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While funny...it is also sad because most of the US investors don't see the parallels. They see it as US MSOs v. Canadian LPs. They don't see it as Canadian capital spent on square footage is roughly the same as the US MSO capital spent on state count. The highest count/value does not equal best, or most efficient, operator. I also think that most investors are overlooking the obvious...they are focused on top line revenue, top line growth and margins without considering the landscape. Is this revenue or growth from a limited licensed state seeing 30% EBITDA margins where product is $3K-$5K per pound and an eighth is $60-$100?...or is this a company seeing a 30% EBITDA in an unlimited licensed, highly competitive, state where pricing is closer to $1,000 per pound and an eighth is a third of the price? If one thing the Canadian and US (competitive) markets have taught us, it is that cost compression is gonna happen. IMO, investors need to value companies based on maturation of state of operation and the company's ability to operate. This is obviously near impossible since almost all companies don't break out their numbers by state...and I am sure we can all guess why. Investors shouldn't also clap their hands when a company sells or closes assets...as they will tell you it is to protect margins. It is happening...and will continue to...but IMO investors should consider it a red flag. It is a tell that something is wrong. They obviously spent the money on those assets, why are they selling especially since cannabis isn't even federally legal or able to be shipped from state to state. What do they think will happen when cannabis can be shipped coast to coast?
Schwazze had super impressive margins in Q3, and Colorado wholesale saw a low of $600/pound. Now the company's revenue in wholesale dropped significantly QoQ...but so did almost all the other 'top MSOs' screaming cost compression in states like Pennsylvania, where it dropped from $5K to $3K. I honestly hope cannabis pricing normalizes...I can't wait until several of these companies disappear, mostly because I am just straight sick of hearing 'how awesome' they are.
I agree with what you wrote...and laughed at the "merge their way to greater debt". I also had to chuckle at the tweet you included. I have heard that person (who is newer to the industry then probably all of us on this board) talk about free cash flow as a criteria before...but I am not sure at the time even he didnt know exactly what he was talking about, more just echoing buzz-words. He and I tend to analyze the industry the same...more operation based and not chart oriented...but I have tried to have a simple discussion with him in what he considers a 'top tier' company. He essentially told me, liquidity and SCALE -- as in just straight size matters. I think his main reasoning to scale was simply someone larger will pay big money for the footprint. Obviously that is where he and I differ. I think straight SCALE can come back to bite a company...especially when they overpaid for assets in locations where the environment is not conducive to growing the plant (and even more so if interstate commerce happens)...and also overpaying without considering cost compression; not if, but when. Well I tried to convey that it wasnt ONLY scale as in size, but scale with efficiency. At the time I was brushed off. Glad to see he just might be coming around.
I wish that they would have dropped that "Catalysts - Safe Banking + in Lame Duck Session". The best thing that they had going for them was Dye's comments not needing the govt to be successful. I guess we all get caught up in the hype. It irritated me when they posted the updated slides...and still does today when I looked at them again.
I have not seen anything regarding capping the dispensary count. In addition, I don't think the state govt sees it as an issue...at least not yet. I think that they are welcoming it because they have seen the growth of the industry since they went recreational in April...22M in April, 24M in August and now 28M.
New Mexico updated their dispensary count. There are 563 dispensaries in the state. Last month there were 502.
New Mexico December 2022 Retail Numbers:
So with that being said I decided to take a stab at a guesstimate for EOY numbers:
2022 Annual Revenue Estimate $162,241,947.81
COGs Estimate $77,876,134.95
Gross Profit Estimate (52%) $84,365,812.86
EBITDA Estimate (32%) $51,917,423.30
If these numbers are met (which I honestly believe they will be because I intentionally shot for the low end) that is a 33% YoY increase in revenue (thanks to sales in NM...which at this point in time are seeing $4M/month, not including wholesale revenue).
New Mexico Retail Sales increased 17% in December 2022 compared to November 2022!
Maybe it's NOT FAIR because there is one more day in the month of December compared to November.
With that being said, if you take (November Total Sales divided by 30) and (December Total Sales divided by 31)...and calculate the per day difference.
New Mexico Per Day Retail Sales increased 13% for December 2022 compared to November 2022!.
Some SHWZ acknowledgement. 25:10 mark
https://twitter.com/i/spaces/1nAKErbvPPOGL
DING, DING, DING! My thesis as well...
