👊 The Pick Is In! 👊

Author

Anthony Varrell
July 16, 2024

GM Everyone,

Donald Trump finally announced his long-awaited VP selection yesterday at the RNC, choosing JD Vance. As far as I’m concerned, Senator Vance is neutral on cannabis and shouldn’t really be seen as a net positive or net negative for the space. He did vote no on SAFE Banking but also commented that he would have voted yes if the language was amended. We call that progress. This is all still very far from being clear on how this will impact the space, so we will be keeping a close eye on this in the coming weeks and months leading up to the election.

Today’s letter can be read in 8 minutes and 26 seconds.

What's Driving the Market Today?

Stock futures are up a small amount this morning:

  • Fed easing hopes grow; Powell hints at a rate cut.

  • Trump re-election chances spike post-convention.

  • China's economic woes hit luxury goods demand.

  • Goldman Sachs beats profit estimates; shares rise.

💸 High Impact

Ascend Wellness Tackles Major ReFi

The What - Ascend Wellness Holdings, Inc. (CSE: AAWH.U, OTCQX: AAWH), a multi-state, vertically integrated cannabis operator, yesterday made headlines with its announcement of a $235 million private placement of 12.75% Senior Secured Notes due 2029. This strategic financial arrangement, aimed at refinancing existing debt, marks a significant milestone in Ascend's growth trajectory. John Hartmann, CEO of Ascend Wellness, provided detailed insights into this development during TDR MSOS Monday Trade to Black Podcast.

Hartmann highlighted the importance of this refinancing initiative, stating, "We are thrilled to refinance $215 million of our existing term loan 13 months before its maturity. This refinancing marks a significant milestone for Ascend." The new senior secured notes are expected to enhance the company's financial flexibility by replacing higher-cost debt with more manageable terms.

The refinancing effort underscores the strong relationships Ascend has cultivated with its lenders. "The support from a majority of our existing term loan lenders, including all of our four largest lenders, highlights their trust in our strategic vision," Hartmann emphasized. This trust is further reflected in the favorable terms of the new notes, providing Ascend with a more sustainable financial structure.

The new notes, carrying an interest rate of 12.75% per annum and maturing on July 16, 2029, offer Ascend a five-year runway to focus on its growth objectives without the immediate pressure of refinancing. Hartmann noted, "The 5-year notes financing reflects the confidence our lenders have in our business and growth prospects, while enhancing our financial stability and flexibility."

The Why - Ascend plans to use the net proceeds from the offering, along with cash on hand, to prepay $215 million of its existing term loan. The remaining $60 million of the term loan will be carried through to its existing maturity at a lower interest rate of 9.5%. "The partial refinancing of the Term Loan through the issuance of new senior secured notes is expected to enhance the Company's financial flexibility and strengthen its balance sheet," Hartmann explained.

"We remain committed to driving value for our shareholders and expanding our footprint," Hartmann stated. The successful refinancing allows Ascend to focus on its core business operations and expansion plans across key markets, including Illinois, Maryland, Massachusetts, Michigan, Ohio, New Jersey, and Pennsylvania.”

The offering follows Ascend’s announcement of its fifth consecutive quarter of generating cash from operations, signaling strong financial health. "At the end of the first quarter, that was our fifth consecutive quarter of positive cash from operations," Hartmann highlighted. This operational success has undoubtedly contributed to the confidence shown by existing and new institutional noteholders in Ascend’s long-term viability.

📈 Dog Walkers 

Czech Republic to Pursue Full Adult-Use Cannabis Market

Leaked documents suggest that the Czech Republic is planning to establish a fully commercial adult-use cannabis market. This development indicates a significant shift towards broader legalization and regulation in the country. The goal for the system would be for it to resemble what we see in California or Canada in terrms of a free adult use market.

CA State Fair Allows Marijuana Sale and Consumption

The California State Fair has made history by allowing the sale and consumption of marijuana on its grounds for the first time. This decision marks a significant milestone in the state's approach to cannabis normalization. This is great to see as far as overall acceptance but I would be interested to find out the logistics on site. While this is one step in breaking down the stigma of the plant I can’t help but think a function like the fair is heavily attended by children.

Wiz Khalifa Arrested in Romania for Cannabis Possession

Rapper Wiz Khalifa was arrested in Romania for cannabis possession during his European tour. Authorities detained him briefly before releasing him, and the incident has sparked widespread media attention. The moral of the story is here is act like you have been there before. If cannabis is going to get you in trouble in a foreign country, please refrain.

🗞️ The News

📭 Research

Initiating Coverage: Green Thumb Industries - Download Here

Reconfirming Buy Rating: MariMed - Download Here

Initiating Coverage Of Verano Holdings Corp. - Download Here

Initiating Coverage: TerrAscend - Download Here

📺 YouTube

Which Five Small Cap Stocks Would We Buy?

What we covered:

✅ On this episode of MSOS Monday Trade to Black with Dan Ahrens from Advisors Shares, the manager of the MSOS Cannabis ETF. Today, we are joined by special guest John Hartmann, the CEO of Ascend Wellness Holdings (CSE: AAWH.U, OTCQX: AAWH), to provide an update regarding the company's $235M debt refinancing to explain how this will strengthen the company balance sheet.

Dan Ahrens will also share what buying and selling trends he sees in the MSOS ETF and marijuana stocks and what this will mean for future cannabis stock prices.

As usual, TDR Trade to Black co-hosts Shadd Dales and Anthony Varrell will update viewers on the most important cannabis regulatory and stock news.