<< Back to All NewslettersCannabis Momentum:: January 22, 2021
Home to one of public cannabis’ best performers, ~$5b market cap Trulieve, the Florida medical cannabis market was again in the news recently as companies announced their moves into the Sunshine State, already a >$1 billion market:
- Cresco, having previously cancelled a $120m all-stock acquisition of Florida licensee VidaCann in 2019, announced its intention to purchase Bluma Wellness for $213m (all-stock),
- A couple of weeks ago, Ayr Strategies announced it would acquire Liberty Health Sciences for $290m (all-stock), and
- Several weeks ago, the large private player Verano Holdings announced that it would go public through an RTO while also merging with Florida licensee AltMed (23% of the combined entity before giving effect to the proceeds of the RTO, and $35m cash in installments to certain former AltMed owners).
Valuation is a dark art in the best of times, but especially when it comes to strategic mergers and acquisitions. What’s a good comp for the right to sell medical cannabis in Florida? Maybe the price of Florida itself - all of it, the land, trees, beaches, Keys, oranges, and swamps. In 1819 the U.S. agreed to purchase Florida from Spain for $5m in a hard bargain driven by then-Secretary of State, and future President, John Quincy Adams. The deal ultimately “closed” in 1822 with the Florida Territory becoming part of America. Adjusted for inflation, $5m is about $115m in 2021 dollars. A true value investor, John Quincy Adams presciently saw 199 years ago how attractive a cannabis market Florida would be today.
This week's Bite:
- 2nd time's a charm: Cresco announces intent to acquire Bluma Wellness for $213m (all stock), expanding the MSO’s footprint into Florida. This is their 2nd attempt to enter the market via acquisition following their terminated acquisition of VidaCann. (BizJournal)
- Move over 4/20: Unexpectedly, although maybe not in a year like 2020, 4/20, national day of cannabis enthusiasts everywhere, did not make it into the top ten cannabis sales days of the year (although some of this could be due to pre-lockdown stockups in March). (Akerna)
- SPAC-mania continues into 2021: The favored financial vehicle has enough momentum to continue the relevancy of SPACs into 2021. (Yahoo Finance)
- UFCannabis: Now stepping into the octagon are guys who used cannabis yesterday (not today though). (ESPN)
"Canna"nomics: January 15, 2021
Cannabis operators in the United States are rushing to take advantage of the currently favorable canna'nomic' environment. A unified Democratic government, albeit with thin control of the Senate, led to investor optimism, which in turn led to larger U.S. cannabis companies utilizing the resulting momentum to raise significant amounts of capital. Potentially tellingly, many of the raises are equity at a slight discount to market prices - far from the terms investors were demanding months ago. Investors wary of such large capital raises dampening stock prices, as notably happened with some large Canadian LPs, may be comforted by the fact that U.S. firms’ financial trajectories are distinctly different from their Canadian cousins - solid growth, with more players expected to inflect into positive cashflow from operations this year. Taken together, the financial and political developments foreshadow a year ahead that will be anything but dull.