📉Cannabis Takes the L on Election Day
Amendment 3 (FL) Fails. Nebraska only State to pass ballot measure. TerrAscend acquires Ratio Cannabis (OH). GTI invests $20M into Agrify. Curaleaf $40M Revolver at 7.99%. Uncle Arnie's raises $4M.
💭 MSO stocks seem to have hit a floor for the time being with Curaleaf, Trulieve, GTI, and MSOS trading up ~5% currently (Verano is still down ~4%) after sharply falling yesterday (MSOS volume was ~52M, ADTV is ~9M).
🗽 As a reminder, I’ll be at Business of Cannabis: New York 2024 on Tuesday (November 12th), if you’re interested in tickets, use this link or code (OBJECTIVE20) for 20% off. 🥃 Also, if you feel like you need a drink or two after this past week, I am getting a group of investors and executives together after the event.
🌿 Industry
Disappointing Results for Cannabis on The Ballot. Voters in five states voted on whether to legalize cannabis in some form and only one measure passed. In Florida, ~56% of voters approved Amendment 3 to legalize adult-use cannabis but the measure failed to achieve the required 60% of votes necessary to amend the state’s constitution. Adult-use cannabis legalization measures also failed to garner majority support in North Dakota and South Dakota. While voters in Arkansas were allowed to vote in favor of expanding the state’s existing medical cannabis program, the state’s Supreme Court ruled prior to the election that the votes could not be counted. The only state to approve a cannabis legalization measure was Nebraska, which became the 39th state to legalize cannabis for medical use. But the validity of the measure is the subject of an ongoing legal challenge.
Cannabis stock traded down sharply in response to results. Cannabis ETF MSOS was down (27.7%), Ayr Wellness was the most impacted, trading down (54.9%), Trulieve, which bankrolled much of the adult-use campaign in Florida, plummeted (38.2%), Curaleaf fell (30.1%), Verano was down (31.2%)
Jesse Remond, Water Tower Research, points out that Trulieve, Ayr Wellness, Cansortium and Planet 13 are the most affected from Amendment 3 failing
Each of the 106 counties and cities in Kentucky with a ballot referendum approved allowing medical cannabis businesses to operate in their jurisdiction. Voters in 53 counties and 53 cities in Kentucky voted Tuesday on a ballot referendum asking if medical cannabis businesses should be allowed to operate there—and every last one of the jurisdictions voted yes.
15% of Americans report they smoke Cannabis. This is according to combined Gallup data from 2023 and 2024. While not statistically different from the average of 14% in 2021-2022, it is consistent with the upward trend in recent years.
DEA Marijuana Rescheduling Hearing Delayed Until 2025, Agency Judge Rules. After DEA Administrator Anne Millgram signed off on over two dozen witnesses to participate in the hearing on Monday, Chief Administrative Law Judge (ALJ) John Mulrooney issued a preliminary order signaling that the information provided on those set to testify was insufficient and requesting additional details and potential availability for a formal hearing in January or February 2025.
Recreational Cannabis delivery became active in Arizona on November 1st. Previously, deliveries were only available to medical marijuana customers.
Ex-Curaleaf SVP sues Company for terminating her employment after she complained about sexual harassment and racist comments. Khadijah Tribble claims that she was fired in March 2023 after taking time off from work to deal with mental health issues she suffered after a death threat she received from a company vendor via voicemail.
Law allowing NYC to padlock hundreds of suspected illegal dispensaries ruled “unconstitutional.” Judge Kevin J. Kerrigan ruled that the mandate, which grants the City Sheriff’s Office authority to keep illicit cannabis sellers shuttered after they’ve been raided, violates the store owners’ rights to due process. The sheriff’s adjudicative power, which leaves store owners helpless regardless of evidence and administrative court rulings — as examined in a recent Post expose — “stands against the cornerstone of American democracy and procedural due process,” Kerrigan wrote. Lazzaro, who represents Cloud Corner, a Queens shop shut down on allegations of selling weed without a license last month, predicted the ruling — which calls for his client’s store to reopen — could allow others targeted in Operation Padlock to sue for “astronomical damages.”
