However, he and other cannabis experts believe thatHunterdon County has the potential to become a robust cultivation center — if applicants seize opportunities here and towns approve of adult-use cannabis.
According to Todd Johnson, treasurer for the state Cannabis Trade Association and thehead of operations for Justice Cannabis Co., cultivation facilities or greenhouses where marijuana is grown require large amounts of land — up to “two, three, four, even five acres of land.”
“In that respect, Hunterdon County is an excellent cultivation location because the availability of land is much more prevalent than in urban centers,” Johnson said.
Hunterdon County is one of the most rural counties in the Garden State, just last year preserving at least 500 acres land. However, Sarah Trent, the founder and CEO of Valley Wellness, emphasized that it’s “going to be a stretch” for farmers to begin growing outdoor cannabis in New Jersey, particularly because growers stillcannot establish cannabis operations on farmland-assessed property under the new adult-use legislation.
“These old-time farmers that are getting state tax incentives, that will disqualify them from being able to use that land unless they’re willing to give up those tax incentives,” Trent said. “So you cannot grow cannabis on any land or really take any benefit from any state tax incentives if you’re growing cannabis.”
Both the climate of New Jersey and the price of land in Hunterdon County pose additional problems for potential farmers in the region, Trent added.
“If you’re growing in New Jersey outdoors, you’re only going to get one or maybe two harvests — so it doesn’t make a lot of sense unless your business model is made for that,” Trent said. “And generally, land is really expensive in Hunterdon County relative to Warren County or down South in Cumberland, or the Vineland area, which is really also the heart of New Jersey agrarian community.”
However, Johnson pointed out that the cost of land in more rural regions like Hunterdon County tends to fall in comparison to those in urban areas.
“I think that a lot of it does come down to the cost of land, where urban areas and acres of land can go to upwards of a million and a million and a half. But in rural towns, they might be as low as $100,000 an acre,” Johnson said. “That’s more affordable of an operation in a place like Hunterdon where the land is more prevalent than in an urban area.”
Trent also acknowledged that there’s “a real need” in Hunterdon County for medical marijuana in particular.
“If you live in Hunterdon County … before The Apothecarium (in Phillipsburg) opened, you’re looking at traveling an hour or more if you’re a medical patient to get your medicine,” Trent said. “And for patients that have serious medical conditions, you can’t travel an hour.”
Medical patients remain prioritized under the latest legislation, as existing operators can’t start selling adult-use cannabis until they can certify to the commission that they have enough product to meet patient demand first, Trent explained.
“You do want to locate where there is a healthy population of aging folks that might be using cannabis for pain relief, or if they’re going through cancer treatments and they need not only pain relief but also potentially an increase in appetite,” Johnson said.
Moreover, Trent recognized that — in the absence of the potential for outdoor cultivation — “there’s room in Hunterdon County” for greenhouse space. Greenhouses and other indoor facilities are the most common ways to grow marijuana in the Northeast, according to Trent.
“I think finding a greenhouse — that could be a legitimate, competitive way to get a permit in Hunterdon County,” Trent said.
Edmund DeVeaux, president of the New Jersey CannaBusiness Association, added that the agrarian culture of Hunterdon County makes it an especially suitable region for the cultivation of cannabis.
“From a municipal zoning and planning perspective, if you have an agricultural community, a greenhouse absolutely fits the character of your municipality,” DeVeaux said. “So it’s not like you would be changing or altering the character or the characteristics of your community by allowing greenhouses; it’s all agricultural.”
Chuckling, he also added that the non-urban nature of Hunterdon County means that there’s “fewer neighbors to worry about.”
“As opposed to a place where people will come out in droves, presumably for or against, here the population is manageable,” DeVeaux said. “You will have little to worry about with respect to having to control rumors and false narrative as it pertains to what the cannabis industry can do or does. It’s just fewer headaches.”
Still, the presence of cultivation facilities or greenhouses in Hunterdon County depends largely upon approval from municipal officials. Some municipalities in the county have already proven to be more cannabis-friendly than others, including Readington Township — which is in the process of welcoming a medical marijuana production facility — and the Borough of Flemington — which is holding a work session at its next Council meeting to discuss adopting an ordinance allowing marijuana dispensaries.
According to Johnson, the “first step” to gaining approval to cultivate either adult-use or medical marijuana in regions in New Jersey is to “find a friendly municipality or a municipality that is at least considering it.”
“You have to have great relationships with the municipality if you want to be successful in this business, and that goes not just for the mayor and the city council, but the zoning officers, the planning board, the chief of police and the police department,” Johnson said. “You want to be a good neighbor in every sense of the word.”
Amanda Hoover contributed to this report.
