Replies to post #1131 on Green Thumb Industries Inc (GTBIF)

[FUNMAN]

Keep Some powder dry - FUNMAN

Worst is over or ‘dead cat bounce’? What to make of the almost 20% rally in cannabis stocks

Some think pot stocks are finally priced right

I have been writing about this all week; the wild cannabis euphoria cannot last lest an inflated mini-bubble bursts. - FUNMAN

https://business.financialpost.com/cannabis/cannabis-business/cannabis-investing/worst-is-over-or-dead-cat-bounce-what-to-make-of-the-almost-20-rally-in-cannabis-stocks

This week’s bounce in pot stocks — the first in at least two months — could be the start of a renewed bullish run, some portfolio managers believe, as investors react favourably to more regulatory clarity on retail stores in Ontario and better-than-expected earnings from some of the major licensed producers.

“The sector got very washed out in the last quarter of 2019 and there was a lot of selling. The tax-loss selling became extreme, and a lot of people had given up on the sector,” said Greg Taylor, portfolio manager and chief investment officer at Purpose Investments, which runs the Purpose Marijuana Opportunities Fund.

Investors are getting more confident that the pricing is right

Jason Wilson of ETFMG Alternate Harvest

“But the year started with a couple of good headlines especially regarding Ontario’s retail store rollout, and then you had some decent numbers coming out from some of the companies. So part of this uptick is also a short covering rally that’s going on here,” he added.

Over the last four trading days, the Canadian Marijuana Index, which tracks the top 16 Canadian cannabis stocks, rose by almost 20 per cent. Horizons Marijuana Life Sciences Index, another pot ETF under the ticker HMMJ, rose by 17 per cent starting Monday — HMMJ had lost more than 50 per cent of its value through the course of 2019. Taylor’s own fund, was up by about eight per cent this week.

A series of weak earnings from cannabis companies in mid-November sparked a sharp selloff, pushing most major pot stocks to some of their lowest levels ever. The bearish sentiment continued throughout December and early January, until this week, when Aphria Inc. and Organigram Holdings Inc. reported earnings that for the most part, exceeded expectations.

Organigram’s stock has surged 57 per cent since it reported earnings on Tuesday evening, its largest rally since the first half of 2019. Analysts, which have largely been bearish on the stock, responded favourably to Organigram’s recreational cannabis revenue numbers.

“I’m starting to see a general view out there that a lot of the cannabis stocks are well-priced now. We’ve seen a shake out in the markets generally, but (cannabis stock) prices have come down and investors are getting more confident that the pricing is right and they can identify companies that have a better balance sheet,” said Jason Wilson, a partner at ETFMG Alternate Harvest (MJ), a U.S.-based pot ETF.

Wilson firmly believes the worst is over for the pot sector, and investors have transitioned from pessimism to realism.

“Look, it’s always hard to predict sentiment especially because retail investors are emotional. Overall we are getting a sense that there is more patience from investors, versus pessimism,” Wilson said.

It’s what I call a ‘dead cat bounce’. It’s not going to last

Chris Damas, author of The BCMI Report

But Chris Damas, a long-time cannabis analyst and author of The BCMI Report believes that the January rally will be short-lived, and stemmed from a combination of stocks being oversold and a tax-loss bounce.

While there are indeed reasons to be bullish about the cannabis sector — long-term international opportunities and the gradual addition of stores in Ontario and Quebec — Damas says that the rally is merely “sector momentum at play,” and not reflective of industry fundamentals.

“It’s what I call a ‘dead cat bounce’. It’s not going to last,” he said. “At the end of the day, cannabis stocks are responding to supply and demand for securities, more than fundamentals.”

Some of the largest LPs that have been under scrutiny lately like Canopy Growth Corp., Aurora Cannabis Inc. and Cronos Group are due for another round of earnings in mid-February. Damas predicts that cannabis stocks will have room to move upward until some sort of news event such as weaker-than-expected financial results.

“The bulls in this rally will be reining in their bets before the earnings start,” he said.

[FUNMAN]

Sure they are "doing good", but they'll make money off of anybody they help to get a license. They will provide loans to open up, and supply the stores with products. It's a WIN - WIN.

Green Thumb Industries (GTI)@GTIGrows Craft grower, infuser, and transporter Illinois applicants – are you ready to kick it into full gear? To get started, contact [e-mail]

Craft grower, infuser, and transporter Illinois applicants – are you ready to kick it into full gear? To get started, contact [e-mail]://t.co/A58MFY0347

— Green Thumb Industries (GTI) (@GTIGrows) January 16, 2020

[FUNMAN]

MEDMEN appears to be on life support.

So I'm wondering who the enterprising entrepreneurs are going to be that pick up some of MedMen's assets for pennies, nickels, dimes or quarters on the dollar?

Those people/companies will have a better competitive chance of success because their investment in property, plant, and equipment will be much less than the rest of the MSO's current cost structures.

The ashes of one of the first-to-market MSO's that made tons of mistakes, may be paving the way for next wave of profitable MSO's.

