Higher Exchanges

The show begins this week by sharing due diligence tips when visiting a grow or dispensary. With cultivation, the group agrees there is no one way to grow great cannabis, but there are a handful of best practices. Regarding retail, location, parking, product selection, and budtenders were on the top of the list.

Curaleaf CEO Matt Darin joins the conversation to talk about their new line of hemp-derived THC products. He shares the vision for the project and how it can complement their current cannabis business. We dig into the products, formulations, and who is the target market. The conversation concludes by talking about pricing and how to compete with more affordable cannabis and alcohol products. 

Off the top, the guys discuss Verano's announcement of a share repurchase program. The company authorized the repurchase of up to $50 million of shares and we debate whether this is a good use of capital. Toby is more bullish on the program, while Morgan is more concerned about preserving cash and investing for growth. 

The Cannabist Company CEO David Hart joins the show to cover their recent restructuring and Florida divestiture news. David explains the rationale behind the Florida decision and how they are leaning into their core markets. Ohio is a key new state, and David walks us through their five-store footprint, tier-one grow, and the process for adding three new stores. Morgan digs into the Colorado market, and David explains how they have optimized those assets and built a strong core retail presence. The conversation concludes with David recapping balance sheet priorities. 

As always, Morgan has another fun question for Ask Grok. 

The episode begins with Toby elaborating on a recent X post stating that a large $90b pension plan recently invested >$100m in a leading cannabis-focused fund. This led to a broader discussion about how institutions are approaching investing in cannabis.

The conversation evolves into what's taking place in Florida. We recently saw a Fox News poll showing 66% support for legalizing adult-use cannabis. Meanwhile, Governor DeSantis recently came out against legalizing cannabis while simultaneously vetoing a bill that would bring new restrictions to the state’s thriving intoxicating hemp market.

The show concludes with another timely installment of Ask Grok. 

It's merger mania week--or merger maybenia as Morgan called it--and this week's show is dedicated to the potential partnerships between GTI and Sam Adams and Cansortium and RIV Capital. 

We tackle GTI and SAM off the top with an overview of the proposed merger and discuss the timing and synergies. We debate the timing and wonder why now as we are just approaching potential federal reform and meaningful TAM expansion if Florida flips adult use. The group also covers potential synergies in the sales and distribution, plus expanding the cannabis beverage category. 

Cansortium and RIV Capital are planning to merge, with the deal expected to close in the fourth quarter. The team talks about how it is hard to find a compelling balance sheet and income state, and perhaps this partnership effectively marries those two pieces. Toby offers perspective on the structure, and Morgan raises hurdles that may make it challenging to close, and this is reflected in the already wide deal spread. 

The show closes with Morgan asking Grok who is buying who in the proposed GTI/SAM merger. 

With Toby on holiday this week, Morgan and Jesse kick off this week's show by reviewing recent price action and contrasting it with reality. While falling share prices have eroded sentiment, there are positive developments. 

Ohio is beginning to turn on adult-use stores next month, and we analyze key dates, estimate the potential size of the adult-use market, and dig into MSO exposure in the Buckeye State. With 43 MSO-owned stores that may expand up to 70 in the near term, this is an important market for public operators, especially those with Level One grows that can add three additional stores and still have the capacity to participate in the wholesale market.

The show ends with a brief analysis of the Farm Bill and changes that may impact the hemp-derived cannabinoid space and Morgan Ask's Grok about the worst M&A deal in history

Nick Gastevich, known as CannaVestments online, joined us this week. He is one of the most experienced cannabis investors  and manages a family office that is active in the space.  

We discussed cannabis stock’s adverse reaction to the positive momentum on rescheduling and debated time frames for a final ruling. The heart of the conversation centers on first-quarter earnings, and we evaluated top-line growth and EBITDA conversion and analyzed cash flow metrics. 

The conversation concludes with an evaluation of different factors investors can use when analyzing cannabis stocks. 

Cresco CEO Charlie Bachtell joined us this week to discuss the proposed rule on Schedule III and the company's recent earnings results. Cresco is active in Washington, and Charlie shared his perspective on Schedule III’s next steps, timing, and impact on Cresco's business. 

We also dug into Cresco's progress. 2023 was the year of the core, and Charlie highlighted the tough decisions they made to cut costs and rationalize the footprint. He also explained Florida's importance and the efforts they are making to help pass adult-use legislation this fall. He closed by telling us, "Every year is now the year of the core; it is just who we are."

The episode concludes with another fun edition of Ask Grok. 

Verano Co-Founder, Chairman, and CEO George Archos joined the show to discuss the company's recent quarter. The business is beginning to generate significant cash flow, and George shared how he expects revenue to grow and opportunities to use the financial flexibility. We also asked about optimizing Florida assets ahead of the potential adult-use transition and M&A strategy. 

The second half of the show is about free cash flow yields. Jesse provides an overview of the metric, and Toby shares how he uses it to analyze investments. The trio then discusses how GTI, Verano, and Ascend free cash flow yields compare and discuss optimizing cash flow and growth. 

The episode concludes with everyone's favorite segment, Ask Grok. 

Today, we heard the welcome news that the DEA is agreeing with the HHS recommendation to move cannabis from Schedule I to Schedule III.  Boris Jordan, Executive Chairman of Curaleaf, joins at the top of the show to share his thoughts on the next steps in the process, the timing of a final ruling, potential risks along the way,  implications for institutional interest, and the specific impact of 280E on Curaleaf's business. 

Hirsh Jain, founder of Ananda Strategy, joins for the second half and helps us better understand the similarities between cannabis's path to legalization and what happened with gay marriage. He also gives his perspective on the time frame for the DEA final ruling, advances in medical research, and how Schedule III may impact state election outcomes. We close by asking Hirsh his biggest concerns about this process and potential stumbling blocks.  

This was an exciting day. Thank you to our regular listeners, and welcome to the new ears learning about this space. 

It's a quieter time in cannabis, but this was a fun show. We started by reviewing the 4/20 holiday, focusing on the revenue lift and which categories performed best. Beverages were a top seller, and the guys debated the category's future and who will drive its growth. 

We debuted a new game called "buy or sell" that led to several fun debates on rescheduling probabilities, how to play a potential rescheduling bounce, when Florida may eclipse California in legal cannabis sales, and whether dispensaries will exist in twenty years.