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Highlighting that cannabis is useful for therapeutic and economic purposes, the Attorney General thinks it’s high time Barbados turns the corner on how this drug and its users are viewed by society.
Although he believed his words may smoke out a „mixed reaction from some”, Attorney General Dale Marshall was adamant about pinpointing how cannabis can be used to reap positive results. He made his remarks as the Drug Abuse Prevention and Control Amendment Bill 2021 was debated yesterday evening.
Speaking at the 13th sitting of the second session of the 2018-2023 House of Assembly, Marshall pointed out that in Barbados there is still a negative attitude towards individuals who use cannabis. However, it is paramount to keep up with the changing times.
„In Barbados, there is still though an attitude towards cannabis use which seems to condemn individuals as being criminals and the worse of the worst…”
Asserting that his intention was not to dictate what anyone’s stance on cannabis use ought to be, he said, „Those are deeply personal matters, but I am here to bring to this Chamber an initiative that we feel as an Administration is important, not in terms of what our attitude towards cannabis is but our attitude towards the users of cannabis…They say hate the sin, but love the sinner. I think that…perhaps is a good place to begin.”
„I don’t want Barbadians to be criminalized for something that we could otherwise, treat to them for.”
Stating „I don’t use cannabis. I’m happy to say I never used…but there is a generation of our young men and women” at university and secondary school levels who have experimented with marijuana, the AG went on to assert that we cannot turn a blind eye to the fact that cannabis use is not even seen as drug use in some spheres. Having seen various situations in regional islands and in Canada, he said that „It [marijuana use] takes on a whole other aspect.”
Therefore, he said, „what is important though has to be the recognition that criminalizing cannabis use is not necessarily the solution for us…”
Looking at the Act, he said that it establishes „that the possession of cannabis is a criminal offence, plain and simple, and it is to be visited by the harshest of penalties. But in the same way we recognize that things change in our society, we have to ask ourselves, is this the appropriate approach in 2021 for our young men and women?” he asked.
Marshall noted that the first known use of cannabis was for therapy but explained that sometime later in history the drug was associated with deviant behavior.
„History and research show that cannabis a far back as a hundred or more years ago has been seen as therapeutic such as cerasee bush, wonder of the world and all kinds of things.
„At some point in time, the view of the international community began to see cannabis in a negative light and as a pernicious drug in itself. They also saw it as being a gateway drug to other drugs. That is the attitude that has dominated the legal landscape not just in Barbados but for most of the Caribbean and many other countries across the world.”
He added that persons have been more accepting of the drug in recent times because it has been proven to be „useful” to aid certain medical conditions.
„In recent times however there has been a shift in the prevailing winds as far as cannabis use is concerned. And that shift comes from many directions. It is now accepted that cannabis is an aid to certain medical conditions. There were early reports that cannabis use was very helpful to those individuals who had to take the HIV cocktail.”
Marshall further went on to explain that cannabis can not only be used for therapeutic purposes but a means of economic growth. He revealed that government has been seeking consultation on this matter and are not „embarrassed” for going in that direction.
„People and that includes Barbados are now looking at the whole area of medicinal cannabis as not just a good thing in itself but as an opportunity for economic advancement and enfranchisement.”
Therefore, he urged: „It is important for the state to provide economic opportunity and economic enfranchisement. Medicinal cannabis is a well-respected and precious opportunity. We are not at all embarrassed that we are going in that direction. We had consultation on it and so on. „
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KIRKSVILLE, Missouri (KYOU) – Medicinal marijuana may have some negative connotations attached to it but Kathleen Beebe who is the regional manager of the Missouri health and wellness dispensary says it is actually quite beneficial, especially to veterans.
“I was talking to a veteran yesterday who said when he came home from his tour he had PTSD and I think he listed about 10 medicines he was on and they were all some pretty strong serious medicine and he said they weren’t working for him and he tried cannabis and now he doesn’t have to take any more of those medicines.”
she says there is a tax on it designed just to help veterans in need.
“With the Missouri program there’s a 4% marijuana tax and that goes 100% to veterans programs to support the veterans.”
she says the medication is used for issues with PTSD, anxiety, sleep disorder, cancer, epilepsy, Parkinson’s’, and more. Some of the negative myths around cannabis use according to Beebe are just that.
“There are stories about people who smoke cannabis or marijuana are lazy or aren’t contributing to society and that’s just not true, in fact, people often get their lives back after using cannabis as medicine.”
There is a campaign called it’s my medicine that allows those suffering to voice their experiences once they turned to cannabis for relief.
She says if you are a Missouri resident experiencing those symptoms, then be sure to have that talk with your doctor first.
