🔍Mercer Park Brand SPAC + Glass House Group combine to create CA brand-building platform in $567M deal

Canopy acquires Supreme Cannabis for ~$435M. Trulieve $198M public offering. Curaleaf raises $130M for EMMAC European operations. Fyllo $30M Series B.

Apr 12, 2021

🌿Industry

Marijuana Business Factbook projects ~$46B US market by 2025. The U.S. recreational and medical marijuana markets is expected to reach $45.9B in sales by 2025, or twice the level of sales projected for this year, according to the newly released 2021 Marijuana Business Factbook. U.S. adult-use and medical cannabis sales in 2021 are expected to reach $22-$26.4B.

Marijuana Business Factbook 2021, Marijuana Business Factbook projects nearly $45B US market by 2025

GTI poised to build out $50M cannabis facility in New York with local incentives. GTI has won local financial incentives to build out a $50M cultivation and processing facility in New York. The Orange County Industrial Development Agency indicated in a news release that the incentives were approved in March before New York lawmakers legalized. The incentives include a sales and use tax exemption and a 15-year property tax abatement in anticipation that GTI will create about 125 full-time employees at an office park in the town of Warwick. The Company plans to purchase the remaining eight lots available – about 40 acres – to build out a cultivation and manufacturing facility at the Warwick Valley Office and Technology Corporate Park. GTI is one of 10 medical marijuana operators in New York. It acquired the vertical MMJ operation from Fiorello Pharmaceuticals for $59.6M in 2019.

Koch-backed group joins marijuana push after Zoom with Snoop Dogg. What do you get when weed-loving rapper Snoop Dogg, right-wing billionaire Charles Koch and criminal justice reform advocate Weldon Angelos walk into a Zoom room? The Cannabis Freedom Alliance, a new coalition that could change the dynamics of the marijuana legalization debate. The organization includes Americans for Prosperity, the political advocacy group founded by the Koch brothers; the Reason Foundation, a libertarian think tank; marijuana trade organization the Global Alliance for Cannabis Commerce; and The Weldon Project, a nonprofit that advocates for the release of individuals incarcerated for marijuana offenses. The movement for marijuana legalization has long been dominated by left-leaning organizations like the Drug Policy Alliance and the National Organization for the Reform of Marijuana Laws. And despite a handful of congressional Republicans supporting the issue, most legalization proponents in Congress are Democrats. “We can’t cut with one scissor blade. We need Republicans in order to pass [a legalization bill],” said Angelos, founder of the Weldon Project. The group hopes Koch’s prominence among conservatives can help sway 10-12 Republicans to join Democrats across the aisle and pass Cannabis legislation.

Vice president: White House hasn’t yet ‘taken on’ federal marijuana reform. Cannabis reform advocates hope Vice President Kamala Harris eventually helps influence President Joe Biden to warm up to potential federal legalization. But apparently those discussions haven’t yet taken place, even as Senate Majority Leader Chuck Schumer of New York gets closer to introducing a comprehensive marijuana reform bill. “We haven’t yet taken that on, honestly, right now, we’ve been focused on getting people food, helping them stay in their apartments or in their homes, getting kids back to school, getting shots into arms. That has been all-consuming.” Harris told the San Francisco Chronicle. This is the first time either Harris or President Joe Biden has publicly talked about cannabis since the November election. Harris, meanwhile, might have adopted the president’s views on cannabis, according to Bloomberg. While she sponsored a comprehensive legalization bill during her time in the Senate, she went silent on the issue since joining Biden’s ticket and more pivoted to discussing his plans to decriminalize, rather than legalize, while campaigning. Taken together, the administration’s lack of focus on cannabis has come as a disappointment to advocates. But in the absence of White House action, Congress has made time for marijuana and could bring legislation to the fore soon.

Sales of marijuana products continue to grow in first quarter as some categories perform better than others. Retail sales from Headset showed clear winners, including beverages, capsules and edibles. The data also showed lackluster sales performances for vapes, pre-rolls and flower.

Chart showing the adult use marijuana category winners and losers for the first quarter of 2021

Nevada Cannabis Sales Reach Record High Despite Lag in Tourism. The Nevada Department of Taxation (NDOT) recently released sales and tax data from the state’s legal cannabis market for January 2021. Total retail sales reached a new record high for the state’s market to open this year. Meanwhile, wholesale prices in January were elevated significantly from December 2020, as well as from the same month a year prior. January’s monthly revenue numbers are up 30% year-over-year. Last year at this time, prior to the COVID-19 pandemic in the U.S., Nevada’s January 2020 sales represented a roughly 20% uptick from the same month the year before. As in several other state markets, early signs are that the expanded demand for legal cannabis that manifested during the pandemic may be here to stay in Nevada.

