📈Cannabis Stocks had the 2nd best trading week of 2020

💰Busy week for M&A and financings: Aphria/Sweet Water, Ayr/AZ, Copperstate Farms/Level Up, GrowGeneration/The GrowBiz, Vireo/Columbia Care/Acreage/MedMen raise debt, 🚗Onfleet Series A

If you had time to look at the stock market and/or cannabis stocks this past week, Cannabis stocks went off 📈! NCV’s Global Cannabis Stock Index, 🆙 was up 27.4% this week, the best week since late March, when they were up 32% shortly after the COVID sell-off/dip buying. Still, the index, which posted its highest close since late February, remains down more than 10% YTD.

While I’m happy Cannabis stocks are up, there is a risk that they ran up way too much, too fast 😱. With Canopy, Aurora and Tilray reporting tomorrow (Monday) after Cronos reported less than exciting numbers (somehow increasing losses Q/Q by $10.5M), they’ll need to beat estimates and confirm/increase guidance for the quarter/year, or else we could be in for another rollercoaster ride over the next few months. Of course, all of this could not matter as retail investors chase returns out of FOMO (despite poor earnings, CRON was up 38% past two trading days). I’ll be watching closely tomorrow — send me a quick reply to this email if you’d like to see a recap.


Juul Cuts Valuation to $10B. Juul Labs has dropped its valuation to ~$10B (valued at $38B just two years ago when tobacco giant Altria took a 35% stake). Juul’s previous internal valuation earlier this year was $13B. Once one of the country’s most highly valued startups, Juul has been pummeled over the past two years due to regulatory crackdowns, lawsuits and investigations into whether it marketed vaping products to teens. Its sales and market share have tumbled. Last month it said it was cutting more than half its workforce and considering pulling out of most overseas markets. The company recorded $934M in operating expenses in the first half of this year compared to ~$2.6B for 2019.

Canadian cannabis firms lost millions on bad greenhouse deals. At Aurora, executive bonuses at the time were partially tied to building cannabis production in Canada and establishing new facilities outside Canada, a regulatory filing shows. That created an incentive for executives to not only pursue M&A to build up production capacity but also to continue building out their own massive facilities. They were effectively incentivized to build greenhouses, fueling investor (not consumer) demand. Hexo acquired Newstrike Brands for C$263M and chose to suspend operations at Newstrike’s key facility shortly after. Four months after the deal closed, Newstrike’s flagship greenhouse was sold off C$10M. Similar deals were seen across the industry. Sunniva spent C$25M on its Canada campus, and sold the property this summer for C$6.8M. In May, Aurora accepted an offer for a greenhouse in Exeter, Ontario, for what appeared to be half its C$17M listing price and one-third of the original purchase price. That same month, to reduce capital outlays, Tilray closed the 406,000-square-foot greenhouse it received with its acquisition of Natura Naturals Holdings only one year earlier. Canopy Growth spent years acquiring and building greenhouses in Canada and overseas, only to shut some down before the company ever turned a profit. In April 2018, Canopy boasted it was on pace to “exceed 5.6M sq. ft. of domestic growing space.” Today, a fraction of that space is operational. Canopy spent ~C$500M in July 2018 to acquire the remaining one-third interest of the BC Tweed operation it didn’t already own. Later, the massive greenhouses associated with that deal were effectively shut down.

Mr. Nice Guy slapped with Telephone Consumer Protection Act (TCPA) Class Suit. The suit is one of dozens of TCPA suits filed against cannabis companies in recent months. Some companies have argued that they had consumers' consent to send the texts, and others have suggested the wave of suits is an abuse of the law. The question of what constitutes an autodialer is currently before the U.S. Supreme Court, in the case Facebook v. Duguid . The high court granted certiorari in July and is weighing arguments about whether the TCPA's definition of an autodialer includes just phone equipment that can store numbers and call them automatically, or if it needs to be able to generate random numbers as well.

