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,
This week, Hightimes Holding Corp., the publisher of High Times magazine, revealed in an SEC filing that it is in default on loans to ExWorks totaling approximately $28 million. We weren’t surprised at all, having shared our negative view of the company in early 2020. ExWorks is in receivership, and shareholders of the company, which has been raising money through a Reg A+ offering, are at risk.
This isn’t the only bad execution of a company in the cannabis industry. One that led us to warn our subscribers at 420 Investor, Agrify, collapsed this week, falling 79.3%. It is now down almost 98% in 2022. When the company announced two equipment company acquisitions in late 2021 for $50 million, we saw that as a red flag.
Cannabis investors, unfortunately, have no shortage of bad companies in which they can invest. 9 years ago, when I launched 420 Investor, I found myself spending a lot of time warning my subscribers and very little time finding good companies. That has improved a lot, as there are now some great companies trading in our view. Still, there are lots of companies that shouldn’t be trading.
The poor performance of so many companies in the industry financially and operationally weighs on the companies that are legitimate. When investors get burned, they are reluctant to invest again. Many investors have selected companies that we think were bad choices, and their losses result in an inability to purchase the stocks of companies that deserve investment.
We aren’t going to provide a list of companies that should be avoided, but we want to warn our audience of things about which investors must be aware. On the financial front, be careful with companies that have high levels of debt and negative cash flow. Look for companies that have strong management and avoid those that don’t. Don’t fall for the tricks of paid stock promotion!
Avoiding bad companies is very important, but we think that there is another essential lesson. We fear that weakness among the bad apples, which are still abundant, erodes sentiment badly and weighs on the better companies in the sector. The bad execution at Hightimes and Agrify is just that. These are not a reflection at all, in our view, of industry weakness. Investors need to be careful and not miss a bargain that may be elsewhere because of negative sentiment.
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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
Exclusives
Eaze has had several iterations since it was formed in 2014. It was established as a technology company, pivoting in 2020 to become a vertical, plant-touching operator. Today, Eaze is a delivery-focused MSO in four states. In an exclusive interview, CEO Cory Azzalino discusses the company’s plans to expand its delivery platform beyond California and Michigan into Colorado and Florida and also its heavy investment in the Sunshine State. The company intends for its Florida expansion to help fund further investment in California and Colorado.
At the end of September, Northern Lights Acquisition Corp., a special purpose acquisition company, completed its purchase of SHF, LLC, d/b/a Safe Harbor Financial and changed its name to SHF Holdings, Inc. It also began trading on the Nasdaq. Since going public, its stock has dropped sharply. In an exclusive interview, CEO Sundie Seefried says the company has its work cut out for it and they are ramping up investor relation efforts to educate investors and get the stock performing. She said they also are actively looking at financial institutions interested in exiting the cannabis market.
Although August Canadian retail sales increased by 0.2% from July, the growth was the lowest since legalization began. August sales hit C$393.7 million, up from a revised C$392.9 million in July. Sales rose 13% from a year ago, down from the 17.2% July growth rate. Ontario sales fell 2.2% from July but were up 15% from a year ago. Alberta sales were down 2.9% from July but up 11% from a year ago. Quebec was up 1.9% from July and down 2% from a year ago, while British Columbia was up 10% from July and shot up 27% from a year ago.
Mergers
The Green Organic Dutchman plans to combine forces with BZAM Cannabis. The producer of premium, organically grown cannabis, announced it would merge with the privately owned producer of flower and 2.0 products. Combined, the company is estimated to be the sixth largest Canadian cannabis company based on June to August 2022 retail sales, according to a press release.
BGP Acquisition Corp. and Craft 1861 Global have entered into a definitive business combination agreement, which is intended to constitute the corporation’s qualifying transaction. As part of the deal, BGP will indirectly acquire all of the outstanding shares of Craft Global in exchange for $430 million of proportionate voting shares. Following closing, BGP will continue to operate the business of Craft Global and intends to rename itself CRAFT 1861 Global Holdings, which will remain a reporting issuer under Canadian securities laws. “After spending the past decade refining our products and approach to the burgeoning cannabinoid industry, we are excited about the inflection point we find ourselves at and believe this combination with BGP will help support the growth of the Craft 1861 brand on a global scale,” said CEO Robert Aranda.
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Sincerely,
Alan & Joel
