💳 Silver Spike Investment Corp. raising $125M in IPO for Cannabis Debt
$3B in 2021 Cannabis tax revenue. Cresco Labs terminates Blair Wellness acquisition (MD). C21 divests select assets (OR). Wonderbrett launches in MI.
Nationwide, those sales generated more than $3 billion in tax revenue for 11 states, including California, Colorado, Illinois, Michigan and Nevada. That's higher than the $2.7 billion collected from the 10 states that allowed recreational marijuana sales in 2020, according to a report from the Marijuana Policy Project. Seven out of the 11 states had their biggest year of marijuana tax revenues on record, according to an NBC News analysis of state revenues.
More than a dozen California cities are opening new recreational cannabis licensing opportunities this year, either by embracing the legal marijuana industry for the first time or by increasing the number of available business permits. Several other cities, meanwhile, are laying the groundwork for new markets down the road by drafting and/or developing cannabis ordinances. The rollout of new adult-use markets and business opportunities come as cities across the state are eager to bring in additional tax revenue after the pandemic and other factors depleted public coffers. The ongoing shift is a welcome sign for the state’s struggling marijuana sector, which remains forbidden in the vast majority of California cities and, at the same time, must compete against a thriving illicit market.
Hochul’s office pushed for $75M sale of MedMen to help campaign donor claims lawsuit. Gov. Kathy Hochul’s office pushed to force the bargain-priced buyout of a well-positioned cannabis retailer just days before it was set to wriggle out of the deal — and just days after the lucky acquirer attended a fundraiser for Hochul, according to an explosive lawsuit. Gov. Hochul’s administration used improper influence late last month to help recreational pot seller Ascend Wellness seal its $75M deal to buy the MedMen marijuana dispensary chain. Specifically, MedMen’s lawsuit alleges that Hochul’s office pushed regulators to approve the controversial deal after dragging their feet for nearly a year—and just days after one of Ascend’s executives attended a fundraiser for Hochul’s reelection campaign. Sources said MedMen appeared to want out of the deal and its relatively low price — whose terms were set to expire on Jan. 1 if state officials took no action — after Hochul made the statewide rollout of retail marijuana shops a priority after taking office in August.
Retail prices for Canadian recreational cannabis products fell across the board in 2021, as retailers and producers sold them for less to entice price-sensitive consumers and capture market share. The 2021 market data from Seattle-based cannabis data analytics firm Headset covers the province of Ontario, Canada’s largest market, the key Alberta and British Columbia markets as well as Saskatchewan. Canadian cannabis industry insiders say some level of continued price compression might remain on the horizon in 2022. However, improving efficiency and lower costs in both cannabis retail and production might help Canadian cannabis companies stay afloat in a low-price environment.
Leaflink — January Flash Highlights: Everything you need to know. Retailers are spending more this year. At a national level, retailers spent 20% more in December 2022 than the same period last year, and 50% of buyers increased their overall spend. This signals that demand is strong at the retailer level year-over-year, which can also be seen in the average transaction volume per buyer, which increased 9% month-over-month and 20% compared to December 2021. There’s opportunity for Flower sellers in MO. December was the 5th straight month that Missouri contained both the most and least competitive product categories, as measured by the ratio of brands selling the category to the total percentage of category sales vs. all categories. This month Flower was sold by just 30% of MO brands, but it made up 67% of all sales. Concentrates are getting more popular with wholesale buyers. While Flower remains the king when it comes to market share on LeafLink, Concentrates continue to grow in popularity according to market share, gaining 2.2% points from November to December to arrive at 16.6% overall market share.
Here’s What To Expect At Cannabis Industry Incubator Green Street And Restaurant Gusto Green. The highly-anticipated cannabis industry incubator Green Street is now open. It’s a unique weed-centric building filled with offices for cannabis entrepreneurs, art galleries, consumption-friendly event spaces, and a ground floor restaurant named Gusto Green. Green Street’s founder Rama Mayo has spent three years remodeling the 7-story space in downtown Los Angeles, California. Built in 1913, the historic building at 718 South Hill Street has been reborn. Its redesigned 67,000 square feet will hold 400 tenants. The only feature his team kept from the original building is the massive, dark wood spiral that winds up the central staircase. Its history is palpable.
