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.
This was a relatively slow week due to Labor Day and we are already looking forward to November, when Q3 financials will be reported. While we aren’t expecting stellar results, they should be better than the results for Q2 that came out in August. In particular, we are most optimistic currently about ancillary cannabis stocks, which have suffered from their customers facing both restricted operating margins and also less access to capital.
In June, we began to share our optimistic outlook for the back half of the year. With the Global Cannabis Stock Index down very slightly since June 30th over one-third of the way through the second half, the market hasn’t exactly moved sharply higher yet. We continue to believe that the u-shaped bottom is forming and remain optimistic that cannabis stocks will advance soon.
At our premium subscription service 420 Investor, our bullishness has been rewarded since the end of June, despite the overall market not yet advancing. In contrast to the index being roughly unchanged since June 30th, our three model portfolios are up 14.5% to 20.9%.
Overall on the year, the S&P 500 is down 14.4%, but the Global Cannabis Stock Index has declined 55.1%. The bear market in stocks in general hasn’t helped and most investors have been paring their risk. In Q3, the GCSI has dropped from 14.76 to 14.75, nearly unchanged, while the S&P 500 is up 7.6%. If the overall stock market continues to retrace losses, investors should warm up to cannabis stocks, which have very low valuations in our view. We continue to believe this unique predicament can favor the patient investor or a new investor just beginning their diligence in the cannabis industry.
This week’s newsletter is sponsored by PwC
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
Could the cannabis market be turning the corner? New Cannabis Venture’s exclusive summary of BDSA’s monthly cannabis sales data for 11 states finds sales in 11 markets increased 4.6% from June to $1.69 billion. On a per-day basis, sales increased 1.2% sequentially. In Eastern markets, year-over-year growth for July ranged from -13.5% in Pennsylvania to 27.2% in Florida. In Western markets, year-over-year growth ranged from -23.1% in Colorado to -10.1% in California compared to a year ago.
Bespoke Financial is assisting the cannabis industry as it struggles through growing pains by offering customers non-dilutive financing to increase growth. Bespoke Financial announced a partnership earlier this year with cannabis technology company BLAZE Solutions. Together, they have launched a dispensary financing program accessible to cannabis retail stores using BLAZE’s dispensary POS software. In an exclusive interview, Co-Founder and CEO George Mancheril discussed the company’s new partnerships and competitive position in the cannabis lending space.
Cresco Labs wrapped up a $45 million sale-and-leaseback of its Brookville Pennsylvania facility to Aventine Property Group. “Our current capital position, combined with the expected cash proceeds from the sale of divested assets related to the pending closing of the Columbia Care acquisition, will put us in a strong position to continue to invest in the high-return opportunities available to us in both the short, medium, and long term to drive returns for shareholders,” said Co-founder and CEO Charles Bachtell. Cresco Yeltrah will continue to operate the facility as it has since 2017.
XS Financial has provided a $15 million lease facility to Ascend Wellness Holding to purchase new equipment with up to 60-month terms. This facility will be used for cultivation, manufacturing and processing equipment across Massachusetts, Illinois, and New Jersey. ‘This transaction exemplifies our strategic focus to collaborate with premier cannabis operators to support their growth, resulting in larger leasing agreements and the potential for repeat business,” said David Kivitz, CEO of XS Financial. He added that this financing is “just the start of a long term, mutually beneficial relationship with Ascend.”
Glass House Brands has closed on the purchase of two California dispensaries – Natural Healing Center’s flagship in Grover Beach and a second in Lemoore. The company said it expects to close on the acquisition of a third store in Morro Bay in Q3 and a fourth in Turlock in Q4. “Given NHC’s positioning in limited license markets and its strong consumer following, we are excited to be adding these four dispensaries to our retail portfolio,” the company stated in a press release.
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Alan & Joel