🤝Mo' Money + M&A

Village Farms raises $135M. Ayr closes $125M. Subversive Capital / The Parent Company deal closed. Cresco Labs acquires Bluma Wellness, raises $125M. Jushi acquires Palm Springs & Grover Beach stores.


🌿Industry

Trulieve — Filing of Resale Registration Statement on Form S-1. Trulieve filed a resale registration on Form S-1 with the United States Securities and Exchange Commission (SEC) and, upon effectiveness, it will become a U.S. reporting company. Speculation is that the Company did so in order to qualify for an uplisting, when allowed.

USADA “essentially” eliminating marijuana use as UFC violation. Beginning retroactively Jan. 1, a positive drug test for carboxy-THC, will no longer be considered a violation — unless USADA is able to prove that an athlete intentionally used it for performance-enhancing purposes. UFC senior vice president of athlete health and performance Jeff Novitzky told ESPN that the decision means USADA's burden of proof on any positive drug tests for cannabis would be extremely high, "essentially" de-emphasizing marijuana sanctions completely. Novitzky said USADA would have to prove a fighter was "impaired" due to cannabis just prior to the fight in order to impose a sanction.

New Hedge Fund Honest Capital gains 88% with bets on just 9 companies (including GTI). Founder Shawn Badlani launched the San Francisco-based firm in May and it remains small at <$100M AUM. The firm owns just nine stocks, including advertising platform Cardlytics, digital media company IAC and Cannabis MSO Green Thumb Industries (GTI). Badlani had been a partner at Marcato Capital Management for nearly a decade, until that firm shut in 2019. His former boss, Mick McGuire, learned about activist investing at William Ackman’s Pershing Square Capital Management, and investors expect Badlani to follow in their mold. At some point, he may start activist campaigns to push for operational improvements at companies and his firm name is supposed to represent the advice he will give CEOs, whether they like it or not, a person familiar with his thinking said. GTI is also a favorite of value investor Bill Miller, who bought 352,000 shares of back in November because he likes the growth prospects, management team, and strategy (capital allocation & operating). His fund has $2.3B AUM so the ~$10M stake still has room to grow.

New York appears better positioned than before to legalize $2B+ recreational marijuana market. Industry officials cite the following factors as reasons they believe it will get done in this year’s Legislature, either through a stand-alone bill or through Cuomo’s budget bill this spring:

  • Democrats now have super-majority control of the state Legislature

  • The state faces a $15B annual budget deficit as the economic impact of the coronavirus pandemic continues to put a drain on state coffers

  • Recreational marijuana legalization in New Jersey at the ballot box in November has escalated the pressure on New York to act

Are recreational Cannabis sales in IL underperforming given the state’s large population? While Illinois topped $1 billion in total cannabis sales in 2020 as consumers scooped up adult-use products, the new recreational marijuana market there might actually be underperforming when considering the state’s large population. Illinois consumers purchased 14.5 million recreational marijuana products last year, generating $669 million in sales. Oregon’s first year netted $87.38 per capita and Colorado’s $61.78, while Illinois brought in only $52.81. With a population of 12.7 million people, Illinois has a few million more residents than Colorado and Oregon combined.

Halo Labs Is Positioning Itself For Federal Cannabis Legalization And Cross-Border Commerce. Based in Oregon, Halo Labs is a cannabis extraction company that recently expanded to flower and pre-rolls. The company has significant presence in two West Coast cannabis markets: Oregon, where it was founded in 2016 and is among the largest producers and distributors, and California, where Sidhu says (unironically) the company is “growing like a weed.”

“What oranges and grapefruits are to Florida is what cannabis is to Southern Oregon and Northern California. In the current state-by-state market, states in other parts of the country simply do not have access to the same quality of cannabis. — Halo Labs CEO, Kiran Sidhu

What We Know About Biden’s Cabinet on Cannabis.

Merrick Garland (Attorney General) — In the 2012 caseAmericans For Safe Access v Drug Enforcement Administration which examined whether the DEA had meaningfully considered the potential use for cannabis as a medical therapy, Garland joined the majority opinion which sided with the DEA.

Janet Yellen (Treasury) — Chair of the Federal Reserve from 2014 to 2018, during which the agency denied Colorado’s Fourth Corner Credit Union, a non-profit cooperative formed by state-licensed Cannabis businesses – its application for a master account. That decision forced the state’s cannabis operators to continue doing business on a cash-only basis.

Marty Walsh (Labor) — Boston Mayor opposed the 2016 ballot initiative to legalize cannabis in the state but seems to have an improved stance on cannabis vs. four years ago, he’s pro-union so any movement there with the industry should help.

Tom Vilsack (Agriculture) — During his time as Iowa Governor, adopted the National Governors Association policies on illegal drugs, which included an anti-legalization platform.

Gina Raimondo (Commerce) — Rhode Island Governor actively pushed for legalization in her state and included adult-use legalization in her 2020 budget. The plan would have included provisions opposed by many industry activists — banning home cultivation, cap on THC %, and putting sales in the hand of the State.

Deb Haaland (Interior) — Works with the USDA to develop some cultivation rules and overseeing legalization on Tribal lands. Currently serves as Representative of NM and is a member of the House Cannabis Caucus, voted in favor of the MORE Act last year.