Hemp-derived CBD was somewhat of a stranger at that time, but the non-psychoactive cannabinoid’s popularity catapulted a multi-billion-dollar market that not only includes tinctures, oils and vapes, but also CBD-infused drinks, topicals and edibles. The overall U.S. CBD market reached $4.2 billion in sales in 2019, according to a report by the Brightfield Group, a resource organization with artificial intelligence-driven consumer insights.
But as U.S. farmers made a rush to meet the hyped demand for CBD, prices plunged. Market saturation resulted in warehouses and barns full of unsold supply throughout the country. In Minnesota, 74.4% of hemp acres planted in 2019 were meant for CBD extraction, while grain-type hemp represented 25.2% and fiber represented 0.4%, according to the Minnesota Department of Agriculture’s (MDA) annual report.
But with price drops in the 2019 CBD market, an alarming amount of biomass went unsold. Even in February 2021, some plant material from two seasons ago has yet to be processed. Responding to that market saturation, Minnesotans shifted their focus to grain hemp, which represented 48% of acres planted in 2020, while CBD dropped to 38% of acres planted, fiber grew to 9% and cannabigerol (CBG) represented 5%, according to that year’s annual report.
Jeremy Saueressig, the owner of SporoBio, a farm-to-table hemp company in Hastings, just southeast of Minneapolis, that specializes in farming, consulting, processing and product development, kicked off his first grow in 2019, partnering with a half-dozen farmers to plant more than 100 acres of CBD-type hemp, from which they ended up harvesting about 80 acres because some fields grew hot, he says.
“We probably overproduced,” Saueressig says. “We’re still monetizing the crop from ‘19 now. We’re still actually processing ‘19 crop. It was just unbelievable how much biomass we had from that. I mean, we’ve processed quite a bit of 2020 crop too, but there’s still 2019 around. People still have it, which is crazy.”
Overall, Minnesota’s 4,690 acres planted outdoors in 2020 was a 36.2% decrease from the 7,353 acres planted in 2019. Also, there were 444 licensed growers in 2020—71 fewer than in 2019.
Multiple factors played a role in those decreases, including, but not limited to, crops testing above the legal tetrahydrocannabinol (THC) limit of 0.3%, as well as the market saturation, says Tony Cortilet, the MDA industrial hemp program supervisor.
“A lot of [growers] might not have gotten licensed again in 2020 because they probably got hit pretty hard,” Cortilet says. “And that also probably caused some issues between buyers and sellers, with them going into 2019 with high expectations and promises of, ‘Hey, if you grow this much hemp, bring it to me and I’ll buy it for “X” amount.’ And then those prices couldn’t be honored once the fall came around because of the midsummer price slumps.”
Hemp biomass prices were fetching more than $4 per percentage point of CBD content per pound in July 2019, according to three PanXchange benchmarks—covering Colorado, Kentucky and Oregon. But as the U.S. supply roughly quadrupled from 2018 to 2019, the trading value dipped. By November 2019, after farmers harvested their crops, biomass transacted in the range of $0.80 to $1.40 per percentage point of CBD content per pound, according to PanXchange.
In other words, if growers had 100 pounds of plant material with 10% CBD content, a processor contract at $1 per percentage point would be worth $1,000—much less than $4,000 at $4 per percentage point.
Launching his operation in 2019, Saueressig says the input costs at SporoBio were more than $12,000 an acre, depending heavily on sourcing genetics and obtaining the proper certificates of analysis. The average yield for CBD hemp biomass was 1,039 pounds per acre for Minnesota farmers in 2019, according to MDA. Above the curve, SporoBio’s machine-harvested yield can produce upward of 4,000 pounds per acre, Saueressig says. For hand-bucketed yields, SporoBio expects around 2,000 pounds per acre, he says.
On the lower end—2,000 pounds per acre for hand-bucketed yields—SporoBio would have had in the vicinity of 160,000 pounds of biomass from the roughly 80 acres it harvested in 2019.
If 20 acres grew hot—or tested above the 0.3% allowable THC limit—that was the equivalent to roughly $240,000 in lost input costs for SporoBio in 2019, as well as the equivalent of more than $400,000 in lost trading value, based on a benchmark of $1 per percentage point of CBD content. (Although, SporoBio does its own processing, including extraction, so biomass trading value isn’t as relevant as it would be if Saueressig was trying to sell his raw materials.)
“Overall, I thought it was a great, great learning year,” Saueressig says. “It sucked for the guys that went hot, and we kind of coordinated it where we formed a six-person co-op because we didn’t know who was going to fail or who would grow big, and that’s how we’re dividing up all the sales now, is just equally among the acres of the growers. So, nobody lost their shirt yet.”
