The Talking Hedge

While the number of businesses that have failed is relatively small, many more failures are coming.

Summary:

Limited License States

Population Matters 

Adjoining States 

People Make or Break It

3 Skillsets You Need 

The "But I’m Not a Stoner" Bias 

An Overpaid C-suite 

Let's use Flow Cannabis recent failures as a learning example;

By vowing to help underground cannabis farmers in the Emerald Triangle become legal growers, Flow Cannabis Co. became the vanguard of the historic Northern California growing region. “At the end of the day, I felt like they used the farmers and the product that they got to be able to attract more investment capital.”

The business recently weathered layoffs and executive departures, including its president, chief operating officer and a co-founder of the company as well as the interim CEO. 

Further accelerating Flow Cannabis' fall was the fact its high-stakes wager was predicated on the federal government legalizing marijuana.

Flow Cannabis fell victim to many of the same factors that have undercut cannabis and mainstream businesses alike.

Its plight offers lessons for cannabis industry executives and investors, as well as small marijuana farmers, by shedding light on key issues that can trip up a company, an investor or, in this case, an entrepreneur.

Think overly ambitious goals, ill-advised assumptions (Uncle Sam would legalize marijuana sooner than later), tumbling wholesale marijuana prices and failure to read contracts carefully. A limited market makes success likely. A team that covers all the bases, is not filled with ego, and is paid reasonably will do well. 

The future will see more cannabis businesses go under than have so far, but much more money will be made than lost. 

Episode 878 The #TalkingHedge dives into Benzinga’s article...

https://youtu.be/28V-HMeY4bw

Practice doesn't make perfect, failure does.  

Ten years after Washington voters approved one of the nation’s first recreational marijuana programs, the state’s cannabis industry has become among the country’s largest, with annual sales of roughly $1.5 billion and more than 11,000 employees.

Yet as Washington state marks the 10-year milestone, industry executives and advocates say reforms are needed to address issues such as high taxes and a “gotcha” regulatory climate as well as a shortfall in minority participation.

They also argue that companies face a funding squeeze and that more needs to be done to make the state’s cannabis industry more competitive if and when the federal government legalizes marijuana.

Episode 876 The #TalkingHedge dives into MJ Biz Daily’s article...

https://youtu.be/8N2gHdqZ0v4

Portugal has long been ahead of other European countries in its understanding and stance on drug reform. Culturally, the Portuguese look favorably on herbal rather than pharmaceutical solutions presented by Big Pharma. 

Saint Vincent and the Grenadines, a Caribbean nation with a population of just over 110,000 people, exported 110 pounds of cannabis to Germany, making it the first Eastern Caribbean state to export medical marijuana.

Thailand decriminalized cannabis paving the way for home cultivation and an entry scheme to attract marijuana enthusiasts from all over the world.

Cannabis with traces of more than 0.2% THC is still illegal in Thailand. Nevertheless, the Thai Food and Drug Administration is plugging the idea of permitting travelers to roam freely in approved districts or provinces consuming “happy brownies.”   

The #TalkingHedge dives into Benzinga’s articles...

https://youtu.be/f_X4KguPBuE

The cannabis industry has come a long way since the beginning of the year. Here’s a recap of the top seven stories that defined the year for cannabis users in 2021.

With an ongoing pandemic, a new president and Congress and five new state cannabis markets worth a collective $5 billion, 2021 has been a year like no other for the cannabis industry.

From full cannabis legalization in New York to the launch of a modest medical marijuana program in Alabama, cannabis reform continued to spread across the U.S. in 2021 amid the ongoing backdrop of the COVID-19 pandemic and other hot-button political issues.

And while federal prohibition remains in place, the year saw major movement toward reform on the federal level, including a number of new legalization bills in Congress and slow, steady progress on cannabis banking.

In a year marked by partisan divisions, the year also saw more GOP lawmakers than ever take the lead on cannabis, helping craft and introduce bills in at least 10 states as well as Congress.

The year also saw its share of cannabis-related disappointments, including the fact that Congress failed to pass any meaningful marijuana reform bills despite the Democratic majority and President Joe Biden’s yet unfulfilled campaign pledges to stop criminalizing people over cannabis.

The suspension of U.S. sprinter Sha’Carri Richardson for a positive THC test, which kept her from competing in the Tokyo Olympics, also made international headlines and frustrated advocates. But the widespread criticism of the penalty has sparked a review of the marijuana policy, with advocates hopeful it will lead to lasting reform.

Episode 874 The #TalkingHedge dives into MJ Biz Daily’s article...

https://youtu.be/ACQkVzwRjnA

The cannabis industry has come a long way since the beginning of the year. Here’s a recap of the top seven stories that defined the year for cannabis users in 2021.

With an ongoing pandemic, a new president and Congress and five new state cannabis markets worth a collective $5 billion, 2021 has been a year like no other for the cannabis industry.

From full cannabis legalization in New York to the launch of a modest medical marijuana program in Alabama, cannabis reform continued to spread across the U.S. in 2021 amid the ongoing backdrop of the COVID-19 pandemic and other hot-button political issues.

And while federal prohibition remains in place, the year saw major movement toward reform on the federal level, including a number of new legalization bills in Congress and slow, steady progress on cannabis banking.

In a year marked by partisan divisions, the year also saw more GOP lawmakers than ever take the lead on cannabis, helping craft and introduce bills in at least 10 states as well as Congress.