Silver Spike Investment Corp. — $125M Proposed IPO. The Company intends to invest primarily in secured debt, unsecured debt, equity warrants and direct equity investments in privately held businesses. SSIC expects to invest in loans made primarily to private leveraged middle-market companies with ~$5-$50M of EBITDA. Investments will generally range between $5-$40M each, although investment size will vary proportionately with the size of their capital base. SSIC has an active pipeline of investments and are currently reviewing over $1.1 billion of potential investments in varying stages of underwriting.
Cresco Labs — Termination of Blair Wellness Acquisition. "We have terminated the purchase agreement with Blair Wellness due to the failure of certain closing conditions to be met prior to our specified termination date. We will continue to look for other avenues to expand our footprint in Maryland, and execute our strategy of going deep in meaningful, material states." said Charlie Bachtell, Cresco Labs’ CEO. Blair Wellness was originally expected to close during Q4 2021. There are no termination fees associated with the Transaction.
Plus Products — Files Application Seeking Sanction Order To Complete Transaction With Glass House Brands. Plus Products has filed an application in the Supreme Court of British Columbia in the Company's Companies' Creditors Arrangement Act (Canada) (CCAA) proceedings, seeking an order that, among other things: (i) sanctions the Company's amended plan of compromise, arrangement and reorganization dated January 17, 2022; and (ii) extends the stay period in the CCAA proceedings until the date that PwC, in its capacity as court-appointed monitor of the Company is discharged by further Court order. Once granted, the Sanction Order will allow the Company to complete the restructuring transactions contemplated under the Plan and the Acquisition Agreement dated December 17, 2021 between the Company and Glass House Brands.
C21 — Divestment of Select Assets in Oregon. C21 has signed a binding agreement for the sale of select assets, including its real property located in Southern Oregon and associated outdoor production licenses and equipment, for $2.0 million. This property was acquired by the Company for $1.3 million, paid in C21 shares at a deemed price of C$0.804 (see news release dated February 19, 2020).
Curaleaf — Completes Bloom Dispensaries Acquisition. 2021 revenue of ~$66M and EBITDA margins of more than 40% across four retail dispensaries located in the Phoenix, Tucson, Peoria, and the only dispensary currently in Sedona. Two adjacent cultivation and processing facilities located in north Phoenix totaling ~63,500 sq. ft. of space. Under the terms of the agreement, Curaleaf paid an aggregate purchase price of ~$211M on a cash and debt free basis with target working capital.
📄 Company Updates
Columbia Care — Receipt of Noteholder Consent for Amendment to Trust Indenture to Increase Debt Capacity. The Company has received the requisite consent of holders of its 13.00% senior secured notes due May 14, 2023; 5.00% senior secured convertible notes due December 19, 2023; and 6.00% senior secured convertible notes due June 29, 2025 for the proposed amendments to the trust indenture dated May 14, 2020, as supplemented, governing the Notes. The key amendment significantly increases the Company’s borrowing capacity to support growth initiatives.
Agrify — Record Bookings of Over $250M in Q4 2021. Q4 2021 Bookings is $150M greater than prior guidance of $100M. The company also reaffirms its fourth quarter 2021 revenue guidance of $26-$28M. The new bookings are an operational metric comprised of the Company’s sales of its state-of-the-art cultivation and extraction solutions, including its Vertical Farming Units (VFUs), as well as the expected revenue from Agrify’s Total Turn-Key Solution (Agrify TTK Solution) agreements over the first three years of cultivation. The Company expects to generate substantially more value over the full 10-year term of the TTK partnerships.
Fire & Flower — Filing of form 40-F with SEC as company prepares for NASDAQ listing. Listing of the Company's common shares on Nasdaq remains subject to the approval of Nasdaq and the satisfaction of all applicable listing and regulatory requirements, including the effectiveness of the Form 40-F. Fire & Flower's common shares will continue to trade on the Toronto Stock Exchange under the ticker symbol "FAF" following the completion of the proposed Nasdaq listing.