2020 Cannabis Sales Data (Akerna)

Top Sales Days: 1. New Year's Eve (12/31) - $89.4M, 2. Green Wednesday (11/25) - $87.4M, 3. Wednesday Before Christmas (12/23) - $87.3M, 4. Black Friday (11/27) - $86M, 5. Friday Before Halloween (10/30) - $85.8M

Sales by product type: Flower – 45%, Cartridge/Pens – 32%, Concentrates – 14%, Infused Edibles – 8%, Other – 1%

Sales by age groups: Under 30 – 27%, 30-40 – 30%, 40-50 – 20%, 50-60 – 13%, Over 60 – 10%

Other highlights:

Silver Spike SPAC extends business combination deadline from 2/12/21 to 7/10/21

Aphria CEO thinks likelihood that U.S. eventually builds too many greenhouses than the market can handle – similar to what Canada experiences – is high

Why the Future of Cannabis Branding Could Be Determined on the East Coast

November Cannabis sales push CO past $2B annually for the first time

MI Cannabis Sales Surge in December to Reach $985M in 2020

IL sitting on $62M in Cannabis revenue meant to foster businesses and help neighborhoods hurt by poverty and violence

AR Medical Marijuana sales hit $175M in 2020, could double this year


💵Deals

Cresco Labs expands to FL via $213M all-stock Bluma Wellness acquisition.

Bluma Highlights:

  • Bluma Wellness (One Plant Florida), has 7 dispensaries with 8 more locations under legal control and planned to open

  • One Plant stores rank 2nd highest in per-store sales of smokable flower

  • 54,000 sq. ft. of cultivation space (with planned expansion of cultivation capacity, processing lab, and edibles kitchen)

Village Farms International ~$135M Offering. 10,887,09 shares at $12.40/share.

Cresco Labs raises $125M. 3.3% discount to the last close as of January 14, 2021. 100% of the Offering is expected to be purchased by a total of seven new and existing institutional investors, including current shareholder, Wasatch Global Investors.

Ayr closes $125M Offering. 4,600,000 shares at a price of C$34.25/share for ~C$157,550,000 (0.79 CAD:USD), which included the exercise in full of the over-allotment option granted to the underwriters.

Subversive Capital Acquisition Corp. Closes SPAC — Launching The Parent Company. Common Shares are now Trading on the NEO Exchange Under the Symbol "GRAM.U" and OTCQX Under the Symbol "SBVCF"; Starting January 19, 2021 the OTCQX Symbol Will Change to "GRAMF." The Company has $381M in cash after the redemption window, ~$350M net of transaction expenses and other fees.

Jushi — acquires Palm Springs & Grover Beach dispensaries. 100% of Organic Solutions of the Desert (OSD) and ~78% of the equity of a retail license holder located in Grover Beach with the rights to acquire the remaining equity in the future.

Other highlights:

Canopy acquired option to purchase 1.07M shares of TerrAscend (26.8% ownership)

Flower One Receives Notices of Default on Delayed Debt Payments on $30M Loan

Vext Science — $18M bought deal

MedMen — additional $10M debt under Gotham Green Facility


📄Earnings

Aphria — Q2 FY 2021:

  • Net Revenue: C$160.5M, up 33% Y/Y, 10% Q/Q

  • Net Cannabis Revenue: C$67.9M, up 99% Y/Y, 7% Q/Q

  • Adjusted EBITDA: C$12.6M

  • Cash Cost Per Gram Decreases for the Fifth Consecutive Quarter to $0.79

  • Completed Accretive Acquisition of SweetWater


🧔People

Harborside COO, Greg Sutton, departs. He joined the Company in November 2018 as VP, Finance and became COO in October 2019.

Josh Rosen (former CEO and current Chairman of 4Front Ventures) joins Bengal Capital as Managing Partner. At 4Front, Rosen helped lead the transformation of a consulting firm formed in early 2011 into an MSO, most notably with the acquisition of Cannex Capital in 2019, which brought production capabilities to 4Front. Prior to 4Front, Josh gained PE experience managing the investment portfolio for a large family office and was an equity analyst at Credit Suisse.

Jerry Derevyanny joins Bengal Capital as a Principal. Jerry was previously General Counsel at Northwest Cannabis Solutions and subsequently helped found, take public, and serve as the Head of Corporate Strategy for Cannex Capital. Following 4Front’s acquisition of Cannex, he continued on in an executive and General Counsel role working closely with Josh.

Victor Mancebo joins Vireo Health Board. Mancebo previously served as President & CEO of Liberty Health Sciences. He has ~20 years of experience in a variety of operational, retail, and agricultural leadership roles.


🏬New Store Openings / New Product Launches

Columbia Care — Receives Provisional License for Adult Use at its Patriot Care Dispensary in Downtown Boston.

Trulieve — 2nd Gainesville Dispensary (71st in FL)

Gage Cannabis — Grand Rapids, MI (6th in MI)

America is Back Kit by Chelsea Handler — launches exclusively at Sweet Flower and Apothecarium. Pure Beauty pre-rolls, Garden Society chocolates, Sundae School merch.

A post shared by Chelsea Handler (@chelseahandler)

💻Hiring

Jushi — Vice President of Internal Audit (Boca Raton, FL)

Agrify — General Counsel (Burlington, MA)

NorCal Cannabis — Corporate and Retail Controller (Santa Rosa, CA)


🤷‍♂️Somewhat Relevant

Molson Coors launches CBD sparkling water exclusively in Colorado


👋 Newsletter curated by Dai Truong.