Columbia Care Launches $74.5M Private Placement (6.00% Secured Convertible Notes)

Connecticut lawmakers pass Cannabis legalization, retail sales targeted for May 2022.

Bear with me here while I test some things out..

When I started this weekly Cannabis newsletter ~3 years ago, it was mostly close friends and colleagues in the industry that read/commented on it, and I’ve been pleasantly surprised at how it’s developed, along with the Cannabis industry. At that time, I wanted to launch a daily Cannabis newsletter, but there wasn’t enough news in a day to do one. Now, I feel like there’s not enough length allowed in the weekly Cannabis newsletter (I often spend 30-60 minutes deciding what to remove or what to make a headline vs. having descriptions) for things I’d like to cover, so I’m going to attempt to do this daily!

A few other potential changes:

  • Subscription — for a few reasons: 1) improve ranking/appearance in searches on substack, 2) engage with readers (perception of free vs. paying for value) 3) events now that things are opening up again (I did a meetup the month before the pandemic started and the connections there are actually playing out now, 4) reinvest in things built on top of the Cannabis newsletter community

  • Weekly Cannabis newsletter — this will still exist (for now) since it’ll cover things that are better for weekly consumption (people, jobs, interviews), otherwise those topics will just be covered in its own post on a weekly/monthly basis

  • More Media — grabbing twitter posts and GIFs now that there are more room

Now on to the newsletter to see how it would look if I sent it out in the morning to highlight news from the previous day to get your day started..


News

Connecticut lawmakers give final OK to marijuana legalization; possession would be legal July 1, retail sales targeted for May 2022. The Connecticut Senate on Thursday gave final legislative approval to a bill that allows for the cultivation and sale of marijuana in the state. The measure would allow adults 21 or older to purchase and possess up to 1.5 ounces of marijuana (or up to 5 ounces locked away at home or in a vehicle’s glove box or trunk) starting on July 1. Retail sales of recreational cannabis in Connecticut would not start until May 2022, at the earliest. Connecticut is now the 19th state plus the District of Columbia to legalize cannabis for nonmedical use.

Lawmakers were tripped up over the “social equity” section, a threatened veto over an equity provision that gave preference to those previously arrested on a marijuana-related charge sent the measure back to the Senate a third time on Thursday. As the bill reads now, people from cities that have borne the brunt of the war on drugs will qualify for expedited licenses, whether or not they have a criminal record.

MJBizDaily has projected that a Connecticut adult-use marijuana market could generate $250 million in sales in its first full year and $725 million in the fourth year.

Existing medical marijuana cultivators could apply for an adult-use license as soon as this summer but would be required to pay a $3 million fee or, if they create at least two social-equity joint ventures, a $1.5 million fee, the MPP bill summary noted. Connecticut, which launched a medical marijuana market in September 2014, has four cultivations and 18 dispensaries. Many are homegrown, but several MSOs, GTI and Trulieve, have spent tens of millions of dollars in the past two years to enter Connecticut’s MMJ market. Curaleaf, which began wholesale MMJ in October 2014, is the biggest player, holding one of four producer licenses and four of 18 dispensary licenses after additional acquisitions in 2020.

Florida high court nixes second try at recreational cannabis ballot measure. The Florida Supreme Court torpedoed a second attempt by activists seeking to get an initiative to legalize recreational cannabis on the state’s 2022 ballot, ruling that a proposed ballot measure was “misleading.” According to the Miami Herald, the court ruled 5-2 that the summary of the measure was unclear, thus barring the initiative from consideration for the statewide ballot. The defeat comes after:

  • Sensible Florida, the group behind the measure, had already gathered nearly 30,000 signatures of the requisite 891,589 in support of putting the initiative on the ballot.

  • The same court ruled by a 5-2 margin in April that a different ballot measure with the same recreational legalization intent was also “misleading.”

