NDAA Tracker
The House passed the NDAA in September, with the language of #SAFEBanking in it. The big question mark in the Senate because @CoryBooker has said he won't support passing banking legislation without ending federal criminalization and letting people out of prison and @Senschumer supports him. Yet, the pressure is building in D.C. to pass SAFE in the NDAA. As reported by Politico @Natsfert, a bipartisan letter was sent to leaders of the Senate and House Armed Services Committees asking that the #SAFEBankingAct language be included in the NDAA which the Senate will take up after the Thanksgiving break. The letter was signed by three Democrats, one Republican and one independent. They are @SenKevinCramer (R-N.D.), @SenGaryPeters (D-Mich.), @SenAngusKing (I-Maine), @SenMarkKelly (D-Ariz.) and @SenJackyRosen, (D-N.V.). As a result, the MSOS snapped a 6-day losing streak up 3% on accelerating volume, although still in a bearish formation.
Coming Soon a TLRY ATM
TLRY is a struggling undercapitalized rollup looking for an identity that is not in Canada. In FY21, the Company likes to talk about positive (A)EBITDA "with the added benefit of enhanced operational efficiencies, infrastructure, production facilities, and distribution networks to capitalize on the long-term growth opportunity that comes with ongoing cannabis legalization." The issue we have is with "the adjustments" to make things to look better than reality as the Company generated an operating loss of $47.8 million in FY2021 ballooning to $101 million in FY22. At the annual meeting this week, the CEO talked about a "current value plus upside model," I have no idea what he means. It's partially referring to the Company's pursuit of delivering $4B in revenue by the end of FY24.
The CEO talked about his goals in the E.U.: "a growth market with nearly twice the population of the US, Tilray expects to generate $1B in revenue by the end of FY24 with a mix of organic growth and acquisitions." The Company has state-of-the-art cultivation facilities in Portugal and Germany that supply pharmaceutical-grade medical cannabis across international markets and sales and distribution arrangements to supply cannabis through major pharmaceutical distribution channels. Last week, leaders in Germany's incoming government coalition made substantial progress towards legalizing recreational cannabis in that market, and "Tilray is ideally positioned when legalization happens based on its market leadership in medical cannabis, production capacity, and strength in brand-building."
The problem with this story is the lack of capital to execute his plan. The Company has $488 million in cash, but we estimate it will burn $160 million in FY2022 before any acquisitions. The Company is also leveraged 7.1x Net Debt to EBITDA, so the only option is an ATM to raise cash and dilute further existing shareholders.
MSOS Changes in Holdings
Since 11/12, the MSOS has deployed a significant amount of its cash. On 11/12, the cash balance was $170 Million, and yesterday it sat at $104 Million. This cash was deployed in buying shares of Columbia Care, Cresco, Agrify, and several other holdings. AFC Gamma was the one new holding they introduced. Riv Capital and IIPR were two companies it reduced its holdings in. In the three largest MSOs the ETF holds (GTBIF, TCNNF, and CURLF), share counts remained the same. The fund will likely be deploying the remainder of its cash balance in the coming weeks, causing further positive catalysts for the U.S. cannabis sector.
All changes are shown using share prices from 11/22.
Johnson Brothers
Minnesota-based Johnson Brothers (beer distributor) is making moves in the cannabis distribution space differently. This week, Johnson Bros. provided $8 million in funding to Green Acre Capital, a cannabis-focused private investment fund. This represents 15.23% of the issued and outstanding common shares. "The Johnson Brothers investment, through Green Acre, is transformative for the legal cannabis distribution market in North America. This investment is one of the first of its kind by an adult beverage distributor, as more traditional companies explore opportunities to access the cannabis market," the CEO explained.
