Tobacco is looking carefully at the cannabis trend
Rivers — Obtains Court approval of the Arrangement with Canopy Growth
Inner Spirit Holdings — C$10M Bought Deal Public Offering
📄Earnings
TerrAscend — Q4 CY 2020 (+13.2% following announcement)
2020 Revenue / AEBITDA: $198M / $60M (30% margin)
Q4 Revenue: $65M, up 28% Q/Q & 152% Y/Y
Q4 AEBITDA: $26M, up 46% Q/Q (40% margin, up from 35% in Q3 and 24% in Q2)
Reiterates 2021 guidance of $360-380M Revenue / AEBITDA of $140-160M
Tilray— CY2020 and Q4 CY2020 (-14.0% following announcement)
Revenue: $210.5M, up 26% Y/Y
Net Loss: $(3.0M) in Q4 2020 from $(219.8M) Y/Y
Adjusted EBITDA: $2.2M in Q4 2020
Cash: $189.7M at December 31,2020 and $261.3M as of February 16, 2021
Combination with Aphria expected to close in Q2 2021
TILT Holdings — Q4 CY2020 (-5% following announcement)
Q4 2020 Revenue: $42.2-$43.2M, compared to $40.4M in Q3 2020
Q4 2020 Adjusted EBITDA: $2.6-$3.6M, compared to $2.8M in Q3 2020
Cash: $7.4M as of Dec. 31, 2020, compared to $4.3M 9/30/20
2021 Outlook: $205-$210M Revenue / $30-$32M Adjusted EBITDA
MedMen — Q4 CY2020 (+12.1% following announcement)
Revenue: $33.8M ($19.8M across 11 CA stores), up 0.3% Q/Q
GM: improved from 47% to 53% Q/Q, Retail GM up to 57% from 54% Q/Q
Adjusted EBITDA: ($11.8M) compared to a loss of ($11.7M) Q/Q
Cash: $7.5M (as of 12/26/20). Closed on additional $10.0M under its senior secured convertible debt facility led by funds affiliated with Gotham Green Partners. 2/16/21 — Private Placement for up to $5.8M (7,800,000 Units @ $0.37 w/ an option to acquire up to an additional 7,800,000 Units on the same terms)
🧔People
The Parent Company — appoints Mike Batesole as CFO. Batesole most recently served as CFO, CA Operations for Origin House, beginning in 2019 through the company’s acquisition by Cresco Labs in January 2020. Prior to Origin House, Batesole spent 10 years as CFO at Shaklee Corporation. Earlier in his career, Batesole held senior finance roles at Dorado Network systems, VA Software Corporation and Bentley Systems.
Plus Products — expands sales force and internalizes all account management. To date, PLUS has partnered with full-service distributors, relying on a hybrid of both internal and external personnel to make up its sales force. Under this new self-service model, the sales cycle for every order will be owned start to finish by a member of the PLUS team. To facilitate this shift, the Company has expanded the team by over 50% since the start of Q4 2020, and has partnered with a self-service distribution provider with access to 99% of California’s licensed retailers in order to manage all order fulfillment.
🏬New Store Openings / New Product Launches
Ice Cube — “Fryday Kush.” Ice Cube partnered with Caviar Gold to produce Fryday Kush, which is available now in California, Arizona, Nevada, and Oklahoma.
Red White & Bloom’s Platinum Vape gets nod for launch in AZ from local MSO partner.
ManifestSeven — Launches Cannabis Delivery Operation in Brisbane, CA. M7's new delivery hub in Brisbane complements its neighboring delivery-only facility in Oakland, providing Weden - M7's retail marketplace that merges the Company's e-commerce, storefront, and delivery operations into its consumer-facing brand - with comprehensive coverage of both sides of the San Francisco Bay Area and maximizes its footprint in Northern California's largest and most populous market.
💻Hiring
Flow Cannabis — Director of Digital Marketing
Namaste Technologies — CFO
Kiva — Director of Procurement (Oakland)
🤷♂️Somewhat Relevant
MindMed — acquires HealthMode for ~C41M. HealthMode, a digital medicine and therapeutics startup that uses Artificial Intelligence (AI)-enabled digital measurement to increase the precision and speed of clinical research and patient monitoring.