In 2020, Saueressig says SporoBio just about halved its input costs at roughly $6,000 an acre. His goal in 2021 is to further reduce his input costs to $2,000 an acre, leaving him a much greater margin for profits. And, of course, preventing crops from growing hot helps too.
In 2020, the MDA collected 762 samples from hemp growers. Of those, 77 tested above the 0.3% THC threshold, which is a 10% failure rate. In 2019, the failure rate was 13%. That downward trend is promising, Cortilet says, but it’s also a result of more farmers shifting their business models to incorporate grain, fiber and CBG.
In 2020, hemp varieties grown for grain tested at 0.06% THC, on average, in Minnesota, while CBG tested at 0.11% THC and fiber tested at 0.22% THC, according to the MDA annual report. Meanwhile, hemp grown for CBD tested at 0.32% THC on average—a 0.03% increase from 2019. In other words, farmers have a much better rate of remaining compliant with grain, fiber and CBG.
“It’s unfortunate if you’re in that [10%] failure rate,” says Cortilet, whose department is in charge of the state-administered tests.
“We need remediation at some level,” he says. “This is going to kill the industry, you know, forcing a person, who has no intent of growing marijuana, as defined, and they buy their seed thinking everything’s great. Then they put it in the ground, and something happens beyond their control. Why should they be penalized financially like that? We don’t do that for any other crop.”
Before SporoBio launched its hemp operation in 2019, Saueressig says he partnered with Grain Handler, a Minnesota-based manufacturer of equipment used in the post-harvest processing of multiple types of grain. The company also built SporoBio post-harvest equipment for drying hemp, which Saueressig says he foresaw as a bottleneck of the industry.
As of early March 2021, Saueressig was focused on upgrading his processing capabilities, which not only include drying, but also encompass grinding, extraction and distillation, he says. A year earlier, he hired a lead chemist—one of the top-paying jobs in the industry—to run that side of his operation.
“That was the best investment we made yet, because he can get us there a lot faster, you know, he just understands chemistry and that’s what extraction is, a hundred percent of it,” Saueressig says. “I don’t second guess that hire any day of the week.”
The CBD distillate market is leveling off in Minnesota, Saueressig says, while CBD isolate—a crystalline solid or powder comprised of near pure CBD—is what’s in demand, so that’s where SporoBio is shifting its focus.
While Saueressig appears to be all in with his CBD operation at SporoBio, investing roughly a couple million dollars in his processing capabilities, he says, the barrier of entry into the CBD hemp industry is not for everybody. For many farmers, gambling $10,000 of input costs for an acre of hemp that may or may not grow hot, is not in the bag.
In 2020, Minnesota farmers planted 56% percent of the projected 8,400 acres that were licensed, Cortilet says.
“They might say, ‘I’m going to do 1,000 acres,’” Cortilet says. “And then they realize how much Cherry Wine costs per seed, or clone, and then they go, ‘Oh, I can’t afford that. I’m going to cut that into a quarter, and that’s what I’m actually going to plant.’”
While there was that rush to plant CBD hemp in 2019, Minnesotans focused primarily on grain-type hemp during the first three years of the state’s pilot program, with 94.7% of crops dedicated to grain hemp in 2016, 99.3% in 2017 and 87.9% in 2018. Then came the CBD hype in 2019, when grain hemp dropped to 25.2% in the state.
But with market saturation and the costs associated with CBD hemp, grain took back over in 2020 with 48% of farmers shifting their focus to that hemp type. The average total cost of production per acre for CBD hemp, for 10-plus acres grown, was $5,995 for Minnesotans in 2019, while the average total cost of production per acre for grain hemp was $502, according to MDA.
“We had a re-uptick in seed (grain-type hemp), which was promising,” Cortilet says. “I think you’re going to see that continue. So, this market saturation [for CBD hemp] will most likely correct itself. I’m assuming in every state across the U.S. more people will be producing seed and finding a market. It’s just, seed is so easy, right?”
In a state like Minnesota, where agriculture is row-crop centric, there’s a foundation of cleaning seed for sale, Cortilet says. In other words, there are plenty of facilities for a farmer to take his or her crop to get it cleaned, dried and have it stored. The main challenge right now is getting more facilities that are hemp-specific, Cortilet says.
“We have quite a bit of diversity up here compared to, like, Iowa, which is primarily corn and soybeans,” he says. “We have a lot of small greens We have a lot of sunflower plants that, you know, they’ll take hemp in. The problem is they have to have enough of it at that particular time to clean up their assemply line from one commodity to allow hemp to come in. They can’t mix them, which means they can’t just get a couple of trucks from farm ‘X’ over here, which was what was happening early on. There just wasn’t enough hemp seed for them to clean. So, it’s really that those [acres planted] are impacted by, ‘Where do I bring it to?’”