Ohio’s Cannabis Sales Tops $143 Million In First 4 Months. Growth between October and November was 47%.
Medical marijuana patients say Georgia is taking too long to get them their cards. The Georgia Medical Marijuana Law was passed in 2015 and tasked the state’s Department of Health with keeping up with the patient database. In 2020, the state created the Georgia Medical Cannabis Commission. The delays stem from both agencies lacking access to the database.
💵 Deals
TerrAscend to acquire the assets of Ratio Cannabis, a dispensary in Goshen Township, Ohio. Upon closing, this acquisition will be TerrAscend’s initial entry into Ohio, the Company’s sixth state. Total consideration to the sellers of $10.3M ($5.0M cash, $1.3M stock, and ~$4M seller’s note bearing 6% interest with a two-year maturity. The transaction, which is expected to be immediately accretive on an EBITDA and cashflow basis, and is subject to customary closing conditions, including regulatory approval from the Ohio Division of Cannabis Control.
Agrify Secures $20M Financing from GTI and Changes Leadership. Agrify‘s Board of Directors have approved a $20M convertible secured note, of which $10M will be drawn upon at closing, from a wholly-owned subsidiary of GTI. Prior to this financing, the GTI subsidiary acquired an ownership stake in Agrify through the purchase of common stock and warrants from its outgoing Chairman and CEO Raymond Chang and outgoing Director I-Tseng Jenny Chan. Agrify will continue to operate as an independent business and was not a participant in the Transaction. Following the Transaction and Financing, Agrify retains the majority of its existing management team and all of its independent Directors. Concurrent with the Financing, Raymond Chang resigned as Chairman and CEO of Agrify and I-Tseng Jenny Chan stepped down from the Board. Following the acceptance of the resignations, the Agrify Board appointed Benjamin Kovler, Richard Drexler, and Armon Vakili to replace the outgoing Directors, bringing the total Board membership to six, the majority of whom are independent. In addition, Mr. Kovler was appointed to the roles of Agrify’s Chairman and Interim CEO following Mr. Chang’s resignation.
Curaleaf Secures New $40M Revolving Credit Facility. The new two-year secured revolving credit facility was completed with a major commercial regional bank and has a maturity date of December 15, 2026. Borrowings under the facility bear interest on any outstanding principal of 7.99%.
Chicago Atlantic Closes $30M Senior Secured Credit Facility to Deep Roots Harvest. The capital will support Deep Roots Harvest’s expansion as it takes on additional retail and cultivation assets across Nevada. In October 2024, Deep Roots Harvest acquired most of the assets of Nevada cannabis operator, The Source, including four retail operations, two provisional retail licenses and one operating facility for cultivation. The acquisition positions Deep Roots to operate 12 total dispensaries and establishes them as the market share leader in Nevada.
Vireo secures $10M Convertible Debt Facility from Chicago Atlantic. The convertible facility has a term of three years, with a cash interest rate of 12.0%, and such interest shall be paid to Lender in cash on the last business day of each calendar month. All accrued and unpaid interest shall be payable in full on the Maturity Date or earlier date of prepayment. The Convertible Notes shall be convertible at any time into Subordinate Voting Shares of the Company at a conversion price equal to $0.625. The Company does not expect to issue any warrants.
Uncle Arnie's raises $4 million. Mindset Capital led the round, having first invested in January. This round was done at a valuation that is more than double the valuation set in January alongside a large strategic investor.
The Cannabist Company closes sale of its 14 Florida dispensaries and two cultivation and manufacturing facilities to MINT Cannabis and SHANGO. This agreement was previously announced on August 23, 2024.The Company continues to work towards closing the Lakeland transaction for an additional $11.4M, and can now proceed with the planned sale of the MMTC license received in the MINT/SHANGO transaction.