The year also saw its share of cannabis-related disappointments, including the fact that Congress failed to pass any meaningful marijuana reform bills despite the Democratic majority and President Joe Biden’s yet unfulfilled campaign pledges to stop criminalizing people over cannabis.

The suspension of U.S. sprinter Sha’Carri Richardson for a positive THC test, which kept her from competing in the Tokyo Olympics, also made international headlines and frustrated advocates. But the widespread criticism of the penalty has sparked a review of the marijuana policy, with advocates hopeful it will lead to lasting reform.

Episode 874 The #TalkingHedge dives into MJ Biz Daily’s article...

https://youtu.be/ACQkVzwRjnA

Are any public cannabis companies potential Leveraged Buyout (LBO) or Recap candidates?

The recently announced Curaleaf (OTCQX: CURLF) acquisition of Bloom can be considered an LBO. The acquisition, valued at 8x 2021 EBITDA, included 6x EBITDA in seller notes as consideration.

Neither Curaleaf nor its subsidiaries will guarantee the debt, which will only be by recourse to the equity and assets of Bloom.

Only one company in Viridian Capital Advisors database- Red White & Bloom (OTCQX: RWYBF) appears to be trading low enough for a full buyout. Several other companies, however, appear to be capable of repurchasing a significant portion of their outstanding equity.

AYR Wellness is the only company on the list that publicly announced a share repurchase program, with others appearing to be candidates. Seventeen other companies tracked do not have analyst estimates but may be potential candidates.

Partial recaps may also be an attractive alternative means of providing cash to owners in private companies.

The combination of languishing stock prices and more available and lower-cost debt could lead the cannabis industry in a direction few of us would have expected a year ago.

Episode 873 The #TalkingHedge looks at Viridian Capital Advisors Chart of the Week...

https://youtu.be/7uCXVKLKn8s

Summary:

E-commerce & Future of Retail

Compliance in cannabis

Safe Banking's impact

Revenue model & exciting new markets

M&A activity

SPAC / IPO (NASDAQ: MAPS)

Cannabis stocks & Federal legalization

Stock Buybacks

Crystal Ball Predictions

WM Technology (NASDAQ: MAPS) signature consumer-facing platform, provides consumers with information regarding cannabis products, including online ordering, local retailer and brand listings, product discovery, and consumer education on cannabis and its history, uses, and legal status.

MAPS was founded in 2008 with a strong belief in the power of cannabis and the importance of enabling safe, legal access to consumers worldwide. Since then, MAPS has worked tirelessly to be more than just the most comprehensive platform for consumers.

Given MAPS strong global footprint, deep relationships with participants at all layers of the supply chain, and understanding of the policy landscape at the federal, state, and local levels, WM Technology is positioned to continue its role as a technology provider serving the cannabis economy.

Episode 872 The #TalkingHedge Interviews Arden Lee & Chris Beals of WM Technology...

https://youtu.be/clP2CbOOYgw

The volume of cannabis capital raised in the first two weeks of 2022 has been significantly lower than in any comparable period going back to 2018.

The average deal size was $7.0 million vs. $70.4 million in the same week last year. Three equity deals totaling $492M by AYR, Columbia Care, and Curaleaf skewed last year's totals.

The valuation gap between the most prominent companies and everyone else continues to be a prime driver of M&A activity. One M&A transaction closed this week with a total transaction value of $0.53M compared to three transactions with a total value of $431.4M in the prior year.

Episode 871 The #TalkingHedge looks at Viridian Capital Advisors’ Cannabis Deal Tracker…

https://youtu.be/k91s4FcoJgE

Analysts have slashed hundreds of millions of dollars off their 2022 sales forecasts for three Canadian cannabis producers, reflecting an increasingly competitive landscape across the adult-use industry, falling overall prices and poor execution by some executive teams.

The BAD ETF (BAD) debuted on Wednesday to target an index focused on gambling, alcohol and cannabis stocks.

The ETF will track companies that make most of their cash from selling alcohol, cannabis, casinos or gaming, as well as developing pharmaceutical products. “We don’t think social stigma should be a primary factor when it comes to deciding what’s a good investment.”

Multistate operator Curaleaf Holdings (OTCQB: CURLF) announced the acquisition of Bloom Dispensaries, a private, integrated Arizona marijuana operator, in a deal valued at $211 million.

This acquisition should be viewed as a leveraged buyout (LBO), one of the first in the cannabis industry.

Episode 870 The #TalkingHedge dives into #potstocks...

https://youtu.be/mayay-aBD6E

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Cannabis sales surged in January after falling four consecutive months across all 15 markets Headset currently tracks, with 2021 sales totaling $1.84 BILLION.

California is the December sales leader with $442.7M. Year-over-year sales growth continues its single-digit trend with many states experiencing negative YOY sales growth.

Decreased average basket size trend continues, while the number of transactions continues to increase- indicating consumers are still going to pot shops more often, but spending less per transaction. This could mean consumers are trying to avoid higher minimum delivery requirements and opting to go to dispensaries and buying only what they need instead.

Brand concentration has remained relatively steady, however, it's anticipated that consolidation will pick up as Canadian companies and private equity and venture capitalists come into the space in anticipation of U.S. Federal legalization to snap up under-valued cannabis prospects in hopes of a legalization rally that'll spark the next wave of cannabis stock speculation.

Episode 869 The #TalkingHedge dives into Headset’s data…

https://youtu.be/8ep-oPfzwfs

#CannabisIndustry #CannabisData #MarijuanaData #CannabisAnalytics #MarijuanaAnalytics #CannabisSalesData #MarijuanaSalesData