Dai Truong's Cannabis Newsletter - Issue #15
Canada “blew it” on cannabis legalization and is rapidly losing ground to the U.S. as a result, according to the founder of one of the top investment bankers to the industry.
A lack of policy innovation, a messy patchwork of provincial regulations and severe restrictions on marketing and branding have left Canadian pot companies eating the Americans’ dust, according to Neil Selfe, founder and chief executive officer of Infor Financial Group Inc.
“I think we had a real chance to be global leaders,” Selfe said in an interview at Bloomberg’s Toronto office. Yet eight months after Canada legalized recreational cannabis, Selfe sees Canopy Growth Corp. as the only Canadian pot company he would classify as a global leader, with big U.S.-focused firms outpacing the rest even though marijuana is still illegal at the federal level.
After six full months of operations, Massachusetts recreational marijuana sales continue to rise, with aggregate sales approaching $140M through the last week in May.
The marijuana market is consolidating rapidly – and some companies with unorthodox histories are taking the lead.
Harborside Commences Trading on CSE; Announces First Quarter Results and Information for Lineage Shareholders
Harborside, operator of the storied Harborside dispensaries in the San Francisco Bay Area, started trading on the Canadian Securities Exchange (CSE) under the ticker symbol “HBOR.” The Company went public through a reverse takeover transaction involving FLRish and Lineage Grow Company Ltd.
The nascent marijuana industry has made significant strides over the past several years. But the once-illicit marijuana market still has hurdles to cross before unlocking its full potential, according to executives at some of the world’s leading cannabis companies.
TILT Holdings Inc. (CSE: TILT), a leading provider of products and services to businesses operating in the cannabis industry, released a letter from the Company’s Interim Chief Executive Officer, Mark Scatterday.
One of Blüm marijuana dispensary’s owners is walking away with $6.3 million after a settlement. The settlement is not fully complete until her license is transferred to Terra Tech, the financial filings revealed.
The suit claims payments for cannabis delivery on Eaze are routed through phony businesses to get around credit card companies’ rules against using their services to purchase pot, making it look like customers instead bought pet supplies or outdoor gear, not joints or edibles. Eaze rejected those allegations and said individual cannabis dispensaries, not Eaze itself, are responsible for handling customers’ payments. Several Eaze receipts included as exhibits in the lawsuit state that marijuana purchases will show up on customers’ billing statements as being from obscure websites that appear to have nothing to do with cannabis.
Oregon has too much cannabis. Other states don’t have enough. A newly passed bill hopes to address the imbalance—and may lower prices for some consumers. The measure would authorize Oregon’s governor to enter into agreements with other states for purposes of exporting and importing cannabis. Such transactions would need to meet certain restrictions, for example the receiving state would need to border Oregon, and the cannabis would have to meet the legal and quality standards of the receiving state.
Privateer holds 75M (77% of outstanding shares) Tilray shares worth ~$2.9B at last Friday’s closing price of $38.80. That stake was worth more than $16B at the company’s peak price of $214.06 in September. Tilray will acquire Privateer in a downstream merger, releasing Privateer’s current stake to the market over the next two years in what is expected to be a tax-free deal for the fund’s investors. In the first year following the transaction, shares will be sold to institutional and strategic investors, which Tilray will determine. Remaining shares will be released over the second year at a staggered rate.
The state’s first medical marijuana law update in nine years cuts fees, adds testing, and tries to ensure access. Under the new rules, medical cannabis cards will be valid for two years instead of one. That will save patients the $150 application fee every other year. Patients will also save on annual doctor visit fees.
It’s become something of a cliché that if you have a problem that modern medicine can’t seem to fix, someone will eventually offer you CBD. It’s gone mainstream. Facebook, on the other hand, still treats CBD like the contraband it isn’t.
Kroger, the nation’s largest grocery chain, plans to sell CBD creams, balms and oils in nearly 1,000 stores, joining a growing list of retailers carrying the cannabis compound.
Gov. Greg Abbott signed a new law that clears up which CBD products are legal in Texas and will also allow local farmers to grow hemp as a crop. The law, which received bipartisan support in the state Legislature, goes into effect immediately.
Green Growth Brands Continues Rapid Expansion with Plans to Open Over 70 New Locations at Brookfield Properties
Green Growth Brands Inc. (CSE: GGB) announced an arrangement through which the Company will open over 70 prime shop locations with potential for more at Brookfield Properties’ shopping centers throughout the United States. These exciting plans will further expand GGB’s physical footprint to ~280 total locations by the end of 2019.
