Full Court Press
MSOS Performance
Yesterday the MSOS declined for the third day in a row down (1.5%) on elevated volume, but volume declined (29.3%) day-over-day. The spike in volume since 11/3 has averaged 18% over the past ten days. Politico is reporting that a coalition of CEOs from some of the largest cannabis corporations sent a statement to President Biden asking him to issue pardons to nonviolent cannabis offenders. The letter was put together by the U.S. Cannabis Council and signed by CEOs from 14 companies, including Cresco Labs, Curaleaf, Akerna, Canopy Growth, and Columbia Care. President Biden pledged on the campaign trail to decriminalize cannabis and grant a blanket pardon, and obviously, nothing has happened. The CEOs were in D.C. for a USCC-organized event on Wednesday and reading between the lines they are meeting with lawmakers to talk about the SAFE Banking Act (among other issues), as the NDAA process unfolds. This statement from cannabis CEOs comes just a week after Sen. Elizabeth Warren (D-Mass.) sent Biden a letter asking for similar pardons. It's with Biden and the DOJ power to pardon any federal offender.
4Front Earnings
FFNTF is a LONG
Consistent with sales trends and some permitting delays, 4Front Ventures reported systemwide revenues of $33.1 Million in Q3, a sequential decrease of 4%, and a YoY increase of 48%. This came in below consensus estimates of $44.5 Million primarily due to their Commerce California facility starting operations later than anticipated. EBITDA (A) increased 103% YoY to $7.5 Million. The company had a gross profit margin of 60%, in line with the gross profit margin in the same quarter last year. The company also provided operational updates.
Their state-of-the-art facility located in Commerce, CA, is now officially open and operating. There is a potential for this facility to be a game-changer for the company and the California Cannabis market. This facility is 170,000 sq. ft. and will be supplying various dispensaries in the state. The California facility is expected to make revenues 5-8x the Washington facility. The company also commenced construction on the first phase of their project: "Big Daddy." This facility will be up to 558,000 sq. ft. and will be in Matteson, IL. Phase 1 will be expected to be completed in Q4 22' and will begin operations in early 2023. In Massachusetts, the company opened its third adult-use dispensary in Brookline, MA. This dispensary will serve the community near Boston University and the Boston metropolitan area. The company continues to see the following long-term guidance/opportunity: "The Company's Existing Licensed Projects at Maturity Represent a Long-term Revenue and EBITDA Opportunity Upwards of $650 Million and $250 Million".
We like the positioning of FFNTF and believe that all of the pieces are in place for 2022 to be a strong year for the company.
Massachusetts Tracker
October sales in Massachusetts remained flat after declining slightly in September. This decline can be attributed to the price of cannabis falling in the state. The average price of 1 Oz. of flower has fallen from $371 in July to $359 in October. Sales volumes in the state have been on an uptrend after peaking in July. YoY growth currently stands at 53%. The price of cannabis will continue to fall as more retailers and cultivators enter the state. With the falling prices, volumes will also increase, causing sales to remain flat. The annual run rate for the state is $1.43 Billion.
