🗳️ House vote on MORE Act this week
CA Q3 tax revenue up 80% y/y. OK leads in Medical Cannabis Per Capita (2x NM). Curio Wellness launches $30M fund. Earnings – Jushi, Planet 13, 4Front, Vireo.
If you weren’t investing in Cannabis stocks in November, you probably had a decent amount of FOMO. I mostly just track the top 8 publicly traded MSOs (there are definitely strong performers outside the top 8 as well). They all provided returns in a month that most investors would be happy to have in a year, with the poorest performer (Curaleaf) still up 17% and the best performer (TerrAscend) up 73%. This increase is actually backed by fundamentals, unlike what we experienced two years ago. These companies trade at 3.0-5.0x 2021E Revenue, which is more in-line with large CPG (and growing much faster!). Ayr was up 49% for November and Analysts/retail investors still think it trades at a discount to peers given revenue scale/market positioning.
Momentum in Cannabis right now is as strong as it has ever been.
California sees new highs in cannabis tax revenue. Q3 numbers released by the California Department of Tax and Fee Administration (CDTFA) revealed a jump in cannabis tax revenue of ~80% compared to Q3 last year. The state pulled in a total of $306.7M for Q3 cannabis tax revenue in 2020, coming from an excise tax of $159.8M, a cultivation tax of $41M and sales tax of $105.9M. This compares to just $170.7M for Q3 2019. Similarly in Oregon this year, receipts in the first quarter of the 2021 fiscal year, which began on July 1, were $46.9M, 45% higher than in the first quarter of the 2020 fiscal year.
Congress set to vote on MORE Act this week. The MORE Act, sponsored by Kamala Harris, decriminalizes marijuana at the federal level and allows the states to set their cannabis regulation policies. A significant highlight of the bill includes expungements of convictions for many federal marijuana-related offenses and a 5% commercial cannabis tax towards communities affected by the War on Drugs. Other provisions include opportunities for cannabis businesses and expansion for medical cannabis with the U.S. Department of Veterans Affairs. Unfortunately, the clear backing in the House shows a significant difference in the Senate.
Several Washington DC-based lobbying groups and trade associations have predicted that the MORE Act could pass the Senate, but only if Democrats control the upper chamber by winning both Senate runoff seats in Georgia. “If the Democrats do a clean sweep, then de-scheduling with interstate trade is definitely within the realm of possibility,” Randal Meyer, executive director of the Global Alliance for Cannabis Commerce, predicted in October.
Oklahoma Leads U.S. in Medical Pot Per Capita. Oklahoma is the nation’s biggest medical marijuana market on a per capita basis. More than 360,000 Oklahomans ~10% of the state’s population have medical marijuana cards. By comparison, New Mexico has the second most popular program, with ~5% of residents obtaining medical cards. Last month, sales since 2018 surpassed $1B. To meet its demand, Oklahoma has 9,000+ licensed marijuana businesses, including ~2,000 dispensaries and ~6,000 grow operations. Colorado, the oldest U.S. recreational marijuana market, with a population ~50% larger than Oklahoma—has barely half as many licensed dispensaries and 20% as many grow operations.
Mike Tyson vs. Roy Jones Jr. Weedmaps was the secondary sponsor after Triller (Tik Tok challenger) and while I didn’t watch the fight, it seems like a decent amount of people did (including Lebron) and serious sports coverage / tweets around the fight further legitimized the exhibition, which was another step forward for normalizing Cannabis (and finding creative marketing channels). Musical performances from Snoop Dogg (commentated last two minutes as well), YG, and Wiz Khalifa made it seem like a real fight.
National View: The wholesale cannabis industry, as measured by LeafLink’s GMV (Gross Merchandise Value), grew 112% in October 2020 (Y/Y)
California shows accelerated growth (65% Y/Y)
Gummies lose market share; Packaged Flower continues to dominate
Public Cannabis Company Revenue Growth Accelerates Significantly. Leading Companies offer a mix of revenue scale & growth. Many MSOs (as previously mentioned) have turned the corner.
