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💨 Current Regulatory Environment Threatens Viability of California’s Legacy Cannabis Operator
Signify acquires Fluence for $272M. Planet 13 acquires Next Green Wave Holdings for $71M. Glass House Brands acquires PLUS for $25.6M. KEY Investment Partners closes $30M Fund.
California cannabis business leaders warn state of ‘collapsing’ industry. In a letter to California Gov. Gavin Newsom and legislative leaders, a group of cannabis industry leaders warned that the state’s licensed marijuana market is on the verge of collapse if drastic action is not taken. “An unwillingness to effectively legislate, implement, and oversee a functional regulated cannabis industry has brought us to our knees,” reads the letter, which was signed by 29 business executives and longtime activists. “The California cannabis system is a nationwide mockery; a public policy lesson in what not to do,” the letter reads. “Without meaningful change, many, if not most licensed cannabis companies, will face a desperate choice: pay exorbitant taxes into a system designed for failure or pay employees so they can feed their families.” According to the letter, there are approximately two legal dispensaries per 100,000 people in California—one of the lowest ratios nationally. In the letter and during a news conference Friday, industry leaders requested the Newsom administration take specific steps: 1) eliminate the state MJ cultivation tax, which is slated to increase on Jan. 1, 2022 2) implement a three-year suspension of the state’s 15% cannabis excise tax 3) expand the number of marijuana retailers in the state.
Santa Barbara County cannabis tax revenue down as supply exceeds demand. Cannabis tax revenue for the first quarter of 2021-22 is down 25% from the same period last fiscal year and 17% lower than what was collected in the fourth quarter. County staff attributed much of that decrease to a glut of cannabis in California that’s preventing growers from selling their product, which in turn is fueling a healthy illicit market. That illicit market is also being driven by high state cannabis taxes that are keeping prices high in legal dispensaries, leading consumers to turn to underground dealers, according to the staff who delivered the first quarter report on cannabis to the Board of Supervisors.
KEY Investment Partners — $30M Final Close of Cannabis-Focused Venture Fund. To date, KEY has made 11 investments across multiple sub-sectors of the cannabis industry, including market-leading companies such as: HERBL, a supply chain solutions and distribution company; Springbig, one of the largest cannabis-focused loyalty and marketing automation platforms; XS Financial, a direct lender that provides flexible leasing solutions to cannabis companies; and Open Book Extracts, a cannabinoid ingredient formulator and producer.
Signify — Acquire Fluence to strengthen Agriculture lighting growth platform for $272M. Signify (Euronext: LIGHT), the world leader in lighting, has entered into a definitive agreement with OSRAM (SIX: AMS) to acquire Austin, Texas-based Fluence for $272M on a cash and debt-free basis. This acquisition will strengthen the global Agriculture lighting growth platform and extend their position in the attractive North American horticultural lighting market. Fluence’s portfolio also includes more than 140 issued and pending patents, focusing on areas such as light quality, thermal management and installation methods. Fluence employs more than 200 people. In the trailing 12 months (October 2020 to September 2021), Fluence generated $141M in revenue. Fluence will operate as an entity within Signify’s agricultural lighting business in Division Digital Solutions.
Planet 13 — Acquires Next Green Wave Holdings in $71M All-Stock Transaction. Based on Planet 13's 10-day VWAP and the Exchange Ratio as at December 17, 2021, the implied deal price per NGW Share is C$0.465, representing a premium of ~52% to the closing price and 44% to the 10-day VWAP of NGW Shares on the CSE as of December 17, 2021. NGW Shareholders will hold approximately 9.2% ownership in the pro-forma company (on a fully-diluted basis). NGW's operations will serve as the backbone of Planet 13's continued focus on the California market. NGW will enable Planet 13 to introduce their diverse brand portfolio of exotic, pheno-hunted cultivars to the Santa Ana SuperStore as well as across the state.
Glass House Brands — Acquires PLUS for $25.6M.
Glass House is acquiring PLUS for ~$25.6M through a combination of unsecured convertible debt and equity, plus additional performance-based consideration. The Acquisition, which is expected to close in Q1 2022, is being completed by way of a plan under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 (CCAA) and is subject to certain customary closing conditions for transactions of this nature, including, among others, the approval of PLUS' creditors, approval of the Supreme Court of British Columbia in the context of the CCAA proceedings, and the approval of the NEO Exchange.
Tilray — Acquires Brand Assets of Green Flash Brewing and Alpine Beer Company. Upon completion, SweetWater, the country’s eleventh-largest craft-brewing company, will begin the process of moving production of Green Flash and Alpine products to its facility in Fort Collins, Colorado. Following the transition, which is expected to take roughly one-to-two months, Green Flash’s current ownership group, WC IPA LLC, will cease operations at the Mira Mesa brewery.