Detroit’s adult-use marijuana ordinance ‘likely unconstitutional,’ judge says. A judge suspended an ordinance in Detroit that would have given preference to long-term residents applying for adult-use marijuana business licenses. U.S. District Judge Bernard Friedman on Thursday granted an injunction that will temporarily halt processing of recreational cannabis applications in the city. The ordinance, as written, “gives an unfair, irrational and likely unconstitutional advantage to long-term Detroit residents over all other applicants,” Friedman wrote in an opinion. The city intended to issue as many as 75 retail licenses, 35 consumption lounge permits and 35 microbusiness licenses, with at least 50% of the licenses earmarked for so-called “Detroit Legacy” residents. Those who have lived in the city 10-14 of the past 30 years must meet additional conditions, including having previous marijuana convictions or a parent with a prior record. The judge’s action is in response to a lawsuit filed by Crystal Lowe, who wanted to apply for an adult-use retail license but didn’t meet the ordinance requirements, even though she has lived in Detroit 11 of the past 30 years. Friedman said that “while there is no right to obtain a business license in the state of Michigan, there is a right to be considered for such a license in a fair, reasonable and nondiscriminatory manner.” The judge cited a 1984 decision, the AP reported. Detroit officials told the Free Press that the city “will review the decision and develop a revised plan to address the concerns raised in the opinion.”

Alabama could add over $600M to its GDP in first three years of medical cannabis retail sales. Business intelligence from Akerna (Nasdaq: KERN) predicts that Alabama will make $600M in its first three years of medical retail cannabis sales. Akerna data analyzed the average retail sales history of current legal medical-only marijuana markets and then compared those figures to Alabama's population. Based on the study, Alabama is projected to retail around $48 million in its first full year of medical sales, ~$163 million in the second year, and ~$387 million in the third year of legal medical cannabis sales. 

Ayr Wellness Receives Provisional License to Sell Adult-Use Cannabis at Flagship Boston Dispensary. Massachusetts Cannabis Control Commission (CCC) has granted its local partner Sira Naturals a provisional license for the sale of adult-use cannabis at its Boylston Street location in Boston. Ayr’s flagship adult-use dispensary in Boston is located at 829 Boylston Street, in the heart of Boston’s Back Bay. The planned 4,500 ft² store is located next to the Apple Store and across from the Prudential Center, well-positioned for pedestrian traffic and easy access to the city’s public transit. The neighborhood is a popular residential community, as well as one of New England’s preeminent destinations for shopping and dining. The proposed Boston dispensary executed a Host Community Agreement (HCA) with the City of Boston’s Cannabis Board on November 16, 2020. The Company executed two additional HCAs in the Greater Boston area, one in Watertown on October 20, 2020, and a second in Somerville, where the Company currently operates a medical dispensary, on October 9, 2020. The CCC’s monthly meeting also included renewals of Sira’s three Media Marijuana Treatment Center (MTC) licenses, each of which covers cultivation, product manufacturing, and retail for medical marijuana. The renewed licenses were related to Sira’s Somerville, Watertown and Needham dispensary locations. 

BC to allow private cannabis retailers to deliver products to consumers starting July 15th. Building on changes made in 2020 that allowed stores to sell product online for pickup, the newest announcement from the BC government means consumers will be able to purchase product online from a retailer and have it delivered to them directly. Currently, the only legal way to purchase cannabis online in BC is through the BC Cannabis Store’s online portal. Orders are shipped through Canada Post, that has largely adopted a policy of not delivering cannabis directly to people’s homes, but instead directing them to pick up their packages from the BC Cannabis Store in their local postal center. The BC Cannabis Store will continue their online sales platform. Although the details are not finalized, the government also expects to begin their direct delivery program that will allow “small-scale” cannabis producers to sell directly to retailers in 2022. Small-scale is not limited to micro licenses and will also apply to cannabis nurseries. 

Cookies — San Diego, CA (Fashion Valley).

LEMONADE — South Sacramento.

GABY Owned, Mankind Dispensary Announces State-Wide Launch of New Lifestyle Cannabis Brand, Kind Republic. A successful six-month soft launch of Kind Republic™ at Mankind Dispensary generated over $1.0 million in revenue at a 71% gross margin. The benefits of GABY building its proprietary brands by placing them in its dispensaries substantially increase as GABY continues to execute on its dispensary consolidation strategy across California. Manufactured and distributed by GABY owned Sonoma Pacific Distribution, Kind Republic™ products will soon be available in dispensaries across the State of California.

