💳 Canopy Growth Raises up to $150M Senior Unsecured Convertible Debentures
Twitter to allow cannabis advertising (but can't promote or offer to sale). MariMed acquires third dispensary in MA. Schwazze acquires two Smokey's dispensaries in CO. Kosmik Brands expands to MO.
🌿 Industry
Twitter to allow cannabis advertising. Twitter updated its advertising policies to allow cannabis ads to run on its service in states where cannabis is legal, in accordance with federal guidelines. The ads that Twitter will accept will be limited, according to a policy update posted to its website:
CBD and THC companies can run ads promoting their brands and providing informational cannabis-related content, but the ads can't promote or offer the sale of cannabis, with the exception of topical (non-ingestible) hemp-derived CBD products "containing equal to or less than the 0.3% THC government-set threshold"
Twitter will only accept cannabis advertisers that are licensed by the appropriate authorities and that the company has pre-authorized
Advertisers can only target geographical areas in the U.S. in which they are licensed to promote cannabis products or services online
Advertisers can't target Twitter users under the age of 21 and they are responsible for complying with all applicable laws and regulations around cannabis marketing
Trulieve was quick to jump on the policy change and roll out Paid Ads.
California county’s cannabis industry on “the brink of irreversible failure.” After six years of legalization, only 12 of the Mendocino County’s 832 active cannabis farms have received annual licenses, according to an SFGATE analysis of county and Department of Cannabis Control (DCC) records. That means only 1% of the county’s cultivators are fully licensed—one of the worst rates in the state. Overall, 49% of California’s cultivation licenses have annual status and over 63% of farms in Humboldt County have received annual licenses. The county has deprioritized more than 300 applications for not paying local cannabis taxes or not having a DCC license.
Michigan Cannabis Sales Soften in January. Michigan cannabis sales sank 6.5% in January compared to December and increased 35.9% from a year ago to a record $207.3M. This was slightly higher than the 32.0% annual growth in December and the fastest since February 2022. As supply continues to expand, flower pricing for adult-use has seen a dramatic decline. In January, the average price of $1282 per pound fell 11.6% sequentially and fell 47.5% from a year ago.
Canadian adult-use cannabis sales jump ~18% in 2022, hitting C$4.5B.
Canada’s cannabis consumers spent C$4.5B Canadian dollars ($3.35B) on regulated adult-use products in 2022, growing 17.9% over 2021’s sales total (C$3.8B), according to new retail sales data released by Statistics Canada.
💵 Deals
Canopy Growth — Up to $150M Senior Unsecured Convertible Debentures. Pursuant to the terms of the Agreement, the Institutional Investor purchased an initial $100M of the Convertible Debentures and an additional $50M of the Convertible Debentures will be purchased in the event that certain conditions outlined in the Indenture are satisfied or waived. No cash will be payable by Canopy Growth in any circumstances in respect of principal, interest or any other amounts owing pursuant to the terms of the Convertible Debentures. The Convertible Debentures were sold at $1,000 per Convertible Debenture and bear interest at a rate of 5.0% per annum, payable in Common Shares at the earlier of (i) the time of conversion of the Convertible Debentures; or (ii) February 28, 2028 (Maturity Date). The Convertible Debentures are convertible into Common Shares at the option of the Institutional Investor at a conversion price equal to 92.5% of the three-day VWAP of the Common Shares ending on the trading day prior to conversion. On the Maturity Date, the principal amount of the Convertible Debentures, including any accrued but unpaid interest, will also be paid in Common Shares.
MariMed — Acquires Operating assets of Ermont (Quincy, MA). Ermont is a medical licensed vertical cannabis operator, located in Quincy, MA, presently in receivership. This will provide the Company with its third dispensary in Massachusetts. The Company anticipates rebranding the dispensary as Panacea Wellness and will commence medical sales upon receipt of final approvals and closing conditions. The acquisition includes two Host Community Agreements with the city of Quincy, one of which is to conduct adult-use cannabis sales. MariMed is applying with the CCC for approval of adult sales and plans to expand the existing medical dispensary to accommodate the increased traffic. Green Market Report points out that Ermont was being sued for $21.8M by Teneo Funds SPVI, which TILT Holdings sold to Teneo for $1.25M in 2021, plus a portion of future collections. TILT previously acquired the debt in 2018 and subsequently extended a line of credit to Ermont.
Schwazze — Acquires certain assets of Cannabis Care Wellness Centers and Green Medicals Wellness Center #5 (d/b/a Smokey's) for $7.5M ($3.75M cash, $3.75M stock). The proposed transaction includes the Smokey's dispensaries located in Garden City and Fort Collins. This acquisition brings Company's total number of Colorado dispensaries to 27.
Item 9 Labs — Secures Financing to Complete Acquisition of Sessions Cannabis. Sessions Cannabis is one of Canada's largest cannabis retail franchisors. The total cash purchase price of the transaction is $12.8M, which is being fully funded through an Acquisition Line of Credit with a 5-year term from a commercial lender. Sessions currently generates over C$80M in annual systemwide sales across more than 45 dispensaries (consists of 15-plus franchisees, with 10+ who are multi-unit owner-operators) in Ontario, with an Adjusted EBITDA margin of ~65%.
Chicago Atlantic Real Estate Finance — Raises $6M in Direct Offering of Common Stock. The Company offered 395,779 shares of common stock at $15.16/share, raising net proceeds of ~$6M.