HEXO — Update on "The Path Forward"; Cost Savings Initiatives. To more closely align the Company’s operating costs with its size, HEXO announced significant cost-saving initiatives to reduce SG&A expenses. Streamline and Simplify the Organizational Structure. These initiatives are expected to represent a 30% reduction in the Company’s SG&A by Fiscal Year End 2023. These cost reductions will be achieved through a combination of reduced reliance on outside consultants, streamlining the organization as a new IT platform is implemented, right-sizing the organization, and realizing the synergistic benefits of the recent acquisitions. Reduce Manufacturing and Production Costs. In addition to the SG&A savings, the Company has also identified ~$30M in additional savings from optimizing HEXO’s production network and leveraging the capacities of its recent acquisitions. Specifically, this includes: 1) Transitioning from co-packaging agreement towards in-house production capabilities; 2) Leveraging HEXO’s scale to deliver on procurement savings; and 3) Reconfiguring the Company’s production network to achieve greater efficiencies, for example, moving vape production and distillate production to the Redecan facility. Sale of Non-Core Assets and Debt Reduction. Under the strategic plan, the Company has also identified certain non-core assets which may be divested. The Company intends to apply the proceeds from any such sales principally to debt reduction. As such, HEXO sold its 25% interest in the Belleville Complex to Olegna for ~$10.1M. Olegna is the owner of the other 75% of the facility and HEXO will continue to lease the facility for processing, manufacturing and distribution with no changes to the existing lease arrangements.
Curaleaf — Opens Two New Pennsylvania Dispensaries. Curaleaf's latest locations in Greensburg and Wayne will increase the Company's retail footprint to 14 dispensaries statewide and 125 across the country. Two additional locations, Curaleaf Erie (7891 Peach St.) and Curaleaf State College (1248 S Atherton St.), are expected to open by the end of February, pending regulatory approval.
Curaleaf — Opens Two New Florida Dispensaries in Tampa Bay and Largo. The expansion will increase the Company's retail footprint to 44 dispensaries statewide in Florida.
Stem Holdings — Granted Adult-Use License for Existing Retail Dispensary in Sacramento. The Company was granted an adult-use license for its existing Foothills Health & Wellness 4,600 square foot retail storefront in Sacramento, California. In 2021, this location generated ~$5.5M in medicinal retail cannabis sales. Management believes it possible to double annualized sales at this location under adult-use.
GrowGeneration — Opens New Hydroponic Garden Center in Ardmore, OK. The 25,000 square foot location is conveniently located in southern Oklahoma at Interstate 35 near the Texas border. This location is the sixth location in Oklahoma and GrowGen's 63rd location nationwide. "In the three years since Oklahoma legalized medical cannabis, its over 9,000 licensed farms have surpassed the number of licensed farms in California and the number of retail cannabis locations in the state is more than Colorado, Oregon, and Washington, combined." said Darren Lampert, CEO of GrowGen.
Wonderbrett — Michigan Retail Launch, Grow Facility Completion. Wonderbrett’s sell-out strains: “Grapes of Wrath,” “Orange Banana” and “Peach OZ” will first become available at Cloud Cannabis stores across the state in pre-rolls and 1/8th-ounce jars. Wonderbrett’s other famed strains: “Black Orchid,” “Pink Picasso” and “Melon OG” will come online in the weeks and months to follow.
BLAZE x springbig — 2-Way Integration for Cannabis Loyalty Program. The two-way integration between BLAZE software and springbig provides cannabis retailers integrated loyalty rewards that can be received and redeemed directly in the BLAZE checkout interface. The integration also provides additional options for adding loyalty members, and enhances SMS/MMS marketing capabilities.
Martha Stewart CBD — Launches CBD Wellness Topicals. The topicals line consists of Super Strength CBD Cream designed for muscle recovery, Sleep Science CBD Cream designed for better sleep and Daily De-Stress CBD Cream designed for stress management. The effective formulas were created by Martha in partnership with Marquee Brands and Canopy.
🧔 People | 💻 Hiring
Akerna — Appoints Current COO Ray Thompson as President & COO. Thomson has overseen the day-to-day operations of Akerna and its portfolio of brands as Akerna's COO since 2018.
Lantern — Head of Brand Partnerships (Remote)
Advanced Flower Capital — Associate/VP of Investor Relations (West Palm Beach)
Connected — Director, Accounting Operations (Sacramento)
springbig — Head of People & Culture (Boca Raton)
Tilray CEO explains why the company isn't waiting for U.S. legalization “lottery ticket”
Glass House CEO Kyle Kazan — Seeking Alpha
Berner’s inspiring rise to the top — Leafly
AeroPay CEO Daniel Muller — Cannabinoid Connect
MedMen’s former CEO dishes on how it all went wrong — Business Insider (paywall)
👋 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.