Currently there are 17 operating dispensaries within the city limits. A total of 32 dispensaries are allowed.
Vertical Companies™ to Expand Its Multi-State Operations & Brands with $462.5M Acquisition of UMBRLA Holding Company and Brands
UMBRLA is a holding company in the process of consolidating several highly-specialized cannabis subsidiaries currently active in California, Oregon, Nevada, Arizona, and Oklahoma. All of these entities will work synergistically and collectively be led by an experienced leadership team with a proven track record in the cannabis industry. UMBRLA will own one of the top 10 cannabis brands in California, growing organically from its manufacturing & distribution center in Oakland.
Leading Cannabis Infused-Products Brand Coda Signature Raises $24.4M in Series A Funding to Bolster Expansion
Altum Investments, parent company of The Grow Foundry California (d/b/a Coda Signature California), announced that it has closed a $24.4M. Coda Signature crafts premium cannabis-infused edibles, topicals and concentrates for medicinal and adult-use markets. Recognized as a leading innovator in product development, Coda Signature features bold flavor combinations and rejuvenating formulas made from only the highest-quality, natural ingredients.
Participants Include Khitan Capital, Cresco Capital Partners II, LLC, and The London Fund. Gross proceeds were $9.2M.
Creso was created to bring pharmaceutical expertise and methodological rigour to the world of cannabis and deliver quality products to people and animals everywhere. Founded by a team of highly-experienced pharmaceutical executives, Creso set out to leverage cutting edge science and research to develop, register and commercialise innovative cannabis and hemp derived products.
Trulieve Cannabis Corp. announced that it has priced its previously announced public offering of units of the Company comprised of an aggregate principal amount of US$70M of 9.75% senior secured notes maturing in 2024 and an aggregate amount of 1,470,000 subordinate voting share warrants.
Cresco Capital Partners, a private equity investment firm focused solely on making strategic investments in the legal cannabis market, announced the closing of an oversubscribed $60M fund (CCP Fund II). Since inception in 2014, Cresco has raised more than $85M in its two funds as well as a series of co-investments.
DionyMed Brands (CSE: DYME), a multi-state cannabis brands, distribution and direct-to-consumer delivery platform, announced that it has entered into an investment agreement with Alumina Partners (Ontario) Ltd. providing availability of up to CAD$32 million over a 24-month period, to provide funding for the expansion of the Company’s leading cannabis product portfolio into new growth markets.
Jushi Holdings Inc., a multi-state cannabis and hemp operator, announced the completion of its previously announced reverse takeover of Tanzania Minerals Corp. by the security holders of Jushi Inc.
The Company announced the closing of an acquisition of intellectual property from The Clinic Consulting ServicesTM, The BankTM and The LabTM and its award-winning operations team for a combination of US$4.1M in cash and US$5.9M worth of shares in relation to this asset purchase. The Clinic's™ expertise as an integrated operator and cannabis industry pioneer with sophisticated IP, KPI’s and SOP’s will complement Jushi’s expanding platform.
GABY is a U.S.-focused, consumer packaged goods company operating a house of brands in the cannabis industry and in the mainstream grocery channel. Through its wholly-owned subsidiaries The Oil Plant, Inc. (“TOP”) and Sonoma Pacific Distribution, Inc. (“Sonoma Pac”), GABY holds a manufacturing and a distribution license issued by the California Department of Health and the California Bureau of Cannabis Control respectively.
Plus Products (CSE:PLUS) announced that it has acquired an option to purchase Emerald Bay Wellness LLC, a California-based cannabis oil manufacturer. The option grants PLUS the irrevocable right, but not the obligation, to purchase all of the business assets of Emerald Bay Extracts for cash and stock consideration.
Ventura Cannabis and Wellness (CSE:VCAN) to acquire a cannabis dispensary based in Oakland, California that specializes in delivery of cannabis to the entire Bay Area. The business is expected to generate $1M in annual revenue with EBITDA of $100K.
In the latest episodes of the “migration saga,” a former President for Kellogg’s and a former DOJ senior official have joined cannabis companies.
KushCo Holdings, Inc. (OTCQX: KSHB) announced that Rodrigo De Oliveira has been named Chief Operating Officer (COO). Mr. De Oliveira joined the company in April 2018 and had been serving as the Company’s Interim COO since February of 2019. With more than 18 years of experience in global supply chain and operations, Mr. De Oliveira is well-versed in lean manufacturing principles and holds a Six Sigma blackbelt. In addition, the Company announced two key hires to the operations team, Calvin Coy as Vice President of Strategic Procurement, and Fabian Chavez as Vice President of Operations.