Curaleaf – $182M Quarterly Revenue / 55% Q/Q growth
GTI – $157M Quarterly Revenue / 31% Q/Q growth
Cresco Labs – $153M Quarterly Revenue / 63% Q/Q growth
Subversive Capital Acquisition Corp. – Qualifying Transaction with Shawn “JAY-Z” Carter, Roc Nation, Caliva and Left Coast Ventures. I wrote more about the deal here. Expect to see more press / appearances from those involved, like this appearance on Bloomberg by Subversive Capital Founder & Chairman, Michael Auerbach.
Curio Wellness launches $30M fund to help women and minorities own a cannabis dispensary. The new fund, started by the Maryland-based medical cannabis company Curio Wellness, aims to help underserved entrepreneurs entering the cannabis market. With $30M (half raised to date) to invest, the Curio WMBE Fund is looking to invest in up to 50 women, minority and disabled veterans seeking to open and operate a Curio Wellness franchise with a path to 100% ownership in three years.
Ayr Strategies — Short-Term Incentive for Cash Exercise of up to 3M Warrants. Offering C$0.50 incentive for cash-only exercise of up to 3M Warrants, ~$25M gross proceeds if 3M Warrants are exercised (20% of warrants outstanding). Warrants are exercisable from 11/24 through 12/8. Effective exercise price of C$11.00 given incentive.
Tilray— Exchanging additional $72.9M in Principal Amount of its 5.00% Convertible Senior Notes Due 2023 for Common Stock. ~6.4M shares of the Company’s common stock. Following the exchange transactions, $277.9M in aggregate principal amount of the Notes will remain outstanding.
Revenue: $24.9M (49% GM), up 67% q/q
Adjusted EBITDA: $1.9M (8% margin)
Net Loss: ($30M)
Cash: $43.2M on 9/30, $73M pro forma for debt
PA – tripling canopy to ~98,000 sq ft; Financing ~$3M debt financing (10% + warrants); opened 10th BEYOND/HELLO location
increasing Q4 2020 revenues from $25–$30M to $28–$30M and AEBITDA to between $2.5–$3.0M
Q1 2021: Revenues: $37–$40M, AEBITDA: $4.0–$5.0M
2021: Maintaining Revenue guidance of $205–$255M, AEBITDA: $40–$50M
Revenue: $22.8M (57% GM), up 36.5% y/y
Adjusted EBITDA: $6.2M (27% margin)
Net Income: $0.2M
In-house brands contributed 25% to SuperStore revenue; 11/5: C$28.8M bought deal; 11/20: re-opened Medizin (Las Vegas) dispensary after 2-year hiatus
Systemwide Revenue: $22.3M, up 18% q/q, 170% y/y
AEBITDA: $3.7M (17% margin)
Cash: $16M, Debt: $43M
2021 Guidance: Revenue of $170-180M, AEBITDA of $40-50M
Acquiring acreage to construct up to 210,000 sq ft of cultivation/manufacturing in Cook County, IL; Construction of 185,000 sq ft (Q2 2021) manufacturing in Commerce, CA; Opening 2nd dispensary in Calumet City, IL (Q4); Retrofitted Georgetown, MA facility
Revenue: $13.4M (43% GM), up 11% q/q, 68% y/y
Cash: $16.3M + $16.0M in expected cash proceeds resulting from the redemption of warrants and divestitures
🏬New Store Openings / New Product Launches
Peter Thiel backs Berlin start-up making psychedelics in $125M round. ATAI Life Sciences, a drug development platform, was set up to acquire, incubate and develop psychedelics and other drugs that can be used to treat depression, anxiety, addiction and other mental health conditions. The Company has raised $210M total to date. ATAI has also invested in Compass Pathways, which has developed a synthetic version of the active ingredient in magic mushrooms, psilocybin. Compass Pathways, which Thiel has also invested in, listed on the NASDAQ stock exchange in September and now has a market cap. of ~$1.8B. ATAI’s owns ~25% of Compass Pathways.