Other highlights:

Election 2020: Cannabis Recap

All of CA’s 30 cannabis tax related local ballot measures in one place

Part of Canopy’s unused 1.7M SQ FT Greenhouse went up in flames

Curaleaf Boris Jordan says "it's very difficult to compete against the illegal market"

Pure Extracts Technologies Corp. Commences Trading on the CSE

Q&A with Lauri Kibby (King’s Garden CFO)


Aphria — acquires SweetWater for $300M. SweetWater's portfolio of Beer Brands, including the Flagship 420 brand, aligns with a Cannabis Lifestyle and provides a scalable platform for expansion into the U.S. and Canada. Aphria plans to release SweetWater products into the Canadian market to grow their brand. SweetWater will receive $250M in cash and ~$50M in Aphria stock at closing and are eligible to receive up to $66M of additional cash under an earnout. SweetWater generated Revenue and adjusted EBITDA of $66.6M and $22.1M, respectively, and production volume increased 7% Y/Y to ~261,000 barrels, twice the growth rate of the craft beer market nationally. The initial transaction value represents ~12.5x adjusted EBITDA multiple, Aphria expects to finance the cash component of the purchase price under the Agreement through (i) a committed $100M term debt facility, (ii) accessing up to $100M from its existing $100M At-The-Market (ATM) equity program, and (iii) available cash on hand.

Ayr enters AZ (its 5th State) with up to $81M upfront and earn-outs based on cultivation targets and EBITDA. [people should not be sleeping on this Company as a 2nd-tier MSO]. 3 dispensaries in greater Phoenix (2 Chandler, 1 Glendale), a 10,000 sq ft cultivation and processing facility in Chandler and an 80,000 sq ft cultivation facility under development in Phoenix. Ayr is paying $81M upfront (​3.7x 2021 estimated Adjusted EBITDA) — $10M cash, $30M seller notes, $41M stock (~2.75M shares priced at 10-day VWAP prior to announcement — $14.91). An additional 2M shares [~$30M based on 10-day VWAP prior to announcement, but looks like it might be based on 10-day VWAP at achievement] may be payable upon the achievement of established cultivation targets through 2021 and 2022.

Curaleaf sells interests in HMS for $27.5M to TerrAscend. The HMS asset sale includes the divestiture of operations in a 22,000 sq ft co-located cultivation and processing facility in Frederick, MD. The completion of the HMS transaction will allow Curaleaf to move forward with its proposed acquisition of Maryland Compassionate Care and Wellness (MCCW), which operates a 55,000 sq ft co-located cultivation and processing facility in Taneytown, MD and a dispensary in Gaithersburg, MD under the Herbology brand. Curaleaf also closed its sale of Curaleaf Maryland, which holds a processing license in Cumberland, MD, for a total consideration of $4.0M. Upon closing in the first quarter of 2021, 100% of HMS' economics will be retained by TerrAscend through full ownership of HMS Health, LLC and a MSA with HMS Processing, LLC. The transfer of 100% equity of HMS Processing is expected to close in April 2022.

Copperstate Farms — acquires Level Up (MedMen AZ). The locations include dispensaries in North Scottsdale and Tempe, as well as a 25,000 sq ft cultivation and processing warehouse. Copperstate Farms now controls four dispensaries and operates a 1.7M sq ft facility and 40-acre greenhouse grow in Snowflake, AZ.

Onfleet — $14M Series A. The last mile software of choice for a heavy majority of Cannabis delivery companies. The round was led by Kennet Partners. This funding round takes place on the heels of massive momentum for Onfleet, which has sustained profitability for several years and has experienced triple-digit revenue growth year-over-year. The company added hundreds of new customers this year and has doubled its year-over-year overall delivery volume as COVID-19 has rapidly accelerated retail’s transition to online, delivery-centric models. Onfleet has powered more than 80M deliveries in more than 90 countries for thousands of clients including Kroger, Sweetgreen, Drizly, Imperfect Foods, Alto Pharmacy, and Gap, among others. This investment round was oversubscribed, and brings Onfleet’s total funding raised to $20M since inception. 

GrowGeneration acquires The GrowBiz. The GrowBiz is the nation's third-largest chain of hydroponic garden centers, with five stores across California and Oregon, generates annual revenue of ~$50M. 

Vireo Health and Green Ivy Capital agree to $46.0M Senior Secured Non-Convertible Credit Facility. The Credit Facility is non-convertible, has a three-year term, and loans issued under the facility will bear interest at a fixed annual rate of 13.25%. For all advances under the facility, the term sheet specifies that the Lenders shall receive warrants at a rate of 30% warrant coverage based on the gross amount of each tranche advanced, with a warrant strike price equal to a 15% premium to the closing price on the trading day immediately preceding each funding date.