Still, every American cannabis MSO can point a finger at the archaic laws that prohibit the transport of product between states, and forces the duplication of a business from the ground up, for every state the MSO's want to expand into.

But the money lost will be the original investors seed money and shareholder equity.



It looks like MedMen will beat HEXO and Aurora to insolvency. The cannabis industry shakeout is well underway.


This is not a pretty story.

No one should be happy.

MedMen shareholders definitely are not.

The market just isn't big enough for everyone.

But something good may yet come of it.

Some of the stronger MSO's are going to pick up assets including coveted licenses. Hopefully, this is a match made in heaven for Green Thumb.



U.S. pot retailer MedMen says it’s trying to use stock to pay its bills amid cannabis industry’s cash crunch

Published: Jan 23, 2020 11:43 a.m. ET

https://www.marketwatch.com/story/us-pot-retailer-medmen-says-its-trying-to-use-stock-to-pay-its-bills-amid-cannabis-industrys-cash-crunch-2020-01-23?mod=mw_latestnews

Company confirms it is offering shares to pay its suppliers as money has dried up for the weed sector

U.S. marijuana retail chain MedMen Enterprises Inc. has been offering vendors shares in its company as payment for cannabis products amid a cash crunch in the industry.

In an email reviewed by MarketWatch, MedMen MMEN, -1.59% MMNFF, -2.60% offered a supplier the full value of the amount owed in MedMen class B non-voting shares, a payment plan for the full value or a one-time cash payment of half the outstanding value. MedMen Chief Financial Officer Zeeshan Hyder confirmed that the company, which announced massive layoffs and other changes late last year, is offering to settle some bills with stock.

“As part of the restructuring, the company has been actively working with its retail vendors on modifying payment terms, which in some cases include stock consideration,” he said in an emailed statement.

MedMen’s situation highlights the difficulties many weed businesses in the U.S. and Canada face in raising financing, as the torrent of cash that had fattened pot company coffers has slowed to a drip. According to data from Viridian Capital Advisors, which tracks cannabis capital raises, the slowdown began in March 2019 and financing cratered by the last two months of last year. Overall, capital raises for public and closely held weed companies fell 20.3% in 2019 from 2018, for a total of $11.3 billion.

“Since late 2015, there has been a mad rush,” Scott Greiper, president of Viridian Capital Advisors, told MarketWatch. “But it has all stopped in 2019.”

MedMen is one of the largest weed retailers in the U.S., with 33 stores across nine states and $44 million in revenue in the fiscal first quarter. Its attractive set of retail properties include a location in Manhattan’s Times Square and a store along the posh Abbot Kinney Boulevard in Venice, Calif. MedMen has likened itself to the “Apple Store of pot,” according to a filing with Canadian regulators, and has advertised heavily in states where such activity is legal.

Paying vendors with stock is part of a larger strategy MedMen is deploying to reduce its overhead and conserve as much cash as possible, according to Hyder.

“The company has been increasingly focused on managing its working capital and has continued to communicate payment status to its key vendors,” Hyder said in his emailed statement.

U.S.-traded shares of MedMen, which trade over the counter and are listed on the Canadian Securities Exchange, have lost 84% of its value in the past year, and now investors could be further diluted by issuing shares to pay its bills. Seaport Global analyst Brett Hundley says that the small amount of stock MedMen is likely to issue won’t affect the stock price that much because there are already more than 588.4 million outstanding shares, according to FactSet.

Hundley says that as funding dried up in the equity markets around September 2019, MedMen was slow to realize that it would be unable to attract investors and, as a result, was late to install cost-cutting measures and other moves necessary to keep the business afloat. Months later, one of its chief sources of capital dried up: according to a December note from Hundley, MedMen management said it doesn’t expect to be able to access the remaining $115 million available to it from $250 million convertible debt deal it inked earlier in 2019. Gotham Green Partners is a weed-focused private equity firm that has backed the likes of Cronos Group Inc. CRON, -1.12% CRON, -1.00% and iAnthus Capital Holdings Inc. IAN, -0.49% IAN, -0.49%.

MedMen has had no choice but to slash costs as the reality of the market set in, including the cancellation of a planned $682 million all-stock acquisition of PharmaCann LLC. After Wall Street reacted with “incredulity” to the company’s selling, general and administrative expenses line of roughly $100 million, according to a note Hundley wrote to clients in December, executives have put in place a plan to cut $70 million of operating expenses by March. The company is also quietly shopping around a license it owns in New York, which may be worth $50 million to $100 million, Hundley says. It’s also selling non-core assets in Arizona and Illinois, and pulling back on capital expenditures and slowing down store construction, according to the company’s filings with Canadian regulators.

In January, MedMen amended a $78 million loan that was due in 2020, to mature in 2022, though at a 15.5% coupon versus the 7.5% it had, and closed a $20 million stock offering of class B stock, which amounts to roughly 47 million shares, according to Hundley.