Once more facilities geared toward grain hemp are built, then more farmers would likely switch their operations toward that grow, especially if market saturation for CBD hemp continues with volatility, Cortilet says.
But volatility in agriculture is not confined to hemp. Various circumstances, such as weather events wiping out an entire harvest, can affect the struggles or successes associated with other crops. Proper storage is key to taking advantage of the market, Cortilet says. When it comes to storing tens of thousands of pounds, or more, of CBD hemp biomass, that’s not always convenient.
However, grain and fiber cultivation practices are more on the same wavelength of traditional farming, whether commercial or organic, where farmers are always storing something, Cortilet says.
“You’re built for that,” he says. “You’re going to preserve your crop until the right time to sell, and the right time always isn’t at harvest. I’m not sure if the cannabinoid market is there, but I think it’ll get there. I’m not an expert, but I can say this: a lot of the folks getting into that area of hemp production, I would not say they’re all what you would typically call a traditional farmer, and that’s kind of cool.
Welcome to the Deep Dive Video Essay Series. Today we are looking at US Cannabis.
Okay, so with the Senate recently flipped blue, Biden and the Democrats now have control over the Presidency, Senate and House, investors who follow cannabis stocks are now expecting the US to head towards some form of either descheduling or legalization.
Call it recency bias, but we believe the path is opening up for a new cannabis bubble. Except this time in the US, with major exchanges, access to apps like Robinhood and institutional capital pouring in that will make the Canadian pot stock bubble of 2018 look tiny.
Cannabis stocks have been around for years. Some are already even listed on the NYSE and NASDAQ, such as Canopy Growth, Aphria and Tilray – but the big difference is – the presence of US operations. For the most part, US operating companies haven’t been able to access the big American exchanges, because their business model involves producing and selling cannabis which is still a schedule 1 drug. Thus they haven’t been able to access popular retail trading platforms like Robinhood; which should in theory drive stock prices upwards.
The common blanket statement you hear about cannabis companies in general is the idea that they aren’t making money. Which is somewhat true, the Canadian operators are still not making money and are still in the process of rightsizing their operations. Conversely, many of the U.S operators are generating positive EBITDA and operating cash flow.
You may ask yourself “what’s the difference between Canada and the US?”
It’s a much larger population.
There are limited licenses in large states like New York and Florida
US Operators can brand, market, and own every part of the process from seed to sale. Meaning they can grow their own product, process it, package it, and sell it in their own stores. So in todays video, I want to chat about who we at the Dive believe are the top 6 best-in-class operators in the US
Trulieve Cannabis (CSE: TRUL)
Our personal favourite is Trulieve. Truelive is primarily a single state operator within Florida, with a dominant market share over 50% thanks to an aggressive rollout across the state. They now have over 73 dispensaries and 1.9 million square feet of cultivation.
The company does have relatively smaller operations in California, Connecticut and Pennsylvania; where they have one retail store in California, three in Pennsylvania and one in Connecticut. They also have two non-operational states in West Virginia which just recently got approval and Massachusetts where they are in the process of building out a large 140,000 square foot cultivation and production building, alongside three dispensaries, all of which are expected to come online throughout 2021.
We believe Trulieve has really had one of the best long term viewpoints from an operational point of view. Trulieve knew from the start that they had a gem state and fostered it, disregarding the flag planting strategy many other operators pursued. Trulieves Florida operations are free cash flow positive, allowing Trulieve to reinvest their profits into additional states without the need to tap the equity market for overpriced debt or dilution.
What makes Trulieve particularly unique is that they are one of a few companies that have generally produced positive operating cash flow and EBITDA for the last few quarters. Trulieve consistently beats analysts expectations and even management’s own guidance.
Trulieve reported $136 million in revenue last quarter, a 93% increase, year over year; with EBITDA margins north of 40%. Their balance sheet is clean compared to their peers. They have no accounts receivable, a large cash balance and strong inventory turnover. Based on analyst reports, Trulieve is expected to double their revenue in 2021 and generate a 45% EBITDA margin. They currently trade around at a 5.1x 2022 EV-to-Revenue estimates. We feel they are the most attractive operator in the US.
Green Thumb Industries (CSE: GTII)
The second most notable cannabis stock in our view is Green Thumb Industries. This company has built a footprint in 9 states but distributes its products into 12 different states. Green Thumb currently has 50 open dispensaries but has 96 retail licenses. Green Thumb management highlights both Illinois and Pennsylvania as their priority markets. This is due to a large supply-demand imbalance and both markets poised to legalize recreational marijuana in the near term.