Columbia Care — $20.4M Add-On Debt Financing. The add-on debt issuance is under its existing senior secured indenture via a private placement of 20,000 units for aggregate gross proceeds of ~$20.4M. Each Unit is comprised of $1,000 in principal amount of 13% senior secured first-lien notes due May 14, 2023 and 60 common share purchase warrants, each Warrant entitles the holder to purchase one common share of the Company at a price of C$5.84 per share prior to May 14, 2023. While the face value of each Unit is consistent with the Company’s prior debt financing that closed in 2Q 2020, these Notes were issued at a premium, resulting in a decline in the expected yield by 170 basis points. The resulting impact of this is the reduction in coupon to ~12%. Including the estimated value of the Warrants, the total yield to maturity is expected to be ~14%. This financing was completed in response to unsolicited investor demand from two long-term institutional investors – with the lead investor being a $140B+ multi-strategy asset manager.

Stable Road Capital upsizes Senior Secured Term Loan to MedMen by $5M. The financing commitment previously announced on September 16, 2020, was increased from $20.7M to $25.7M.

Acreage raises $28M Senior Secured Term Loan Facility. The Facility has an annual interest rate of 15% with a maturity of 48 months from closing.


Cronos — Q3 2020. Net revenue of $11.4M in Q3 2020 , up $5.6M from Q3 2019. Reported operating loss of ($41.2M), an increase of $10.5M in losses from Q3 2019’s ($30.7M).

IIP — Q3 2020. Total revenues of ~$34.3M, up 197% Y/Y. Net Income of ~$18.9M, or $0.86/share, up 205% Y/Y, and adjusted funds from operations (AFFO) of ~$27.9M, or $1.28 per/share, up 192% Y/Y. IIP paid a quarterly dividend of $1.17/share on October 15, 2020 to common stockholders of record as of September 30, 2020, representing a ~10% increase over the previous quarter’s dividend and a 50% increase Y/Y.

ManifestSeven — Q3 CY2020. Revenue: $4.7M (31% GM), Adjusted EBITDA: ($1.3M), Net Loss: ($1.9M)

HEXO — Q4FY2020 (7/31/20). Net Revenue: $27.1M (42% GM), up 23% Q/Q and 76% Y/Y. Gross Revenue: $36.1M, up 17% Q/Q and 76% Y/Y. Adjusted EBITDA: ($3.25M); tracking towards Adj. EBITDA+ 1H FY2021. Cash: $184M. Net funds of $54M and $33M were raised through the May 2020 public offering and the June 2020 ATM offering, respectively. Also under going 8:1 share consolidation.

Liberty Health Sciences — Q2FY2021 (8/31/20). Revenue: $18.1M (up from $10.6M Y/Y), and $36.6M for past two quarters. Adjusted EBITDA: $5.6M (up from $0.9M last year). Cash: $17.1M


TerrAscend — adds Ed Schutter to Board. Currently serves as CEO of Arbor Pharmaceuticals (specialty pharmaceutical) which markets prescription products for the cardiovascular, neuroscience and orphan/hospital markets.

Columbia Care — adds Alison Worthington to Board. Most recently served as the global CMO for Method Home Products. Previously worked for Coca-Cola, Starbucks, Microsoft and L.E.K. Consulting.

PharmaCielo — adds Marc Lustig as Lead Director. Lustig remains the Chairman of IM Cannabis and Trichome Financial and a Director for Cresco Labs.

Vahan Ajamian joins High Tide as VP, Capital Markets. Ajamian previously held a similar role at MedMen. High Tide is a ~$40M Market Cap. dispensary-focused company and has raised money from Aurora and Aphria.

🏬New Store Openings / New Product Launches

Cookies — Denver (1st dispensary in CO)

Harvest — King of Prussia, PA (8th dispensary in PA)

Canopy finally launches Quatreau after announcing Cannabis 2.0 portfolio last year


Cronos — Associate Director, Consumer Insights (Los Angeles)

710 Labs — Creative Operations Directors (Beverly Hills)

Sweet Flower — Store Manager (Culver City)

🤷‍♂️Somewhat Relevant

goPuff acquires Bevmo for $350M. BevMo has been on the selling block for almost two years now. The acquisition provides goPuff with retail (rather than just warehouses) and a strong entry point into CA.

Elon Musk’s $250 Tesla Tequila started as an April Fool’s joke, now it’s sold out. Tesla Tequila, Tesquila? Has a nice ring to it. Ferrari only sells ~10,000 cars/year but does $2.5B+ in merchandise so don’t be surprised if the Tequila hits $100M run-rate in a few years.

Who writes this newsletter? ➡️ Dai Truong