"All or most of these in that same 2-year period have been stagnant or reached a point of growth"
Timing...and price...are everything! This is just another reason why I continue to like SHWZ if the industry has a tough 2023. They haven't peaked and they will continue to show overall growth...albeit in competitive markets so not as flashy, or high margined, as a the new online east coast markets...however this will provide them the opportunity to purchase assets on the cheap and see a quicker ROI than those other companies. Their peers will continue to struggle because their assets were price at cannabis being sold for $5k/pound...and they just aren't efficient operators.
Side note: I think FCF was a convo last year when investors were looking for a way to differentiate between businesses...and determine leaders. I think in actuality, the industry will complain about 280E and walk investors back to aEBITDA so they can look better when capital is not being spent as fast...and their only growth is new market and/or improved margins. I sure hope 2023 is the year where companies distance themselves from the pack, but the reality is, regardless of good/bad operators the industry cycles together...and probably will continue to until there is federal influence.
It ain't pretty but look where we stand:
🇺🇸 #CannabisStocks 2022%$MSOS $PSDN $CNBS $MJ $MJUS $YOLO $POTX $THCX $CURLF $GTBIF $CRLBF $TCNNF $VRNOF $AYRWF $TRSSF $CCHWF $AAWH $FFNTF $GRWG $IIPR $PW $HYFM $GDNSF $GRAMF $MRMD $CXXIF $GLASF $MMNFF $JUSHF $HBORF $RWBYF $PLNHF $LOWLF $CNTMF $VEXTF $SHWZ $SLGWF $TLLTF pic.twitter.com/x8pENwIpT9
— Cannalorian (@Cannalorian) December 30, 2022
🇺🇸 #CannabisStocks Q4 2022%$MSOS $PSDN $CNBS $MJ $MJUS $YOLO $POTX $THCX $CURLF $GTBIF $CRLBF $TCNNF $VRNOF $AYRWF $TRSSF $CCHWF $AAWH $FFNTF $GRWG $IIPR $PW $HYFM $GDNSF $GRAMF $MRMD $CXXIF $GLASF $MMNFF $JUSHF $HBORF $RWBYF $PLNHF $LOWLF $CNTMF $VEXTF $SHWZ $SLGWF $TLLTF https://t.co/U7IbZWEQFd pic.twitter.com/koIUIv5nX4
— Cannalorian (@Cannalorian) December 30, 2022
Thanks IPS, I managed to catch that on Twitter yesterday. It's nice to see that the Twitter world is finally realizing what we have had past conversations about. The selfish part of me wants them NOT to find SHWZ. It's been under their nose, and mentioned several times, but they chose to ignore us...they don't deserve to get shares at this price. I am also learning about 'redemptions' and can honestly say THANK GOODNESS the ETF decided against investing in SHWZ in 2022.
IMO this is worth a listen:
— Jesse Redmond (@jesseredmond) December 29, 2022
I have not checked out the video, and plan to do that now, but there is currently a lawsuit against Lowell Farms for mislabeled THC content in CA...off by a significant amount. Now the company could be at fault...or the testing company...or whoever, but an active lawsuit could delay any possible consolidation. Maybe not for CURA or TRUL, who seem to combat litigation on a daily basis...but I don't see SHWZ considering any possible M&A with them until the issue is resolved. We are in a time of protecting cash, not looking for ways to lose it.
https://www.benzinga.com/markets/cannabis/22/12/30129014/another-weed-company-faces-lawsuit-over-inaccurate-thc-content-labeling-as-consumers-sue
Dang, MSOS essentially singlehandedly tanked the cannabis market today with their 'redemption' sell off...almost an 1.1M share sell off across 14 holdings. I am not exactly sure how a redemption works, but if it is a mandatory sell offs (to reduce risk) when there is a dip/down market, could they not walk themselves into an endless death spiral?
Crazy, MSOS is so good at buying high and selling low...and doing so without shorting any of the stocks.
I agree...and I figured it was probably Trulieve's idea. They probably figured it was cheaper to pay $1M biannually, and shed the 'ankle-biters', than continue to lose market share.
Might want to stay out of Florida considering the new rules that were recently released. They have become a huge pay-to-play state...apparently further catering to the large MSOs in the state.
https://www.cbsnews.com/miami/news/florida-sets-stage-for-more-marijuana-licenses/
"The state Department of Health also published an emergency rule that would make it far more expensive for marijuana operators to renew their licenses every two years, increasing the cost from roughly $60,000 to more than $1 million."
"The jump in the renewal fees came after Gov. Ron DeSantis this year said medical marijuana companies weren't paying enough to operate in the state, where licenses have sold for more than $50 million."
