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.
