Cannabis Investors Need to Get Ready for These Changes Ahead

You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.

Friends,

Two weeks ago, we suggested that the Global Cannabis Stock Index, then down 43% in 2022, was likely to bottom before year-end. It has fallen further (by 15.4% subsequently) and is now about 52% lower this year. The bullish factors we cited then are still intact, and we are more interested than two weeks ago at these lower prices. Despite that, we are clearly in a bear market for stocks generally, and our optimism doesn’t help in choosing the best time to enter or to expand positions in the cannabis sector. The future looks very bright in contrast to the price action lately, and we want to discuss how investors should be prepared for changes ahead.

We are expecting big market growth in several states. Illinois is currently increasing its dispensary count by more than 100%. Two weeks ago, we mentioned Eastern states generally. Today, we want to refine that observation and mention New York and New Jersey, both transitioning to adult-use, at the top of the list. Virginia can also be included, and there are some other states like Maryland, Ohio and Pennsylvania that may move to legalize adult-use as well. The big takeaway is that investors need to be ready for strong top-line growth.

Beyond that, there are other factors investors should understand. First, capital-raising could get challenging. New operations typically consume cash, and not all cannabis companies are in a strong position at this time. Investors need to be in a position to avoid capital raises, as they can now depress the equity price of the issuer substantially.

A final area that investors should consider is market positioning. There are some multi-state operators that are in many states already and their ability to expand into new states at this time is in question in our view. Simultaneously, there are MSOs that have a more concentrated market presence. The smaller MSOs come to mind, such as Ascend Wellness, Jushi and TerrAscend as well as Planet 13 Holdings. Each of them has new markets coming on now but is also in a position to expand to new markets. The California operators have expansion opportunities as well.

We remain uncertain about the timing of improved prices for cannabis companies, but, as we said two weeks ago: the current valuations seem too low. We expect prices to rise as the fundamentals stabilize and improve in the future.

Jushi Holdings Inc. is a national, multi-state cannabis company operating high-end retail locations, premium brands and state-of-the-art cultivation, processing and manufacturing facilities. The company’s platform is designed to set the new standard for a sophisticated, modern cannabis experience.

In recent news and a big win for medical patients, their families, and caregivers across Pennsylvania, Jushi along with others operators in the state can now immediately restock earlier recalled products, thanks to the Court order that lifted the stay of temporary injunctive relief previously imposed. Jushi is one of the select few fully scaled retail providers in Pennsylvania.

Get up to speed by visiting the Jushi Holdings Investor Dashboard that we maintain on their behalf as a client of New Cannabis Ventures. Click the blue Follow Company button in order to stay up to date with their progress.

Exclusives

Michigan’s cannabis sales fell 4% sequentially in May but increased 25% year-over-year to $186.4 million. While medical sales fell nearly 48% year-over-year to $23.3 million, adult-use sales rocketed 56% to $163.2 million.

New Jersey launched its adult-use cannabis sales on April 21 with strong sales. The first month consumers purchased $24.2 million at the 12 dispensaries approved to sell adult-use cannabis. Eight public companies are approved for adult-use sales in the Garden State. BDSA is predicting that New Jersey’s adult-use sales will push the state to become one of the fastest growing cannabis markets in the country.

During the past year-and-a-half Jushi has expanded its operations from a handful of grow rooms to 10. And, with a change in regulations, the company brought new genetics to Pennsylvania. In an exclusive interview, Founder, Chairman and CEO Jim Cacioppo discusses the company’s growth and what the future holds for Jushi.

Private multi-state cannabis operator Holistic Industries, which started 12 years ago focusing on limited-license markets on the East Coast, has found success in winning merit-based licenses. The company is in 11 states and Washington, D.C. In an exclusive interview, Founder and CEO Josh Genderson talks about its past expansion and its plans going forward in 2022.

PharmaCann is focusing on lean operations and converting working capital to cash. In an exclusive interview, CEO Brett Novey discussed how PharmaCann expects to compete and where the company sees opportunities.

Earnings

Fire & Flower’s Q1 revenue decreased 4% sequentially to C$40.9 million and declined 7% from $C44.1 million compared to last year. Newly appointed CEO Stéphane Trudel is focused on the next phase of the company’s evolution by growing its Hifyre cannabis consumer technology platform, expanding its Pineapple Express Delivery service and integrating their wholesale and logistics segment.

High Tide Q2 revenue increased 12% sequentially to C$81 million and was up 98% from $40.9 million a year ago. President and CEO Raj Grover noted that the company’s continued EBITDA positivity is a critical point “as we are steadily growing at the same time when many of our publicly-traded and private peers are facing fierce challenges and slowing down.” The company has 126 stores across Canada with plans to have 150 by the end of the 2022 calendar year.

Deals

Loyalty and marketing platform springbig and Tuatara Capital Acquisitions Corporation completed their previously announced merger in which TCAC has changed its name to SpringBig Holdings, Inc. and began trading on the Nasdaq Global Market. The company serves more than 1,300 clients with more than 2,400 retail locations

Tilray Brands says it has revised its deal with HEXO to improve the terms of its previously disclosed agreements that provide for, among other things, an additional discount to Tilray Brands’ purchase price, as well as the reduction of the conversion price under the HEXO Note. The deal is expected to close next month. Irwin D. Simon, Tilray Brands’ Chairman and CEO, said it will accelerate the company’s operational turnaround and “is an essential next step in improving our capital structure, and we’re confident that the synergies realized will reset the industry.”

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View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

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Sincerely,
Alan & Joel
info@newcannabisventures.com

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email