"The rule also set the application fee for new licenses at $146,000, more than double the $60,830 fee established during the state's initial round of licensing more than five years ago."
I thought Booker was going to lay down...sadly he only got, as far as, down on to his knees. At this point, let the industry consolidate. I am over half of these bad operators...and the pumpers that push them. The only issue is, that the shake out wont get them all.
Exactly...control of all three areas for the last 2 years and wait until literally the last minute of the year to try and shove something in. It doesnt seem likely, at least to make Omnibus...but here was a recent post...not sure if this will have any traction either:
BY: NATALIE FERTIG
| 12/16/2022 02:20 PM EST
A bipartisan group of representatives and one senator are circulating a letter among colleagues on the Hill this week requesting the Biden administration remove marijuana from the Controlled Substances Act. The letter comes just over two months after President Joe Biden announced that the Department of Health and Human Services and Justice Department would review the scheduling of marijuana.
Pablo re-explains his thoughts:
Cantor on 🐎 trading
— Todd Harrison (@todd_harrison) December 12, 2022
🇺🇸 #cannabis 🌿 pic.twitter.com/XHRYm1Abrw
Twitter seemed sloppy today/tonight. You have Boris come out and say that they are still negotiating the Omnibus bill, and that it could take until January 3rd...which he stated was technically still within the lame duck period...and that everyone should write theirbl Senator's. He also stated that there is no time for a stand alone bill. Then you have Pablo come out and say that SAFE is not dead, yet, and language is supposed to be in Omnibus released tomorrow, but given Mitch's recent words, that there is not guarantee that it will ultimately make it into the bill that is filed...and then goes on to state that the best route would be for banking to be put up as a stand alone bill.
Another industry red flag, is when the ETFs can purchase 100K shares daily of the 'top-MSOs' and their stock prices barely increase (Tues this past week MSOS had the highest inflows that they have ever seen yet the 'top' companies only increased 1%-4%) or sink like a stone. I think that is why I appreciate that SHWZ is not under the industry microscope, because then it would be wrapped even further into cycling with them. I cant wait for the day where SHWZ (definitively) separates itself from the pack and then all the 'analysts' in the space have to eat crow because they have (intentionally) kept their SHWZ blinders on when discussing cannabis companies.
Too bad it wasn't the Cornbread Mafia. Then we wouldn't be in this mess.
Schumer worked how long to negotiate cannabis reform...only to fold quicker this time around when removing SAFE from the NDAA? Either his original plan was not the NDAA, but Omnibus or a stand alone bill...or he just earned a larger paycheck from BigPharma.
Just wanted to clarify, the reported numbers are total sales per dispensary since NM went adult use...thru November.
Month over Month Sales per Dispensary:
Information based off the total store sales since the cannabis law took effect, reported last month, and the total sales reported this month.
Month over month sales of $3,453,636.70
https://qimw5q0w5j.execute-api.us-west-2.amazonaws.com/prod/dispensaries.html
According to updated data from New Mexico's Cannabis Control Division, overall sales — including medical and recreational cannabis — for November were at about $38.6 million. That's down from nearly $39.8 million in October.
Meanwhile there is 1 more day in the month of October than there is in November...so technically there wasn't a dip...there was a 100K gain.
October: 39.8M / 31 days = 1.284M per day.
November: 1.284M X 30 days = 38.5M
True November: 38.6M - 38.5M = +100K.
October sales per day were 1.284M
November sales per day were 1.287M.
Biden just signed the research bill.
I get research supported decision-making, but with cannabis there is a huge flaw in that theory...and is essentially kicking the can down the road. The best thing that they could do is to deschedule cannabis. This would allow the states to regulate it while also opening the door to 'true' cannabis research. The problem with the current research bill is that it maintains product comes from UMISS, which is junk product...no where near dispensary sold product. UMISS product continues to produce unfavorable, or inconclusive, results. Descheduling should open the door to higher quality product but also it would allow for University sponsored, and government funded, research...which is 'true' data that the govt is looking for in order to make a decision.
What a joke! His post was like..."look at the concerns the DOJ pointed out", and then he literally posted a comment HE made...to which all his minions retweeted like it was gospel.
A lot of end of the day industry run up today based on speculation that SAFE+ news/language will drop tomorrow. I guess we shall see.
Did you see, on the Why Invest in Schwazze? slide, the last point:
Catalyst - SAFE Banking + in Lame Duck Session
With how much Dye reinforced that term sheets would not be announced...and deals would need inked before being announced....there is no way he signed off on including this unless he had it on good authority that it was going to happen.
Right?