Acreage Holdings — Secures $150M Credit Facility at 9.75% Interest. Under the terms of the Credit Facility, $100 million is available for immediate use and a further $50 million is available in future periods under a committed accordion option once certain, predetermined milestones are achieved. Acreage intends to use the proceeds of the Credit Facility to fund expansion initiatives, repay existing debt and provide additional working capital. The Credit Facility will bear interest at 9.75% per annum, payable monthly in arrears, with a maturity date of January 1, 2026. AFC Gamma has committed $60M (with an additional $10M syndicated to an affiliate) and $30M will be held by co-agent Viridescent. The loan is secured by first-lien mortgages on Acreage’s wholly owned real estate and other commercial security interests. In connection with the closing of the Credit Facility, Acreage amended the terms of its subsidiary’s $33 million credit facility announced on September 29, 2020 to: (i) extend the maturity date thereof from September 28, 2023 to April 1, 2026, and (ii) provide that interest accrued on or after December 1, 2022 may, at the borrower’s election, be paid in kind and added to the principal amount of the loan to be paid when the loan becomes due and payable or is repaid.
IIP — Acquires 100% Leased Portfolio of 27 Properties in Colorado, Pennsylvania and North Dakota for $72.7M. The property portfolio consists of 24 properties located in Colorado, two properties located in North Dakota and one property located in Pennsylvania. 16 properties are leased to a subsidiary of Columbia Care Inc.; four properties are leased to subsidiaries of Schwazze; three properties are leased to subsidiaries of Curaleaf; three properties are leased to subsidiaries of LivWell; and one property is leased to a subsidiary of Kaya Cannabis.
Stem Holdings — Divestiture of E-Commerce and Delivery Operations and Management Changes. Stem will divest its assets and liabilities to Driven Deliveries’ founders in return for 12.5M shares of Stem. The Company has also announced the appointment of Steve Hubbard, co-founder and current CFO, as interim CEO, replacing Adam Berk who has resigned and will remain part of the team as an advisor during this transition.
Curaleaf — 8.0% Senior Secured Notes due 2026 with a settlement date of December 15, 2021, for aggregate gross proceeds of $425M. The Indenture enables the Company to issue additional notes on an ongoing basis as needed, subject to maintaining leverage ratios and complying with the other terms and conditions of the Indenture. In addition, the Indenture permits up to US$200 million of senior bank financing.
AWH — Receives New York State Conditional Approval for Investment Agreement with MedMen NY Inc. The previously announced (February 2021) deal would see AWH invest $73M for 86.7% of the equity in MMNY.
Canopy Growth — Divests Pharmaceutical C3 Cannabinoid Compound Company. As a result of the divesture, Canopy Growth is expected to avoid future operational complexities associated with C³ and is significantly reducing short-term capital investment requirements. Dermapharm, a European pharmaceutical company will pay C$115.5M upfront in addition to an earnout payment of up to C$61.4M.
📄 Company Updates / Earnings
C21 Investments — Q3 Results (period ended 10/31/21).
Revenue: $8.2M (43% GM before fair value adjustments)
Adjusted EBITDA: $2.2M (27.4% Margin)
Net Income: $3.3M; Cash Flow from Operations: $5.5M YTD
Body and Mind — Q1 FY2022 Results (period ended 10/31/21).
Revenue: $7.56M (46% GM), up 43% Y/Y
Adjusted EBITDA: $0.8M
Net Loss: $0.7M
Texas Original Compassionate Cultivation — Opens Pick-Up Locations In Dallas and Addison, Texas. TXOG’s pick-up locations are made possible by the company’s extensive network of physician partnerships. Each pick-up site operates once weekly within a physician’s office, enabling TXOG to bring its medicine closer to the region’s patients and thus removing the standard $25 delivery fee. The company also operates other temporary locations in Plano, Fort Worth, Houston, San Antonio and Austin.
Aurora and 22nd Century Group — License Foundational Biosynthesis IP to Cronos Group. Biosynthesis, a process common in the pharmaceutical industry, involves using living micro-organisms to convert simple substances into complex compounds. Through biosynthesis, cannabinoids, particularly those that are rare such as cannabigerol (CBG), cannabichromene (CBC) and cannabinol (CBN), are expected to be produced efficiently and reliably at high levels of purity.
GTI — Opens GreenStar Herbals in Chelsea, MA (68th Nationwide). The store will be rebranded to Rise in 2022. In addition to the new store in Chelsea, the Company owns and operates adult-use retail stores in Dracut and Maynard, along with medical-use retail stores in Amherst, Boston and West Springfield. The Chelsea location is less than three miles from Boston-Logan International Airport and one mile from Encore Boston Harbor. GTI began serving medical patients in Massachusetts in 2018 and has two operational cultivation and production facilities in Holyoke and Clinton that continue to support the growing consumer demand for high-quality cannabis.
Verano — Opens MÜV Dispensary in Stuart, FL (41st in FL, 93rd Nationwide). Situated on Florida’s scenic “Treasure Coast,” Stuart is located in a popular area that boasts 160 locally owned restaurants and over 60 miles of coastline.