📄 Company Updates
TILT Holdings — Completes Legacy Debt Refinancing. This reduces the Company’s non-revolving debt to $46M, down from $86.7M in December 2021. The Company repaid $2M of debt retiring the remainder of its 2019 senior debt facility, previously extended to February 28, 2023, with no further obligations. Subsequently, on February 15, 2023, the Company amended and extended terms with its junior noteholders to provide for amended and restated promissory notes with an aggregate principal balance of US $38 million. The amended and restated notes bear a floating interest rate at the higher of 16% or Prime +8.5%, and mature in February 2026. Also on February 15, 2023, the Company issued $8.2M of payment-in-kind secured promissory notes maturing in February 2027 and carrying the same interest rate as the amended and restated notes.
MedMen — Strategic Review of Assets. The company is exploring a potential sale of one or more of the Company’s non-core assets in Arizona (vertically integrated operations with one dispensary in Scottsdale and a 20,000 sq. ft. cultivation and production facility in Mesa), Illinois (two dispensaries located in Oak Park and Morton Grove), and Nevada (two dispensaries located in Las Vegas).
SC Labs — Opens New Cannabis Testing Lab in Los Angeles. The 12,000+ square foot facility, conducts both R&D and compliance cannabis testing – similar to its Santa Cruz counterpart—providing faster turnaround times to process samples for customers south of Santa Barbara. The new lab offers the full suite of California compliance testing (potency, pesticides, heavy metals, residual solvents, microbials, water activity, filth and foreign material) as well as terpenes. Shelf stability testing will soon be available to help customers determine the expiration date of their products.
Greenlane — Receives $4.8M+ in Employee Retention Credit, Reduces $6.4M+ of Existing Debt. The company reduced its current loan facility by over 40% from $15M to ~$8.5M, while also receiving more than $4.8M from the sale of its ERC.
🏬 Retail
Union Square Travel Agency opens as Manhattan's 3rd dispensary. The new dispensary is called Union Square Travel Agency: A Cannabis Store located at 62 East 13th Street. It's owned by the non-profit the Doe Fund which works with people who have prior marijuana convictions.
Verano — Opens Zen Leaf Clifton Heights, the Company’s 16th Pennsylvania Dispensary and 123rd Location Nationwide. Zen Leaf Clifton Heights is located in the greater Philadelphia area in Delaware County near the border of Philadelphia County, the most densely populated county in the Commonwealth. Zen Leaf Clifton Heights adds another convenient location for patients in northeast Philadelphia that complements the Company’s existing dispensaries in Abington, Chester, Malvern, Philadelphia, West Chester and Wynnewood.
Trulieve — Begin Adult-Use Cannabis Sales at Relocated Bristol, CT Dispensary. This is the Company’s only dispensary in Connecticut.
Columbia Care (gLeaf) opens its 8th Dispensary in Colonial Heights, VA. This is the Company’s 84th active dispensary nationwide. Columbia Care and gLeaf are licensed to operate 12 dispensaries in Virginia combined. The Company plans to open another dispensary in the near term. The Company also has a fleet of delivery vehicles able to serve the entire state from its Richmond-area locations.
Curaleaf — Opens Boca Raton, FL Dispensary. This brings the company to 58 Locations in Florida and 148 Nationwide.
🌱 Product
Kosmik Brands — Launches The Abyss in Missouri. A treat that is guaranteed to make customers buckle up their moon boots and prepare for blastoff, as it contains 200mg of THC in one piece and 2,000mg in the entire bag. This stimulating gummy is available in red, green, or blue editions with mysterious, mouth-watering flavors that melt together to make every taste bud dance all over the place. Kosmik is an Oklahoma-based cannabis brand that has expanded to MI, NV, and MO.
Copperstate Farms — Launches Live Rosin All-in-One Cartridge and Infused Pre-Rolls. The 0.5-gram Live Rosin all-in-one features single-source fresh frozen strains chosen for their distinct terpenes and desired effect that is pressed to express pure portable rosin. The new Mini Hashies are hash-infused, half-gram pre-rolls that are easy to share with two in each pack. Products will be available at the Company’s Sol Flower dispensaries in the Phoenix metro area (Sun City, Tempe McClintock, Tempe University, Scottsdale, and Deer Valley).
springbig x Flowhub — Two-Way Loyalty Integration Feature. The collaborative feature eliminates the need for customers to use their phones at checkout to redeem or track their rewards and offers. Instead, budtenders and dispensary employees can redeem springbig rewards for customers through point of sale. Additionally, budtenders and dispensary employees will have the ability to enroll customers in the loyalty program at checkout.
Alleaves x Leafly — POS integration. With this new partnership, customers will receive real-time inventory updates from Alleaves, with automatic menu syncs between the POS and Leafly.
🧔 People
Dama Financial — Appoints Patrick O'Boyle as CEO. He most recently served as SVP Banking Partner Division at Talus Pay. He was also a founding partner of MSP Consulting, and a former partner with Accenture.
Goodness Growth – Management Reorganization. Josh Rosen has been promoted to interim CEO. Dr. Kyle Kingsley, will assume the role of Executive Chairman.
Schwazze — Christine Jones joins as Chief Legal Officer. Jones replaces Dan Pabon who in late 2022 moved into a newly created role at Schwazze as Chief Policy and Regulatory Affairs Officer. In her most recent role, she served as the SVP, Legal and Corporate Secretary of Long Play, a vertically integrated cannabis company with cultivation, manufacturing, retail, and a portfolio of brands that includes Willie Nelson and the Grateful Dead.
High Tide — Rahim Kanji, CFO, mutually part ways. The company has appointed Sergio Patino as interim CFO. Patino joined High Tide as a Financial Consultant in November of 2022. Prior to joining High Tide, he was the America's CFO of a large Mining Construction company.
🎙️ Interviews
Kyla Sirni, CEO, Dispense | High Rise
Aaron Miles, Verano, CIO | The Dime
Growing demand for cannabis & CBD audience insights | Alchemy
Greenlane Holdings, CEO, Craig Snyder | New Cannabis Ventures
👋 Highly Objective is curated by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors. 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.