READING THE DC TEA LEAVES
We now have three large cannabis companies (GTBIF, CGC, & TCNNF) with nearly billion-dollar shelf offerings. All three companies are also very close and actively involved in the new formation of the USCC (U.S. Cannabis Council), a nonprofit organization that "aims to advance social equity and racial justice and end federal cannabis prohibition." This group was formed in early February, just a few short days (maybe hours) after meeting three top Democrats. The coalition brings several major North American cannabis industry stakeholders together to convince policymakers in Washington D.C. to bring about legalization. Last night after the close, CGC filed a $2.0 billion shelf offering. The question we are asking is, why do they need the money? The Transaction with Acreage to enter the USA is for a predetermined ratio for the stock, so no cash is needed? STZ has $5.0 billion of warrant that can be converted for cash, but STZ does not have that much cash on the balance sheet. One can conclude that CGC believes that we are close to having a deal in Washington for them to enter the USA. This means that they might be looking at another US company to buy, as the Acreage assets are marginal at best. TRSSF is the logical pick, given they currently own 20% of the company.
Another interesting story came out yesterday about Washington insiders buying stock. Congressman John Yarmuth (D-KY), the chairman of the Budget Committee, has recently purchased several cannabis industry stocks while championing legalization legislation that could increase their value. According to a filing with the Clerk of the House Representatives, obtained by website Popular Information through CongressTrading.com, Yarmuth purchased three cannabis industry stocks on November 5: Canopy Growth Corporation, Aurora Cannabis, and Tilray. The law only requires Yarmuth to report the range of the purchase price. The Congressman purchased between $1,000 and $15,000 of each stock. New disclosures filed on February 19, Yarmuth reported he purchased an additional $1,000 to $15,000 shares of each of the three stocks — Canopy Growth Corporation, Aurora Cannabis, and Tilray — on February 12. On December 3, Yarmuth promoted his cosponsorship of the (MORE) Act, which would decriminalize and deschedule cannabis in the United States.
The formation of a new lobbying group, billion-dollar shelf filings, and washing insiders buying cannabis stocks all feel like we are about to experience a seismic shift in Cannabis Reform in DC.
AYR WELLNESS
AYR is a best Idea LONG
AYRWF and LHSIF announce that Liberty shareholders voted overwhelmingly in favor of the proposed acquisition of Liberty shares by Ayr in a transaction originally announced on December 22, 2020. Shareholders representing 57% of issued and outstanding shares voted and 95% voted in favor of the transaction. Under the terms of the agreement, which will take the form of a Plan of Arrangement (“POA”) under the Business Corporations Act (British Columbia), Liberty shareholders will receive 0.03683 Ayr shares for each Liberty share held, equating to approximately 13.1 million new Ayr shares. Following this transaction and Ayr’s pending acquisitions in New Jersey, Arizona, and Ohio, the Company will have operations in seven key US markets covering a population of 73 million, 43 operational dispensaries, and 554,000 sq. ft. of cultivation.
NEW CANNABIS SPAC
Parallel, the parent company of NETA, which has medical and adult-use cannabis stores in Brookline and Northampton Massachusetts, announced seeking to go public through a SPAC. Parallel is one of the largest privately held MSOs. Parallel has entered into an agreement with Ceres that would bring it into the public markets by the summer. The implied enterprise value would be $1.88B. The SPAC has received $225M in PIPE commitments. Parallel owns and operates 42 retail dispensaries in four medical and adult use markets including in Florida, Nevada, Texas and Massachusetts with NETA. Parallel also has a license under its Goodblend brand in Pennsylvania for operations and up to six retail locations. The company would have a $430M cash balance at closing and revenues of $447M in 2021. Parallel's CEO is William "Beau" Wrigley Jr., the former CEO of the Wrigley gum company.
