NEW Hedgeye Cannabis Best Idea Long: Glass House Brands (GLASF)
With today's release of our deck on the potential for interstate commerce in 2023, we are adding GLASF to the LONG list.
We have been following the progress of GLASF since the de-spac when the company became public on July 5, 2021, through a SPAC transaction with Mercer Park Acquisition Corp. It has always been an opportunity for investors with a long-time horizon and a view on when interstate commerce would commence. Our view on Federal Legalization and the potential for interstate commerce is 5+ years away. California's latest "state-led" initiative has altered the potential timeline, and a line of sight on interstate commerce could be as early as 2023. This put Glass House Brands' business model front and center to capitalize on this potential.
In short, Glass House is committed to growing Sun grown flowers at scale but with a low environmental footprint.
- Glass House is the low-cost cannabis cultivator in the most prominent cannabis state in the U.S, California.
- The company's cost structure makes it a low-cost producer, with production costs 70-80% lower than other multi-state operators.
- The stock's market cap is below its real estate and other assets' replacement value.
- The Governor of California is taking proactive steps to improve the California cannabis economy by reducing taxes and improving access.
- It has a retail dispensary footprint that can more than double in 2022.
- The recently signed California Interstate commerce act could likely improve the value of all cannabis businesses in the state if "producing" states and "consuming" states come together in 2023
In September last year, Glass House closed on one of the largest greenhouses in the U.S., Located in Ventura County. The Southern California facility consists of a 165-acre property in Southern with a planned 5.5M sq. ft. of cultivation across six state-of-the-art greenhouses to be built out in 3 Phases. When complete, the facility can produce 1.7M dry pounds of cannabis annually. Glass House can produce a pound of cannabis for about $120. These cost advantages will become exponentially important if cannabis is allowed to cross state lines. We believe that this is happening faster than most believe. Glass House is vertically integrated, with a 20,000-square-foot manufacturing facility in Lompoc, an hour north of Santa Barbara. This complex produces extracts and pre-rolls and serves as a distribution hub. The company sells its products in Glass House retail stores and other non-Glass House stores.
More detail will become available in the upcoming GLASF Black Book.