📄 Company Earnings / Updates
Curaleaf Q3 2024 Revenue of $331M, down (1%) YoY. 49% Adjusted GM, up 312 basis points YoY, Adjusted EBITDA was $75M (23% margin), YTD CFO from continuing operations of $119M and FCF from continuing operations of $53M, Net loss of ($44M) from continuing operations. The international business grew 82% YoY and 17% QoQ to $30M. Cash of $90.0M.
Trulieve Q3 2024 Revenue of $284M, up 3% YoY. Gross margin of 61%, compared to 52% in Q3 2023, Adjusted EBITDA of $96M (34% margin), up 24% YoY, YTD CFO of $241M and FCF of $162M. Currently operate 220 dispensaries (opened 15 new dispensaries in Florida and Pennsylvania during Q3) and over four million square feet of cultivation and processing capacity. Cash of $237.7M.
Verano Q3 2024 Revenues of $217M, down (2.6%) YoY. Gross profit of $109M (50% GM), SG&A expense of $92M (43% of revenue), Net loss of $(43M)M, or (20)% of revenue. Adjusted EBITDA of $64M (30% margin), Net cash provided by operating activities of $30M, CapEx of $57M. Cash and cash equivalents of $65M, working capital deficit of $(114M) and total debt, net of issuance costs, of $420M.
The Cannabist Company Q3 2024 Revenue of $114.8 million, down 8% from Q2. The decline in revenue resulted primarily from the sale of Eastern Virginia and Arizona businesses in August; excluding divested assets for both Q2 and Q3, revenue would have been flat QoQ. Adjusted EBITDA of $14.8M, down from $17.5M in Q2, Adjusted EBITDA margin of 13%, compared to 14% in Q2. $31.5M in cash, up from $22M at the end of Q2. CFO was negative ($18M), compared to negative ($3M) in Q2 and negative ($6M) in Q1. CapEx was $1.5M. The Company also submitted an amended tax return and refund claim for $5M associated with 280E for the 2020 tax year.
Innovative Industrial Properties Q3 2024 revenues of $76.5M, compared to $77.8M for Q3 2023, a decrease of 1.7%. The decrease was primarily due to (i) a $3.0M decline in contractual rent and property management fees related to properties that IIP regained possession of since June 2023; (ii) a decline of $1.3M due to rent received but not recognized in rental revenues resulting from the re-classifications of two sales-type leases starting January 1, 2024; and (iii) $1.3M of contractually due rent and property management fees that were not collected.
SLANG Worldwide Wind-Down Plan and Anticipated Receivership in Colorado and Bankruptcy Proceedings in Canada. SLANG has finalized a wind-down plan for the Company and its assets and subsidiaries with its secured lenders under the Company's credit and guaranty agreement dated November 15, 2021, as amended, given that the Company does not anticipate being able to repay amounts owing under the Credit Agreement at the upcoming maturity date of November 15, 2024.
Parallel’s legal discovery exposes executive attempts to put out fires. A disgruntled investor lawsuit against Parallel Cannabis (Surterra Wellness), is about to enter its third year—and the judge overseeing it is pressing to move it forward. The case was filed when a group of unhappy investors with Tradeinvest Asset Management made a $25M investment through a SAFE. The group accused Parallel’s management of making misleading statements about its financial health during its capital raising campaign, as the company was unable to make its debt payments shortly after.
Flora Growth reaffirmed medical cannabis supply agreement with Curaleaf subsidiary Northern Green Canada. Although on October 30 and 31, 2024, Curaleaf tweeted that there was "no agreement in place between Curaleaf and Flora Growth Corp," the parties have now confirmed the supply agreement-first dated October 28, 2024 and, as revised and fully executed, dated October 31, 2024, by and between Flora and Northern Green.
Cookies sued for allegedly not buying $4.75M worth of products. Cookies is being accused of not paying for $4.75M in cannabis products and then using “stolen property” to fraudulently enrich the Cookies company.
Metrc wins Track-And-Trace Government Contract with the Commonwealth of Virginia. Virginia licensees will also have access to the newly launched Metrc Retail ID™ functionality. This provides businesses with the option to generate compliant labels with QR codes for item-level identification and allows patients with a smartphone to scan and access product information such as lab results, product origin, and more.
