🃏Active Week for Cannabis Deals
Weedmaps/Silver Spike SPAC ~$1.5B valuation. Leaflink — $40M Series C. Ayr — $110M debt. GrowGen — $150M follow-on. Arise Bioscience — $20M debt.
A reminder that I’m hosting weekly zooms on Thursdays from 4-5p PT where the discussion is completely open and dependent on who joins, link here.
🌿Industry
Weedmaps CEO shares the 3 reasons he thinks he can beat Google and Amazon, even if cannabis is legalized in the US. Weedmaps CEO Chris Beals laid out three reasons why he's not afraid of big tech companies like Google or Amazon pushing to dominate the emerging cannabis industry.
"I think there's a pretty fundamental misconception that a lot of these companies haven't been trying to attack the space. When you look at Google or Amazon, there's traditionally three areas — I can give you specific examples that have kind of been kryptonite for them. First, he says that the complex, rapidly evolving regulations in the cannabis industry — which can differ at the local, state, and federal level — give companies like Weedmaps that have dealt with the complexity of cannabis from the start a clear advantage. Second, tech giants have had trouble integrating "nuanced or niche" users, like cannabis consumers, onto their platforms. And third, is what Beals calls "non-normalized" data sets. "Cannabis has all three of those problems and has them in spades. He says that Weedmaps has invested heavily in machine-learning tools for consumer data, and in crowdsourcing the effects, aroma, and taste of different cannabis strains reviewed on its platform. For a company like Google to acquire the data it needs as well as the ability to navigate the regulatory hurdles to compete in cannabis is a heavy lift, one that Beals says will help prevent Google from competing with Weedmaps. "Just putting all this software together in one suite has strong competitive advantages, is a moat in of itself"
Harris Poll releases survey on Cannabis consumer/consumption habits. 42% of adults aged 21+ who have ever consumed cannabis have started or increased their consumption since the beginning of the pandemic. According to the survey by the independent pollster, conducted online in October 2020 among ~2,000 U.S. adults aged 21+, the main reasons many Americans have chosen to start or increase their cannabis consumption since the pandemic began include:
to reduce stress and anxiety (54% — women (64%) and men (47%))
to relax (50% — women (50%) and men (49%))
to help them sleep (48% — women (52%) and men (45%))
California cannabis growers seek cheaper mixed-light license fees, saying current cost too high. A group of marijuana industry executives representing hundreds of California cannabis growers are urging state regulators to overhaul current licensing fees, arguing they create unsustainable costs for growers who rely on light-deprivation cultivation practices. Under current regulations, a license for a small outdoor cannabis grower costs $4,820 per year. By comparison, a Tier 1 mixed-light license – for growers who rely on natural light, light deprivation or perhaps a combination of natural and artificial lighting – costs more than double that amount, at $11,800 annually. Although some growers in California hold both licenses, those strictly in the mixed-light category say the licensing fees are financially unworkable. “The regulations definitely put a mixed-light farmer at a disadvantage,” said Ryan Tarbell, owner of Trinity Trichomes, in Hayfork, Trinity County. Cannabis growers who prefer to use outdoor techniques as well as light deprivation are asking for a revision to the rules: They want regulators to allow light deprivation to be included in the small outdoor license category, a move that would reduce their licensing costs significantly.
Las Vegas marijuana dispensaries adjust during pandemic, coming back strong. Before the coronavirus pandemic, the two Curaleaf-owned dispensaries in Las Vegas didn’t focus much on delivery. Delivery options for customers were sporadic at best, said Mark Russ, president of the cannabis company’s Western U.S. operations.
Since COVID-19, however, that’s all changed. Today, Curaleaf is making about 1,000 deliveries a month in Las Vegas. It’s an example of how the marijuana industry has had to change on the fly in a time filled with challenges nobody would have predicted. According to the Nevada Department of Taxation, $76.7M was spent on recreational and medical cannabis products in September. That’s up ~$20M from September 2019, before the pandemic. Last year, ~42M people visited Southern Nevada, according to the Las Vegas Convention and Visitors Authority. When the estimated figure for 2020 comes out, visitation is expected to be down by as much as 50%.
Ontario to license cannabis stores faster as authorizations surpass 300. Ontario’s cannabis store regulator is again doubling the number of Retail Store Authorizations (RSA) it is issuing per month. The Alcohol and Gaming Commission of Ontario (AGCO) said it is picking up its pace with the goal of issuing 20 RSAs per week. That is up from 10 per week before the announcement. The AGCO had doubled its pace to 10 in September. 1,100+ RSA applications have not been processed, ~305 RSAs have been issued, and 269 authorized cannabis stores are open, according to the AGCO.