Green Thumb is both operational and free cash flow positive; which is our main reason for putting them number 2 on our list. They have beaten analyst revenue and EBITDA estimates for the last few quarters and currently hold the second highest EBITDA run rate with their eyes on taking over the number 1 spot sometime during 2021. Over the last year, Green Thumb has grown quarterly revenues from $75 million to $157 million and they currently trade around 5.2x 2022 EV-to-Revenue estimates. Like Trulieve, analysts expect Green Thumb to nearly double their sales in 2021 with an estimated 35% EBITDA margin.
Curaleaf Holdings (CSE: CURA)
The third most notable in our view is Curaleaf. They are currently the largest multi state operator by both market cap and footprint. Not only are they in 23 states with almost 1.8 million sq feet of cultivation space. Curaleaf’s key markets are Arizona, Florida, Illinois, Massachusetts, New Jersey, New York, and Pennsylvania.
Curaleaf has opened 97 dispensaries with 137 retail licenses. They boast the #1 market share in 8 different states and have #2 market share in specific categories in 4 other states.
Ramping operations in various states of this magnitude costs cash, as result, Curaleaf has yet to produce sequential cash flow from their operations as a public company. They have generated 5 consecutive quarters of positive EBITDA with the highest revenue run rate in all of US cannabis. Based on the last quarter revenue of $182.4M, Curaleaf is running at an annual run rate of $729.6 million in topline revenue, almost a 200% increase year over year and currently trades around 5.3x 2022 EV-to-Revenue estimates. Analysts forecast Curaleaf will almost triple their annuals sales in 2021 with a 31% EBITDA margin.
AYR Wellness (CSE: AYR.a)
AYR Strategies went public in 2019 through the SPAC route. This path made them flush with cash and ready to collect great operators under the parent company. Today AYR operates in 7 states with 42 dispensaries, albeit 4 of those states are from pending acquisitions. Of these pending acquisitions, Florida, Ohio and Arizona are expected to close by the end of Q1, while their New Jersey acquisition is expected to close by the end of the third quarter. The most noteworthy one in our view is Liberty Health Sciences, whom they acquired for $290M which came with 28 dispensaries across the state of Florida.The company states that Florida and Pennsylvania will be their core markets moving forward.
Although AYR has a limited operational history, they have produced positive operating cash flow since inception. AYR has grown revenues to $45 million as of the most recent quarter, an increase of 61% quarter over quarter. They currently trade around 2.7x 2022 EV-to-Revenue estimates. And thanks to those great acquisitions, analysts expect Ayr to almost triple their annual sales with around a 36% EBITDA margin.
Cresco Labs (CSE: CL)
Cresco Labs currently has operations in 9 states with all the key jewels including Florida, New York, Illinois and California. They currently operate 20 dispensaries, and that number is about to escalate dramatically with their recent acquisition of Dive favourite Brady Cobb’s Bluma Wellness. This acquisition is expected to close by the beginning of the second quarter.
Cresco also has their products in over 800 dispensaries.
In their most recent quarter, Cresco had over $153M in revenue and stated an adjusted EBITDA figure of $46M. They currently tradesaround 4.5x 2022 EV-to-Revenue estimates and analysts expect Cresco to double their sales in 2021 with a 32% EBITDA margin.
TPCO Holdings (NEO: GRAM)
The last company I wanted to mention here is formerly named Subversive Capital , now referred to as The Parent Co. TPCO is interesting in that they are the largest operator in the largest state: California. They have partnered with Jay Z doing a 50/50 JV with his cannabis company Monogram. TPCO is flushed with cash on their balance sheet following the redemption period for their SPAC. The consolidated California operation is expected to close out 2020 with $185M in revenue and the company states in their marketing materials, they expect combined pro forma revenues of $334 million in 2021.
We believe that the company has the nucleus plus cash to quickly build a first tier MSO through M&A. They have the right people, balance sheet, and fundraisers inside the company to quickly be considered amongst the top 3 operators in the US.
Its very challenging to find analogues between what we saw with cannabis stocks in 2017-18 in Canada to what we see today. US cannabis stocks have much more growth opportunity in front of them. Some of which already do what Canadian names can’t figure out; generate a profit. Our thoughts are that if you are looking for the lowest risk opportunity, the best in class operators are the way to go. And all of the companies we just mentioned are worth considering.
Thank you for joining us on our first edition of the The Dive Video Essays.
The author has no securities or affiliations related to any organization mentioned. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
FULL DISCLOSURE: TPCO Holdings is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover TPCO Holdings on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
For decades, marijuana legalization opponents have claimed that the marijuana of their generation is far more potent, and therefore inherently more dangerous to society, than that of the past. In the 1930s, Henry Anslinger, Commissioner of the United States Bureau of Narcotics, testified to Congress that cannabis was so potent that it „is entirely the monster Hyde, the harmful effect of which cannot be measured” — thereby justifying the federal prohibition of the plant. In the 1960s and ’70s, public officials alleged that so-called ‘Woodstock weed’ was so uniquely powerful that smoking it would permanently damage brain cells and, therefore, its simple possession needed to be heavily criminalized in order to protect public health.
