- Baked In
- Posts
- 🍃 The Sector Has Life 🍃
🍃 The Sector Has Life 🍃
Anthony Varrell
July 30, 2024
GM Everyone,
The sector felt alive yesterday with a nine-figure deal hitting the tape, thanks to Verano Holdings and The Cannabist, and Boris Jordan coming on the livestream to drop some bombs regarding rescheduling. As of yesterday, we were 100 days out from the election, and I think we will see momentum continue from here for the entire sector.
Don’t forget we have Irwin Simon of Tilray on the livestream today at 3 PM for a special deep dive into their earnings print from yesterday.
Today’s letter can be read in 8 minutes and 26 seconds.
💸 High Impact
The Price Was Right
The What - Verano Holdings Corp. (OTCQX: VRNOF, CA: VRNO) has agreed to acquire The Cannabist Company Holdings Inc. (Cboe CA: CBST, OTCQX: CBSTF) operations in Virginia and Arizona for $105 million. This acquisition will significantly enhance Verano’s market presence and allow The Cananbist Company to derisk its balance sheet.
In Virginia, Verano will acquire Columbia Care Eastern Virginia LLC, making it the sole cannabis operator for Health Service Area (HSA) 5, which includes major cities such as Virginia Beach, Chesapeake, and Norfolk. This area is home to nearly two million residents. The Virginia operations include one cultivation and production facility and six dispensaries. The unique structure of Virginia’s cannabis program, which permits only one cannabis operator per HSA, provides Verano with a significant competitive advantage. Additionally, Virginia’s program allows home delivery across the state and wholesale opportunities to other HSAs, enabling Verano to serve patients statewide.
The total consideration for the Virginia operations is $90 million, to be paid with $20 million in cash, $40 million in Class A subordinate voting shares, and a $30 million promissory note. Based on our internal research at TDR, the Class A shares of Verano could be worth $10.08 per share or $102M compared to the current market price of $40 million. The proceeds from the financing will allow The Cannabist Company to deleverage its balance sheet. Depending on the terms of the shares and promissory note (note yet fully disclosed), the proceeds would significantly improve the company’s current ratio and total asset to total liability ratios, putting The Cannabist Company closer to a similar risk profile as its peers for financial leverage.
Verano will acquire 203 Organix, L.L.C. and Salubrious Wellness Center, Inc in Arizona. This acquisition includes one cultivation facility, a production facility, and dispensaries. Upon closing, Verano’s total cultivation footprint in Arizona will expand to 90,000 square feet across three facilities, and its dispensary count will increase to eight, with new locations in Tempe and Prescott.
The Why - Once these acquisitions are finalized, Verano’s operational footprint will span 14 states, with 15 cultivation and production facilities and 150 dispensaries. This expansion aligns with Verano’s strategy of entering and scaling operations in limited-license markets to enhance both wholesale and retail capabilities.
George Archos, Verano’s Chairman and CEO, stated, “Today’s agreement further diversifies Verano’s portfolio, which, since the company’s inception, has remained focused on expanding our business into limited-license markets to scale both our wholesale and retail operations. This opportunity greatly increases Verano’s growth trajectory as we gain access to the coveted market of Virginia ahead of an adult-use program and deepens our footprint in Arizona.”
The Cannabist Company will retain its operations in the Richmond, Virginia area (HSA 4), maintaining approximately 80,000 square feet of cultivation and manufacturing capacity, five retail locations, and one additional location in development.
📈 Dog Walkers
Tilray Reports FY Record 26% Revenue Growth
Tilray Brands (Nasdaq: TLRY; TSX: TLRY) has released strong financial results for the fiscal year ending May 31, 2024. The company reported a 26% increase in net revenue for fiscal 2024, reaching $789 million. This beat the average estimates of Wall Street analysts that had predicted $783M.
This growth was driven by strong contributions from the cannabis and beverage-alcohol segments. The beverage-alcohol sector experienced remarkable growth, with net revenue soaring by 113% to $202 million. The cannabis segment also showed strong performance, with a 24% increase in net revenue to $273 million.
Trulieve Expands To 142 Locations In Florida
Yesterday, Trulieve announced the opening of its new location in Ocala, FL. This brings the grand total of dispensaries in the state of Florida to 142, giving them the largest footprint by far in the state. Trulieve has a stranglehold on the Sunshine State in terms of dispensary locations, and with the potential passing of Amendment 3 in November, it could put them in pole position for the number one spot in the sector.
Greenlane Is On Life Support
Greenlane Holdings reported earnings yesterday, revealing a $4.5 million loss for the quarter. With revenue falling to $4.9 million from $24 million a year ago, YIKES. That precipitous drop in revenue for one of the “picks and shovels” plays within the cannabis space should be a deep cause for concern. That, paired with only $157,000 cash on hand, leaves me scratching my head as to why anyone would choose to invest in this company at this point. This might be just another one that we add to the scrap heap of cannabis casualties.
🗞️ 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
MSOS Monday: Curaleaf Boris Jordan Talks Rescheduling + $CBST & $VRNOF Major Announcement
What we covered:
✅ On the latest Trade To Black Podcast episode with special guest, Boris Jordan, Chairman of Curaleaf (OTC: CURLF). We dive into the latest rescheduling developments from Washington, his take on the results from the comment period, and whether or not this will have an impact on marijuana stocks as we head into Q4 2024.
Dan Ahrens from Advisor Shares (NYSEARCA: MSOS) will also be joining us to provide a recap of the week for cannabis stocks and share insights on potential rallies for the industry.
Additionally, hosts Shadd Dales and Anthony Varrell will be joined by Verano Holdings (CBOE: VRNOF) Chairman, George Archos, and The Cannabist Company Holdings (CBOE: CBST) President, Jesse Channon. They will discuss the agreement between the two companies and its implications.