Market share trends in Florida (TCNNF, CURLF, GTBIF, CCHWF, LHSIF)
The Florida Office of Medical Marijuana Use (OMMU) releases updated cannabis data every Friday.
For the week ending December 4th, the number of qualified patients in Florida’s medical marijuana program grew 0.8% WoW or 49.6% YTD to 447,386 qualified patients with active ID cards. THC in mgs sold grew 4% WoW to 145.2 million mgs, CBD in mgs sold grew 10.5% WoW to 3.6 million mgs, and flower in oz. sold hit a record high, increasing 29.7% WoW to 52,900 oz. sold.
The significant increase in the volume of flower sold was likely due to Trulieve sales issues during the holiday break, backing up orders into this week’s reporting period. The company apparently transitioned to a new website and online system during the week of Thanksgiving, which timed poorly with increased demand due to their Black Friday promotions and the holiday break. According to patient complaints on social media, the new online platform incorrectly showed in-stocks for certain SKUs, failed to process a significant volume of online orders, and caused supply chain issues. With last week’s delayed orders rolling into this reporting period, along with patients likely placing their orders on Black Friday and Cyber Monday due to promotions, Trulieve recorded its highest volume of flower sold at 28,456 oz. or 53.8% market share.
Florida’s medical marijuana marketplace has strong potential – the state’s medical marijuana program still has a runway for population penetration, edibles were just introduced to the market in August, and there’s a broad range of qualifying medical conditions, notably ‘severe and chronic pain’. The rising tide that is patient volume growth lifts all ships.
The MORE Act passes in the House in historic vote; Georgia Senate runoff elections are critical
On Friday, the Marijuana Opportunity, Reinvestment, and Expungement Act (MORE Act) passed in the U.S. House of Representatives (YEA – 228; NAY – 164). With the approval of the MORE Act in the House, the U.S. moves one step closer towards ending federal prohibition on cannabis. The bill will now be referred to the Senate, where its anticipated that a Republican-controlled Senate under Majority Leader Mitch McConnell will unlikely approve it.
Georgia’s Senate runoff elections on January 5th are critical for any chances of meaningful cannabis legislative reform on the federal level happening in the near-term. Two Republican senators, Kelly Loeffler and David Perdue, are up against two Democratic challengers, Raphael Warnock and Jon Ossoff, respectively. The outcome of these races will dictate the controlling party within the Senate. Mitch McConnel and most Republican senators are opposed to legalization – any measures passed by the Democratic-controlled House, like the MORE Act, are likely DOA in the current Senate. While Democrats winning in Georgia would not guarantee the MORE Act’s passage, it would certainly allow for serious negotiations to take place.
The MORE Act would decriminalize cannabis by removing it from the Controlled Substances Act, permit banks to do business with the industry, allow states to determine their regulations on commercializing cannabis, expunge convictions for non-violent cannabis offenses, and levy a federal tax on sales. In amendments made to the bill, the MORE Act's modified tax provisions would have cannabis federally taxed at 5% for the first two years following implementation and then would successively increase by 1% annually until reaching 8%. After five years, taxes on cannabis products would be based on weight rather than price. Another change requires the FDA and the U.S. Department of Health and Human Services to hold public meetings on “regulation, safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds” within one year of the bill’s enactment.
US MSO Verano Holdings to go public this month with $2.8B valuation
Verano Holdings announced plans to go public this month with a valuation of approximately $2.8 billion. According to BNN Bloomberg, Verano is planning to offer up to $75 million in shares through a reverse takeover of Majesta Minerals Inc. – a shell company listed on the Canadian Securities Exchange – that would value the company at US$2.8 billion. Canaccord Genuity and Beacon Securities are joint book runners on the deal.
If Verano lists on the CSE, it would become the third largest public cannabis operator in the U.S. by revenue and the fifth largest by valuation. The U.S MSO, founded in 2014, has operations in 14 states with over 1,600 employees, 46 retail locations, and eight production facilities. In 2019, Verano generated $121 million in revenues and $42 million in adjusted EBITDA. For 2020, the company estimates upwards of $380 million in revenues and $160 million in adjusted EBITDA, suggesting an increase of 214% and 281% YoY, respectively.
Last month, the company announced the signing of a definitive merger agreement to acquire and combine operations with Alternative Medical Enterprises, LLC, Plants of Ruskin, LLC, and affiliated companies (collectively, “AltMed”), vertically-integrated cannabis companies that apply pharmaceutical industry standards to developing, cultivating, producing, and dispensing medical cannabis and medical cannabis products in Florida and Arizona. AltMed, founded in 2014 and profitable in recent years, is a fully-integrated medical cannabis company with 27 active retail locations, 220,000 square feet of cultivation facilities in Florida, and 30,000 square feet in Arizona.
The combined entity will establish Verano as one of the three largest MSOs in the United States based on 2021 internal projections compared to current FactSet 2021 consensus estimates for revenue and EBITDA. CEO of Verano, George Archos, commented, “This combination will create significant opportunity to expand our business into limited-license markets and scale both our wholesale and retail operations. We have created a thoughtful model for long-term success and a solid platform to deliver what we expect to be an industry-leading EBITDA margin on a pro forma basis. In addition, our combined strong balance sheet should provide us with the financial flexibility to expand operations and go deeper in states in which we operate.”
