Cannabis SPAC: SAMA & Clever Leaves anticipate closing in early Q4
In a cannabis SPAC forum yesterday, Schultze Special Purpose Acquisition Corp. (NASDAQ: SAMA) said that they anticipate closing their merger with Clever Leaves in early Q4 (under ticker "CLVR"). The estimated initial enterprise value is approximately $255M. Clever Leaves is a multinational operator and licensed producer of pharmaceutical-grade cannabinoids with its primary operations in Colombia. The company has operations and investments in Canada, Colombia, Germany, Portugal, and the United States.
Clever Leaves has been ramping its international efforts towards Europe. It has been granted European Union Good Manufacturing Practices (EU GMP) certification for its Colombian operation, a requirement to import medical cannabis products into the EU. Last week, the company's Portugal operation was granted a license to cultivate, sell, and export medical cannabis, establishing the Iberian country as Clever Leaves' European medical cannabis production hub. The Portugal operation is designated for producing dried cannabis flower, while the Colombia operation focuses on cannabis extracts.
Clever Leaves is on track towards becoming a formidable competitor to Canadian LPs in the European market. The company has one of the most extensive cultivation and extraction operations in Latin America and is among the largest in the world, including Canada's licensed producers and top extractors. The company has the advantage of low-cost operations, due to favorable climate conditions and cheaper labor, in comparison to its Canadian peers. The average cost per gram by Clever Leaves' Colombian operation is USD 0.20 – Canadian operators run upwards of USD 1.71 (average of APHA, ACB, OGI, and TLRY). In a sign of what's to come, Clever Leaves has already signed a regional supply agreement with Canopy Growth (CGC) - the Canadian company outsourced its LatAm operations to Clever Leaves in April 2020. Under the one-year deal, Clever Leaves will supply CGC with cannabis extract products with an option to renew for two additional years.
We are adding SAMA to the Hedgeye Cannabis LONG bias list.
New U.S.-focused ETF launches on NYSE (MSOS)
AdvisorShares Pure US Cannabis ETF (MSOS) began trading yesterday on the NYSE. MSOS is the first U.S.-listed active ETF to deliver exposure dedicated solely to American cannabis companies. Its ticker is a slight misnomer given that it also includes REITs and companies focusing on CBD, pharmaceuticals, and hydroponics. It has an AUM of $2.5B and a net expense ratio of 0.74%.
IIPR adds another Michigan property to portfolio, expanding partnership with private MSO Holistic Industries
Earlier this week, Innovative Industrial Properties, Inc. closed on the acquisition of industrial property in Madison Heights, Michigan, for $6.2M (excl. transaction costs). The company entered into a long-term, triple-net lease agreement with a subsidiary of Holistic Industries Inc., which intends to operate the property as regulated cannabis cultivation, processing, and dispensing facility, upon completion of development of an approximately 63,000 square foot industrial building. In connection with the development of the property, IIPR has agreed to provide reimbursement of up to $18.8M. Assuming full reimbursement for the development of the property, IIPR's total investment in the property will be $25.0M.
This transaction makes it the companies' fourth real estate partnership since 2017. IIPR leases to Holistic three other properties in Maryland, Massachusetts, and Pennsylvania. IIPR's total investment in Michigan, including committed funding for future tenant improvements, is approximately $155.8M.
Michigan's legal market has been thriving – July's total sales for medical-use and adult-use cannabis were approximately $109.6M, equating to roughly $1.3B in sales on an annualized basis and $473M YTD through July.
IIPR is on the Hedgeye Cannabis Long Bias List. Stay tuned for more details on our September black book.
