You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.
In a bull market for stocks, cannabis stocks are sitting it out. Despite the recent rally, they are down 13.9% this year as measured by the NCV Global Cannabis Stock Index. We have discussed all year how cannabis stocks are cheap relative to how they have been valued historically. Investors looking for a sign that folks are interested don’t see that in the trading volumes, which remain low. There is, however, evidence that insiders see the valuations as low.
Green Thumb Industries (OTC: GTBIF) (CSE: GTII) revealed in its 10-Q that it had quickly followed through on its early-September announcement of a potential 10 million share repurchase. It bought 2.5 million shares at $9.96 during September. It’s so rare to see companies buying their own stock in the cannabis sector. After the quarter ended, two senior executives each sold 500K shares at $10 privately to a qualified institutional buyer. While many get alarmed by insider selling, we don’t see this as a negative development.
We have been looking for the strategic investors that have been investing in Canadian LPs to potentially buy them at the much-lower prices. British American Tobacco fell short of buying Organigram (NASDAQ: OGI) (TSX: OGI) when it announced an increased stake ahead in early November. The company will be investing C$125 million in three tranches at C$3.22, a much lower price than its initial investment but quite higher than the current price. The cash-rich debt-free company will become more cash-rich.
One company that has seen a lot of buying by several different executives and directors recently is SHF Holdings (NASDAQ: SHFS), the parent of Safe Harbor Financial. We called this a potential bear market bargain in mid-May when it was at $0.43. SEC filings over the past week or so seem to have driven the stock up to $1.00. The stock now trades at 2.4X tangible book value, and the$41.7 million enterprise value is about 8X the projected 2024 adjusted EBITDA by a single analyst. Investors should note that the ratio of current assets to current liabilities is a very low 0.5X as of the end of Q3. Not the bargain it was!
TerrAscend (OTC: TSNDF) (NEO: TSND) has rallied 38% this year, and insiders have been been buying it the whole time. Most recently, JW Asset Management added 10K shares at $1.5855 on 12/6. This brings its holdings to an impressive 90.4 million shares. Of this amount, Jason Wild, the company’s Executive Chairman, owns 2.7 million. At year-end 2022, JW Asset Management owned 88.5 million shares with Wild owning 2.2 million.
These parties that are buying the cannabis stocks don’t know the answer to the big question of 280E going away. Again, 280E would be wiped out if cannabis were to be rescheduled from Schedule 1 to Schedule 3, which the Department of Health and Human Services has recommended to the DEA. It’s nice to see this buying, but we aren’t excited enough by it to change our cautious view.
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Alan & Joel