SC Labs has released a new expanded testing panel for cannabis products that allows brands to test for additional pesticides that are not currently required for testing. The 11 pesticides in this expanded panel in California include Pymetrozine, Propargite, Pyrimethanil, Propyzamide as well as seven other increasingly common analytes. Pymetrozine is showing up in an alarming percentage of distillate batches in California as it is an ingredient in the popular insecticide, Endeavor.
🏬 Retail / Cultivation
Green Dragon founders fired up to “get back to where we were” with new joint. The trio say they’re now focused on Fired, which has seven stores in the works between Denver and Aurora. In May, they took over three licenses from the now-defunct Altitude Dispensaries. In June, they got another four from Lightshade Dispensaries, which still operates four other local stores itself. They bought two of the buildings for $2.1M and $600,000 and leased the other five, which are all in Denver.
Blue Sage Cannabis Deli to open Valley Park, MO location. This is Show-Me Organics’ fourth Blue Sage location. In addition to those locations in Lebanon and Carthage, Blue Sage opened its third location at Hi-Pointe in St. Louis in March 2024. Show-Me Organics acquired the dispensary from Elevate Cannabis, which opened the location in partnership with Feel State dispensary about two months ago. Elevate also partnered with Feel State to open a location in Richmond Heights.
GTI opens RISE Dispensary in Orlando. The new West Orlando location expands RISE Dispensaries’ retail footprint in Florida to 21 locations and 99 nationwide.
Verano Commences Adult Use Cannabis Sales at Zen Leaf™ Waterbury, CT. Situated in Connecticut’s fifth largest city with 115,000 residents with the location seeing an average daily traffic count of 25,900 vehicles. All five of the company’s dispensaries in Connecticut have now completed the conversion to hybrid sales.
Curaleaf opens Dispensary in Miami, Florida on Bird Road. Curaleaf Miami Bird Road expands the Company's footprint in Miami-Dade County to eight locations, serving new and existing patients across the region.
MariMed Commences Cannabis Manufacturing Operations in Missouri. MariMed plans a statewide wholesale push, distributing its popular edibles and vapes. This expansion brings MariMed’s operations to six states, with facilities also in Delaware, Illinois, Maryland, Massachusetts, and Ohio. MariMed will manage the Missouri facility under a Managed Services Agreement (MSA) until license transfer approval.
🧔 People
PAX CEO, Adam Cahan, and President, US Consumables, Collin Lam departs. Former CEO, Adam Cahan, departed the company in October. His replacement has been appointed, but not announced—but comes from the Consumer Electronics industry. Collin Lam also seems to be transitioning out of PAX with a new role focused on developing global market for cannabinoid medicines and consumer-focused wellness products, based in the U.K.
4Front CFO Peter Kampian Transitions Out of Role. Peter Kampian's contract as CFO has ended. Michael Kronberg, who has been serving as Controller, will assume the role of Interim CFO.
Ronald Dissinger Replaces Joe Culp as Jones Soda CFO. The Company's Director of Finance and Interim CFO, has resigned from the Company to pursue other endeavors. Ronald Dissinger, a director on the Company's Board, will serve as Interim CFO until a permanent CFO is identified. Dissinger served as SVP and CFO from 2010 until his retirement in 2017.
🎙️ Interviews
Who Wins and Who Loses Once the U.S. Legalizes Weed? | Freakonomics Radio
Sundae School On Building A Cannabis Lifestyle Brand | Creative Review
Inside Gary Payton’s Mission To Promote Wellness | Forbes
Fluent plots Florida expansion – with or without adult-use legalization | GMR
How U.S. Cannabis Legalization Will Shape Global Influence ft. Hirsh Jain | The Dime
2024 Election Preview Starring Hirsh Jain | Higher Exchanges
public sentiment seems a weak factor in actual change.
was a bit surprised to learn, again, how much more powerful is the interest of state-level politicians in cannabis revenue...especially if leaking to nearby states.