Cresco Labs — Opens Dispensary in Sarasota, FL (13th in FL, 45th Nationwide). Sunnyside Sarasota is centrally located in the city between Interstate 75 and the Sarasota Bradenton International Airport. The store is in University Square Plaza, one of Sarasota’s busiest shopping areas.
Jushi — 18th BEYOND / HELLO™ Store in Pottsville, PA (28th Nationwide). The building, a former bank built in 1923, is a classic “small-town skyscraper” with six stories of offices above the large banking hall. It resides in the center of Pottsville’s commercial heart located at the intersection of main and center in downtown Pottsville, sharing the block with other historic architecture hailing from the late 18th and early 19th centuries.
TILT — Commonwealth Alternative Care to Become First Recreational Cannabis Dispensary in Taunton, MA.
CAC’s Taunton dispensary is located adjacent to its 100,000 square-foot cultivation and processing facility. Featuring 3,000 square-feet of nature-inspired space for customers and patients, CAC offers a wide selection of products from their house brands ONE, CHROMA and SLATE including flower, concentrates, edibles and topicals. Additionally, customers and patients can find products from industry-leading partner brands including 1906, AIRO, Her Highness, Old Pal, and Wana. CAC Taunton joins CAC Brockton in serving both adult-use customers and medical marijuana patients.
Lume — Opens 28th Michigan Store. Lume has opened 15 adult-use stores this year, with the goal of having 100 adult-use stores open throughout Michigan by 2024.
GT’s Living Foods — Launches Cannabliss.
Cannabliss combines THC and CBD with a blend of adaptogenic mushrooms, full-spectrum cannabis and prebiotics from apple cider vinegar to nourish the gut. Available in two varieties, dubbed “mild” and “wild,” it comes in the following flavors: Cannabliss MILD Piña Express (pineapple flavor), infused with 3 mg THC and 7 mg CBD. Cannabliss WILD Ginger Haze (ginger and lemon flavor), infused with 7 mg THC and 3 mg CBD.
Jeeter x Dwyane Wade — Limited-Edition Cannabis Line. The drop includes 3 exclusive strains and is available in a unique book format that echoes the recent release of Wade’s photographic memoir, Dwyane. Each preroll pack will also come with a copy of the memoir. The lineup of strains features packs of mini joints called Baby Jeeters in 3 varieties: Fruit Punch, an infused sativa strain with tropical, fruity notes; Mojilato, an infused hybrid strain made from a cross of Sunset Sherbet and Thin Mint Girl Scout Cookies; and Game Over, an indica with clear, smooth, relaxing effects.
Binske — Cannabis-Infused Coffee Products, Featuring Beans Roasted by Intelligentsia. Binske's new coffee-infused chocolate bars will be the latest addition to a robust line of premium cannabis chocolate products in the Binske portfolio, all of which are made with one of the rarest, most prized varieties of cacao, exclusively sourced by Binske from the heart of Peru. Coffee-infused chocolate bars will be available at retailers in Colorado, Nevada, and California to start.
Unrivaled Brands — Korova 1,000 mg THC Hot Sauce Tincture.
Columbia Care — Launches the UK’s Broadest Portfolio of Doseable Medical Cannabis Extract Vaporizer Pens; First Company to Manufacture Extract Vaporization Products in the UK. The products launched under its flagship medical Ceed brand and are comprised of four formulations that will be available for patients throughout the UK when prescribed by a specialist consultant. These new vaporizer pens complete Columbia Care’s initial medical product portfolio, which includes tinctures, launched in April 2020, and its proprietary solid-fill powder capsules, launched in April 2021, that remain unique in the UK market.
🧔 People | 💻 Hiring
Charlotte's Web — Former CAO of Bacardi, Jacques Tortoroli, Appointed CEO. Tortoroli was also former President of Bacardi International Limited and brings significant global executive leadership experience. His 40-year career includes launching ecommerce platforms, global finance, mergers & acquisitions, and strategic partnerships through various senior executive roles at Bacardi, Viacom, Young & Rubicam, PepsiCo, and KPMG.
Agrify — Adds Barry Turkanis to Board. He previously served as Managing Director in the Fixed Income, Currency and Commodities Division and Co-Head of the Mortgage-Backed Securities Department at Goldman Sachs. Turkanis subsequently co-founded Ocean Gate Capital Management and more recently, co-founded NXT Ventures Management, a venture capital firm.
HEXO — Appoint John K. Bell as Chair of Board. Bell is currently Chairman of Stack Capital, Pure Jamaican Limited and a board member of Cure Pharmaceutical. John was also a member and Chair of the Board at Canopy Growth between 2014 and 2020.
Grasslands — Director Of Public Relations (Denver)
Grasslands — Publicist (Denver)
Eaze — Senior Accountant (LA)
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