High Times Holding Corp (fka HTHC)

[JohnCM]

THEN

High Times parent hustles to lure cannabis investors; here’s what you need to know

Published September 13, 2018
By Lisa Bernard-Kuhn

The parent company of the iconic marijuana culture magazine High Times is looking to attract a large number of small investors as the publication works to go public, bolster its brand and shore up a balance sheet mired in debt.

The company, High Times Holding Corp., has set out to raise up to $50 million through a Regulation A+ offering. The relatively new funding tool allows companies to raise up to $50 million through a wider pool of investors – both those with and without deep pockets.

But paperwork filed late Tuesday with the U.S. Securities and Exchange Commission could signal that the company’s fundraising efforts – some of which have been unconventional – may be stalling out.

Here’s a breakdown of what investors should know:

What’s the deal?

For its initial public offering (IPO), the company is peddling 4.5 million shares at a price of $11 per share with its sights set on a listing on the Nasdaq. But the firm still needs to meet a number of financial and regulatory benchmarks for that to happen.

Among the stipulations: The company must receive a minimum of $17.2 million from the offering, according to filings with the U.S. Securities and Exchange Commission (SEC).

If it can’t list on the Nasdaq, High Times has said it would turn to over-the-counter markets in the United States or to Canada exchanges.

If High Times is able to raise the full amount – which would give the company a $288 million valuation – about $16 million would be used to expand the firm’s events lineup and bankroll potential acquisitions.

The company currently has a stated valuation of $225 million – a value “arbitrarily determined by the Company and not based on book value, assets, earnings or any other recognizable standard of value,” according to its SEC filing.

But another large chunk – at least $13.5 million – would go to pay off debts to Chicago-based ExWorks Capital, according to High Times’ prospectus.

That could be an issue for prospective investors who would essentially be covering the wagers placed by current High Times investors.

A look at the company’s financials reveals sizable losses and sluggish sales. High Times posted $14.5 million in sales in 2017 – down slightly from $14.6 million in 2016. Losses in 2017 rang in at $24.7 million, widening from $2.9 million in 2016.

In an investor presentation High Times hosted on YouTube in August, CEO Adam Levin laid out the firm’s strategy to grow, adding that the company has had more than “4,000 shareholders invest to date.”

But on Tuesday, High Times filed paperwork to extend its offering period from Sept. 13 to Oct. 31.

The maneuver is a possible signal that the California-based firm is still working to reach its fundraising goals, although High Times officials could not be reached for comment.

Credit cards, Bitcoin

High Times has deployed unconventional efforts to lure investors as it leans on rules tied to Reg A+ offerings that allow companies to advertise their IPOs on websites and via social media to reach smaller investors.

In early August, High Times said it would accept the cryptocurrency Bitcoin from potential investors eager to buy stock, but the firm backed off that pledge later in the month.

In a filing with the SEC, the company said the announcement was “distributed in error.” No additional details were disclosed.

The firm has also used email blasts like the following one sent to subscribers in August:

“High Times has been a major cannabis supporter for the past 44 years, and now we’re excited to give our community the opportunity to join us as shareholders and have the chance to watch their investment grow with the company.

“You can become a shareholder today with a minimum investment of $99 using your credit or debit card.”

The tactics garnered criticism from some industry analysts, including Alan Brochstein, founder of 420 Investor.

“This type of solicitation, while legal, is unethical to me, and it further solidified my negative assessment,” Brochstein told Marijuana Business Daily. “No one should buy stock on a credit card.”

Matt Karnes, founder and managing partner at GreenWave Advisors, said the move “calls to question (High Times’) ability to secure funding in a traditional manner.”

High Times’ pitch: Bet on the brand

Karnes also noted that High Times is “a well-established brand with international recognition” and, if properly positioned, could “present a compelling opportunity for investors.”

That’s exactly what the company’s leaders are banking on as they make their pitch to investors.

“High Times is a brand that everybody knows … (both) those in the cannabis industry and not in the cannabis industry,” Levin told listeners during the August presentation. “It’s the Amazon of cannabis.”

In 2017, Levin’s Oreva Capital purchased a controlling stake in the company for $42 million. At the time, it was one of the largest deals in the cannabis industry.

Under Levin’s management, the company has continued to ramp up its event-based programming, such as the Cannabis Cup, which generated more than 75% of the firm’s revenue in 2017.

The company also is working to grow its share of revenue coming in from licensing deals. Through that line of business, the High Times name has been slapped on everything from bongs and cannabis accessories to home urine test kits.

If all goes as planned, the company’s name could even be associated one day with a line of dispensaries – or other plant-touching lines of business, Levin has said.

“We have a brand that hasn’t been monetized yet,” Levin said in August. “Now is that opportunity.”

NOW

'High Times' getting into retail pot business

BY MATTHEW FLAMM - Bloomberg

High Times, the nearly 50 year old bible of weed, is piling onto the legal green rush. But its investment could go up in smoke.

The media company, which publishes its monthly magazine out of its Midtown offices, announced Thursday that it struck a deal to take over two recreational cannabis dispensaries--one in Los Angeles and the other in Las Vegas--and brand them as flagship stores. In addition to carrying the High Times name, the stores will feature memorabilia and assorted licensed products. The stores will also have a section dedicated to winners of the company's signature Cannabis Cup competitions.

The acquisitions are part of a plan to create a High Times retail brand that mom-and-pop dispensaries could license in order to set themselves apart with a trusted, high-profile name. But at least in California, the company is entering a crowded field that has struggled to compete with a thriving black market.


High Times magazine is leaving New York for Los Angeles
Inside New York City's marijuana black market in the era of legalization
The past year has been a punishing one for the cannabis industry overall. Los Angeles based MedMen, one of the best known cannabis players, lost $277 million in 2019 and pulled back on its expansion plans.

The move into retail is part of parent company High Times Holding Corp.'s long term strategy of diversifying its revenue streams. The company, which moved its corporate headquarters to Los Angeles in 2017, was acquired by a group of investors that same year in a deal that valued the publisher at $70 million.

Since then it has been working to expand its operations through acquisitions of other cannabis media properties as well as festivals and events, which supply the bulk of the company's revenue. It is also taking an unconventional route to a public offering, using what's known as a Regulation A offering to sell shares on its website at $11 apiece, with a minimum purchase of $99.

Marijuana entrepreneurs aim for diversity in legal-cannabis industry

In the six months that ended in June of last year, High Times reported $10.7 million in revenue--an increase of about 20% over the same period in 2018--and a net loss of nearly $12 million. It had lost nearly $20 million in the prior-year period.

The company also announced Thursday that it had appointed a new president, Paul Henderson, who has worked at Goldman Sachs and Apple and run the California cannabis retailer East of Eden.

"High Times has connected customers to brands for decades, and this is the next step in that evolution," Henderson said in a statement. "Our network within the industry allows us to offer the best possible products, at every price point, on our shelves."