Other highlights:

At $1BExpected in Its First Year, New York's Legal Cannabis Market Means Business

11 Effective Ways to Turn Your Customers Into Loyal Product Advocates

Judge freezes Detroit marijuana business application process over residency dispute

Some Democrats pushing for North Carolina to be next to legalize

Lil Wayne to Throw 420 Parties at LA Coliseum for "Years to Come"

💵Deals

Mercer Park Brand Acquisition Corp. (SPAC) and Glass House Group — Business Combination to Create the Largest Cannabis Brand-Building Platform in California. Total consideration for all assets in the combination is ~$567M, representing a 2022E revenue and adjusted EBITDA multiple of 1.7x and 5.5x, respectively, and a respective 2023E revenue and adjusted EBITDA multiple of <1.0x and <2.5x. The full consideration amount includes $325Mfor Glass House, $219M for the Southern California Greenhouse (up to 6M sq ft) and $24M for the 17 Element 7 retail licenses (21 operational dispensaries by Q1 2022). Investors Commit to $85M PIPE — The combined public company is expected to have up to $355M in cash at Closing. BRND shareholders and the management teams of Glass House, Southern California Greenhouse, and Element 7 will roll 100% of their current ownership into Glass House Group stock.

Canopy Growth (NASDAQ: CGC) acquires Supreme Cannabis for ~$435M. The Transaction provides Supreme Cannabis shareholders with a premium per Supreme Cannabis Share of ~66% based on the closing prices of the Supreme Cannabis Shares and Canopy common shares on the TSX as of April 7, 2021. Canopy strengthens its brand portfolio including one of Canada’s leading premium brands, 7ACRES (Canada’s #1 premium flower brand position, #1 in PAX vapes, and Top-5 in pre-rolled joints). Brand growth is anticipated with distribution supported by Canopy’s robust sales and distribution network as well as superior consumer insights and R&D capabilities.

Curaleaf — completes EMMAC acquisition and secures $130M from a single strategic institutional investor. To accelerate the expansion of Curaleaf International, Curaleaf has secured an investment of $130M from a single strategic institutional investor in exchange for 31.5% equity stake in Curaleaf International, implying a $413M Post Money valuation, with $80M in cash available to spend. The subscription will fund the entire cash portion of the EMMAC acquisition consideration of $50M with the remaining $80M to be used to fund Curaleaf International's current capital expenditures plan through 2022, as well as its pipeline of potential acquisitions. This infusion of outside capital into Curaleaf International significantly accelerates Curaleaf's expansion plans in Europe by fully funding Curaleaf's cash outlay for the EMMAC acquisition and providing the capital required to support Curaleaf International's near-term European rollout. With its foreseeable expansion budget fully funded, Curaleaf's new international business can focus on executing its further European expansion.

Fyllo — Raises $30M Series B. The round was co-led by JW Asset Management and Sol Global. Additionally, Peter S Kraus, chairman and, CEO of Aperture Investors and former AllianceBernstein CEO joins the Company's Board of Directors. The round brings Fyllo’s total funding since its launch in 2019 to ~$60M. Fyllo plans to use this new capital to expand its company’s footprint. It believes that its work in the cannabis space proves that it can provide its tech solutions to other highly regulated industries. Fyllo co-founder and Chief Business Officer Aristotle Loumis told Chicago Inno that the company expects to double its entire employee headcount in the next 12 to 18 months. Currently, the company has ~120 employees.

Trulieve — prices 5,000,000 shares at C$50.00 ($39.63) per share for $198.1M. Trulieve has granted underwriters a 30-day option to purchase up to an additional 750,000 subordinate voting shares.

Cansortium (OTCQB: CNTMF) — second and final closing of its previously announced private placement of units at $0.70/Unit (1 common + 1/2 common warrant for 24 months at $0.90). The second closing was ~$5.2M, bringing the total Private Placement investment to $17.1M.