By the 1990s, former Los Angeles Police Chief Daryl F. Gates opined that advanced growing techniques had increased THC potency to the point that “those who blast some pot on a casual basis…should be taken out and shot.” A few years later, during Congressional hearings on the topic of strengthening federal anti-drug laws, then-Senator Joe Biden also weighed in on the issue, opining, “It’s like comparing buckshot in a shotgun shell to a laser-guided missile.”
Looking back, it is apparent that each of these previous generation’s claims were nothing more than pure hyperbole. Yet, nonetheless, they had a lasting influence on marijuana policy — in many cases, leading directly to the passage of detrimental public policies that caused the undue stigmatization and criminalization of millions of citizens. The latest recycling of the “It’s not your parents’ pot” claim is no different.
Higher potent cannabis products, such as hashish, have always existed and, essentially, marijuana is still the same plant it has always been — with most of the increase in strength akin to the difference between beer and wine, or between a cup of tea and an espresso.
More potent concentrates are more akin to hard liquor. But, unlike alcohol — which is routinely sold in lethal dose quantities at liquor stores throughout Colorado and America (e.g. a handle of vodka) — THC, regardless of potency or quantity, cannot cause death by lethal overdose. Currently, the United States Food and Drug Administration regulates the production and sale of dronabinol, a pill containing 100 percent THC. Several years ago, the agency rescheduled this drug from Schedule II to Schedule III because of its remarkable safety profile.
Prohibiting the production and sale of cannabis products above some arbitrary potency level is not an appropriate action for Colorado lawmakers to take. Consumer demand for these products is not going to go away, and re-criminalizing them will only push this consumer base to seek out similar products in the unregulated illicit market.
This scenario is not in the best interests of either patients or public health. Rather, arming the public the with better public safety information about the effects of more potent products, and further diligence on the part of regulators to ensure that legal products do not get diverted to the youth market, are more productive ways to address public health concerns.
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In last Monday’s state-of-the-nation speech President Fernández announced a bill to develop Argentina’s medical cannabis industry. Multi-million investments have already been agreed with laboratories.
The Peronist leader ratified the government’s idea of going ahead with a productive agenda for medical cannabis at the local level, affirming that his administration will push a law contemplating its industrialisation.
„Cannabis has highly useful properties for medical and industrial ends. The global industry for medical cannabis will treble its turnover in the next five years. The bill provides for its cultivation exclusively for medical and industrial use,” he said.
Within that framework the national government and the pharmaceuticals sector have agreed to invest millions of dollars in the production of medical cannabis under the knowledge industry and health chapters of the Socio-Economic Council.
Last month the government announced that it would be investing 350 million pesos in research and development towards the local elaboration of cannabis for medical use via the National Programme PRODUCIR+ SALUD.
The CILFA pharmaceuticals sector (including the local laboratories Bagó, Roemmers, Temis Lostaló among others) joined this announcement with a pledge to invest US$120 million this year and next while their international CAEME counterpart (Sanofi, Bayer and 39 other companies) agreed to inject US$300 million this year.
According to international consultant María Laura Sandoval, a specialist who advises in this area, Argentina has a vast pharmaceutical potential to promote the local development of medical cannabis.
„We have pharmaceutical labs in Argentina which are in the vanguard in Latin America and other continents too,” she told Perfil.
Sandoval describes Argentina’s pharmaceutical sector as one of the strengths permitting the development of medical cannabis.
“Many policies of the current government are geared to the pharmaceutical research area, thus greatly promoting innovation and development and placing a foot in the global pharma-cannabis market,” the local representative of the Asociación Latinoamericana de Cáñamo (LAIHA) told the newspaper.
The current scenario
Last year Frente de Todos deputy (CABA) Mara Brawer presented a bill to develop the hemp industry, dividing the uses into textiles, cosmetics and food. Following this week’s announcement by President Fernández, the government will be unifying this bill to promote the domestic production of various areas of cannabis and hemp under the mantle of the Productive Development and Health Ministries.
„I try not to talk numbers because we are in an extremely initial phase so that people can get to know the cultivation, regulations and so on. The relationship between Argentines and the cannabis market is still highly platonic because we are only just starting. It will be tough,” said Sandoval.
Despite trying to avoid numbers, she did pass on the report of a United States consultancy which calculated that Argentina could be earning a billion dollars in the hemp/cannabis area in two years’ time, while the president’s state-of-the-nation speech last Monday spoke of a trebled market within five years.