Other highlights:California on track to collect $1 billion in cannabis taxes in 2020
CA Cannabis Advisory Committee recommends lifting $5,000 limit on Cannabis delivery/vehicle
Detroit to issue recreational marijuana licenses in summer 2021
Marijuana is now Maine's biggest agricultural commodity
New Mexico’s medical marijuana sales rise as prospects for recreational legalization improve
💵Deals
Weedmaps to go public via Silver Spike SPAC at $1.5B valuation. More details here if you didn’t read the in-depth post.
LeafLink raises $40M Series C led by Founders Fund. This round brings the total amount raised by the company to more than $90M, Thrive Capital, Nosara Capital and Lerer Hippeau participated in the round as well. The company now has 130 employees, operates in 27 markets, and has ~32% of the U.S. wholesale cannabis market, resulting in an annualized gross merchandise value (GMV) of $3B+.
“We invested in LeafLink because the team is merging best practices from e-commerce marketplaces with B2B technology to streamline an entire industry’s supply chain and operations,” said Founders Fund Partner, Napoleon Ta, who’s has investment responsibilities for Rippling, RigUp, The Athletic, Zenreach, DuckDuckGo, Scale AI, Flexport and Newfront Insurance.
Ayr Strategies — Upsizing of previously announced 12.5% Senior Secured Notes Offering; Completes Incentive Exercise of Three Million Warrants. Increased the size of Notes from $75M to $110M. Additionally, it has completed an oversubscribed incentive cash exercise of 3M of the Company’s share purchase warrants, resulting in gross proceeds to the Company of $25M+. In aggregate, following closing of the debt offering, the Company will have raised gross proceeds of $135M+.
GrowGeneration — $150M Upsized Common Stock Offering. 5,000,000 shares at an $30.00/share. GrowGen intends to use the net proceeds from the Offering primarily to expand its network of hydroponic/garden centers through organic growth and acquisitions, for general corporate purposes and pursuing strategic opportunities.
Canopy Growth lends $20M to Arise Bioscience (TerrAscend subsidiary). The Debenture will bear interest at a rate of 6.10% per annum and will mature on December 9, 2030. In connection with the Loan, TerrAscend has issued 2,105,718 common share purchase warrants to the Company.
Other highlights:Magnolia Wellness (Oakland) dispensary signs MSA w/ Grupo Flor
BellRock Brands enters Licensing Agreement with Matrix NV
Greenlane and PAX LABS renew exclusive U.S. Distribution Agreement
📄Earnings
Revenue $35.6M (47% GM), up 31% q/q
Adjusted EBITDA: ($11.7M)
Net Loss: ($30.2M)
Cash: $10.3M; $25.7M financing commitments, lender/landlord agreed to defer ~$32M in cash commitments during FY2021, sold Evanston retail for $20M
🧔People
Harvest COO “retires.” Harvest has no immediate plans to fill the COO position. The responsibilities held by Ron Goodson will be assumed by other members of Harvest's senior leadership team. Goodson had previously served as President/COO at Verano prior to joining Harvest in October 2019, and previously spent 35+ years at Pepsi.
Canopy lays off ~220 at grow operations. Canopy Growth will cease operations at the following sites: St. John's, Newfoundland and Labrador; Fredericton, New Brunswick; Edmonton, Alberta; Bowmanville, Ontario; as well as its outdoor cannabis grow operations in Saskatchewan. ~220 employees have been impacted as a result of these closures.
🏬New Store Openings / New Product Launches
MONOGRAM (The Parent Company — Caliva/LCV/Subversive Capital)
Cresco Labs — Artisanal Chocolates
Trulieve — Clermont, FL (68th in FL)
Mission Dispensary (4Front Ventures) — Calumet City, IL
💻Hiring
Weedmaps — Director, Revenue (Irvine)
🤷♂️Somewhat Relevant
MindMed — upsized Financing of C$34.5M, Gross Proceeds Raised Since Company Founding Now Total C$121.4M ($94.8M). MindMed Co-Founder & Co-CEO, J.R. Rahn said, "The COVID-19 pandemic has made it clearer than ever that the current global mental healthcare system demands more comprehensive solutions to address multiple mental health and addiction crises around the world. This successful upsized financing from investors offers further validation that psychedelic medicines are being viewed as a promising new frontier in mental health treatments. As we advance and design this new treatment paradigm in mental health and addiction, we believe that interlacing digital therapeutics alongside regulated psychedelic drug development through rigorous science at the FDA and other regulatory bodies will be integral to advancing the potential healing of millions of patients globally."