Other highlights:

Vibe Growth — acquires Desert Organics (Palm Springs, CA)

Verano — Completes Territory, Emerald and Local Joint Acquisitions in Arizona

Akerna — closes acquisition of Viridian Sciences

InterCure — Reaches agreement with Cookies to expand brand across Europe

Golden Leaf Holdings — Completes 80% acquisition of CBD Skincare Brand, Fifth & Root

Flower One — Issues Common Shares Term Lender per Term Loan Modification Agreement

Red White & Bloom — Receives Florida DOH, Office of Medical Marijuana Use Approval

📄Earnings

Verano — CY2020

Revenue: $355M (63% GM), 196% Y/Y
Net Income: $245M, compared to $10M in 2019
Adjusted EBITDA: $170M (48% margin)
CFO: $151M, FCF: $53M
73 operational retail stores and 770,000 sq ft of cultivation (includes pending acquisitions and construction in-progress)
On March 11, 2021, Verano completed a bought deal financing raising gross proceeds of ~$80M. Special Warrants sold in the offering were priced at C$28.50 per warrant and are exercisable into one class A subordinate voting share

4Front — Q4 and CY2020

Q4 Revenue: $25.0M, 2020 Revenue: $88.1M
Q4 Adjusted EBITDA: $5.9M (24% margin), 2020 Adjusted EBITDA: $5.9M
Reiterated FY2021 guidance for Systemwide Revenue of $170-180M and Adjusted EBITDA of $40-50M
The Company's existing licensed projects at maturity represent a long-term revenue and EBITDA opportunity upwards of $650M and $250M, respectively

KushCo — Q2 FY2021 (ended 2/28/21)

Announced transformative merger with Greenlane Holdings (NASDAQ: GNLN)

Raised $40M, used a portion of the proceeds to retire senior unsecured term debt

Revenue: $32.9M, 23% Q/Q and 9% Y/Y, driven by increased sales to the Company's top customers, including leading MSOs and LPs
GM: 20% (23% Non-GAAP), compared to (30%) Y/Y (22% Non-GAAP). The increase in GM is due primarily to the Company's restructuring initiatives, which led to prepaid inventory write-offs of $3.3M and excess and obsolete (E&O) inventory charges of $11.9M in FY Q2 2020

Net loss: ~$5.0M, compared to ~$44.4M Y/Y. Basic loss per share was $0.04 compared to $0.40 Y/Y.

Adjusted EBITDA: ($0.7M) compared to ~($14.8M) Y/Y

Cash: ~$35.0M as of February 28, 2021

🧔People

GTI — Swati Mylavarapu joins Board. Since 2017, Mylavarapu has served as Founder and Managing Partner of Incite.org, a hybrid incubator and investment fund that combines VC, philanthropy, and civic advocacy to accelerate bold ideas and solve some of the world’s most pressing challenges. She was an investment partner at Kleiner Perkins Caufield & Byers from 2015 to 2017. Prior to that, Mylavarapu built the early international efforts for the financial services and digital payments company Square.

Terra Tech — Tiffany Davis joins Board. Davis currently serves as CEO and CFO of Generation Alpha and prior to her appointment as CEO in October 2019, was Generation Alpha’s COO from February 2018. From 2016 through 2017, Davis worked as a senior executive for a US based cannabis consulting group supporting legal grows, assisting in license applications, developing programs for cultivators, business structuring for medical dispensaries, including developing M&A opportunities, and development of plans for several cannabis start-up ventures.

🏬New Store Openings / New Product Launches

Curaleaf — Horsham and Philadelphia, PA. The new Curaleaf-branded stores mark the company's 11th and 12th locations in Pennsylvania. The Company now has 104 locations across 23 states. Curaleaf successfully closed its acquisition of Grassroots on July 23, 2020. In connection with that deal, nine Herbology dispensaries in Pennsylvania—located in Altoona, Bradford, Brookville, Dubois, Gettysburg, King of Prussia, Lebanon, Morton and Philadelphia— have already been rebranded under the Curaleaf umbrella.

Liberty Health (Ayr Wellness) — Sebring and Palm Bay, FL. Becomes the 32nd and 33rd Stores in the State and increases Ayr’s total dispensary count to 49. Ayr Wellness completed the acquisition of Liberty Health Sciences in an all-stock transaction on February 26, 2021. The Company plans to have 42 stores open by the end of 2021. The Florida medical marijuana market continues to show robust growth with the Florida Office of Medical Marijuana Use reporting over 520,000 registered patients as of April 2, 2021, up 57% year-over-year.

Trulieve — Dunedin, FL (79th FL dispensary)

MedMen — Emeryville, CA.

Airgraft 2 — monthly subscription service launching May 15th for 1g pod for $18-80 depending on brand (vs. $35 for the average 1g 510 cart). Partners include: Gold Drop ($18/g), Friendly Farms ($20/g), Tutti ($24/g), Moxie ($25/g), flav ($30/g), Bear Labs ($34/g), Holy Water ($35/g), BaM ($40/g), IC Collective ($50/g), and Biscotti ($80/g).

💻Hiring

Curaleaf — Director, Strategy and Business Development (Wakefield, MA)

GTI — VP, Ecommerce (Chicago, IL)

Eaze — Director of Operations (Baldwin Park, CA)

Highly Objective