But first the country must draw up all the laws and frameworks possible so that the development can take off as the next advance in the cannabis agenda.
As cannabis demonstrates its potential health benefits, the business of this new ‘green gold’ does not cease growing.
In Uruguay exports of cáñamo – fibres and stalks of the plant along with flowers with a maximum of one percent of THC, the psycho-active component – have already reached US$100 million, according to Agriculture Ministry data. That’s the equivalent of a quarter of the citric trade, the most important market after soy.
The latest novelty is that for the first time a national private-sector group is plunging into this industry by taking control of a Canadian-based company – former PRO deputy Facundo Garretón and Claudio Belocopitt, the owner of Swiss Medical Group and Grupo América, are the main names behind this multi-million venture.
Last month the capital group FLA Ventures bought a majority shareholding for US$1 million in Blueberries, a firm based in Canada and operating in Colombia.
FLA Ventures was created by Sebastián Houchbaum and Facundo Belocopitt (the son of Claudio Belocopitt), both lawyers specialising in finance and both aged 26. They have attracted various investors, including the elder Belocopitt.
Betting on business
“It was a hard sell for me when they began to show this to me as an alternative. I’m pretty old and I did not see how anybody could come to me and talk about these things,” Claudio Belocopitt told Noticias. “But I’ve known people undergoing treatment with cannabis who told me: 'Just a few drops and it’s working.' That’s not a fantasy, I’ve seen it!”
The Swiss Medical Group owner says he spied a business opportunity: “It seems to me an industry just starting and everything points to a huge potential.”
Furthermore, Belocopitt assures that there will be more businessmen wanting their slice of 'green gold.'
“Once this industry is massively developed, I’ve no doubt that it will come to form part of the general and commercial pharmacological market. It’s showing itself in medical treatment – its globalisation can be assumed,” says Belocopitt, who was convinced to jump in by his son Facundo, who also sits on the Board of Directors of Swiss Medical Group.
“My old man is super-open – he listens,” recounts the younger Belocopitt, as he recalls how he persuaded his father to open up his wallet to buy the Blueberries shares. “I told him all about how cannabis was coming on in the world. It’s something which can help a great many people and it’s related to health.”
“When I was in Congress, I had to handle the Medicinal Cannabis bill in 2017 and I started looking at comparable legislation in Uruguay, Canada and the United States. I spotted the opportunity there,” Garretón told Noticias.
Garretón’s first stake in cannabis was in Uruguay in late 2019, with an investment of US$1.5 million in Ivy Life Science growers.
“The challenge lay in passing to an industrial scale and giving added value to cannabis. We’re assembling the biggest company in Latin America with super-strategic partners,” said Garretón, referring to the Swiss Medical Group owner.
That’s why the former lawmaker’s next mission was to stick the flag in another country of the region where the regulations were already resolved – in mid-2020 the Tucumán entrepreneur purchased shares in Blueberries, thus becoming one of the directors of that Canadian-based company with its main operations in Colombia.
His decision was no coincidence.
In Colombia CBD – the component of the plant related to medical use – has been completely legal since 2016. Since then, the sky seems the limit for this business.
According to an Asociación Colombiana de Industrias del Cannabis report, last year’s exports for medical use increased 1,363 percent by comparison with 2019, totalling annual earnings of some US$4.5 million. A report prepared by the Fedesarrollo consultancy firm sees Colombian sales abroad as more profitable than the cacao trade.
The business opportunity is served up and Argentine businessmen have already started signing their cheque-books.
The group of Argentine investors say they’re aiming to install a number of different sister companies scattered across the region, which are intended to be self-sufficient with productive material while generating their own business.
Uruguay has the raw material and Colombia the production of medicinal oil. But in the future, the project aims to set up base in Mexico and Brazil for aesthetic items and digital commerce. Argentina does not lie outside these projections and the businessmen already have partners in the form of members of the family of Jujuy Governor Gerardo Morales.
Another key player in the Argentine group is Sebastián Houchbaum, a lawyer specialising in finance and a friend of Facundo Belocopitt since childhood, who is now one of Blueberries’ directors. While Houchbaum has been following the development of this business at global level with close attention, he only joined last year when he invested in Garretón’s company in Uruguay – a key connection for reaching the owner of Swiss Medical Group.
Nevertheless, the Blueberries director says that he wants to contribute a new mode of production to the world because “capitalism cannot continue being run as until now. It’s been a wilder world in recent years,” he says, referring to the exploitation of natural resources and environmental pollution.
That’s why the youngster affirms that part of the key is “making the transition from artificial to a more natural medicine.”
“Cannabis is part of that as one of the industries which can contribute the most to that change,” he says.