Sprig’s THC Beverages to be Manufactured on Tinley’s Newly Installed Canning Line in Long Beach, CA. Sprig also sells its hemp-derived CBD-infused beverages in stores and online nationwide. Working with Tinley’s, Sprig is now re-introducing its THC-infused beverages—Citrus Original and Citrus Zero Sugar—to California dispensaries and licensed home delivery channels after receiving significant interest from dispensaries and consumers for Sprig in its original THC format. The CBD versions will continue to be manufactured in third-party facilities as California law prohibits manufacture of hemp-derived CBD products in cannabis-licensed facilities. Sprig reports that since inception, consumers have purchased nearly 3 million cans of Sprig, and consumers will now be able to enjoy these products in both CBD and THC versions, with the THC version available in California through licensed dispensaries and delivery.

AWH Deepens Commitment to Last Prisoner Project to Aid in Cannabis Criminal Justice Reform with $500,000 commitment by July 2022. The pledge, which is part of a partnership with LPP that was launched in July 2020, will see AWH commit to raising an additional $500,000 by July 2022 through a customer donation program at all AWH retail locations. The Company completed its previous pledge to raise a total of $250,000 through a similar customer donation program and company match of $150,000 this past February, five months ahead of its goal.


Deals

Columbia Care — $74.5M Private Placement Offering of 6.00% Secured Convertible Notes Due 2025. The Offering is being conducted on a "best-efforts" basis pursuant to an agency agreement entered into on June 17, 2021 between the Company and a syndicate of agents. The Notes will be senior secured obligations of the Company and will accrue interest payable semi-annually in arrears and mature on June 29, 2025, unless earlier converted, redeemed or repurchased. The conversion rate will be 154 common shares of the Company ("Common Shares") per $1,000 principal amount of Notes (equivalent to a price of ~S$6.49 per Common Share), subject to customary adjustments. The conversion price of the Notes represents a premium of ~25% over the closing price of the Common Shares on the NEO Exchange on June 17, 2021. The Company may redeem the Notes, in whole or in part, on or after June 29, 2023, if the volume weighted average price of the Common Shares trading on the Canadian Stock Exchange or the NEO Exchange for 15 of the 30 trading days immediately preceding the day on which the Company exercises its redemption right, exceeds 120% of the conversion price of the Notes.

The closing of the Offering is expected to occur on or about June 29, 2021.

This Convertible Note raise comes two days after the Company announced it will be acquiring Medicine Man for $42.0M upfront ($8.4M cash + $33.6M stock) — ~4.5x projected 2021 EBITDA. The transaction terms also include a potential additional milestone payment in 2022 if certain performance targets are met. Columbia Care Chief Growth Officer Jesse Channon spoke to Westword about the deal.

Hydrofarm Enters into Agreement to Acquire Aurora Innovations and its Organic Nutrients and Grow Media Operations for $161M. Hydrofarm will spend $161M using a combination of cash and ~$26 million in newly issued HYFM common stock. The referenced transaction consideration excludes a potential earn out payment estimated at ~$21 million based on achievement of certain performance metrics. Founded in 2000, Aurora is a family-owned business with a strong vertically integrated manufacturing base with three locations across North America. The company is dedicated to ethical and sustainable practices and offers comprehensive plant fertility product lines free from harmful chemical residues and pesticides. Aurora will add to Hydrofarm’s growing proprietary brand nutrient and grow media line-ups, including its first organic nutrient and premium soil brands. Hydrofarm will also gain new domestic manufacturing and distribution capabilities on the east and west coasts along with a peat moss harvesting operation in Canada.

Leafly has raised ~$23M of $30M funding target. Leafly is raising $30 million according to a filing from Wednesday. Leafly has raised ~$23M of the total $30M offering of convertible debt in the latest fundraising from 33 investors. A Leafly spokesperson told MJBizDaily that the company would use the money to “continue to stay focused on building out our consumer marketplace” with initiatives that include “scaling in local markets and ensuring sustained brand dominance on the East Coast as legalization trends accelerate market growth.”


👋 Newsletter curated by Dai Truong.