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Cansortium: One Of Few Remaining Florida Cannabis Gems

Cornerstone Investments profile picture
Cornerstone Investments
22.98K Followers

Summary

  • Cansortium mainly focuses on the Florida cannabis market, but also owns small assets in Texas, Pennsylvania, and Michigan.
  • Florida is an attractive cannabis market for MSOs due to its limited licenses and fast-growing medical market.
  • We view the stock as speculative as its cheap valuation is negated by a shaky balance sheet and past debt restructuring.

Welcome to our Discover Cannabis series, where we publish in-depth research to introduce new cannabis companies to our coverage.

Introduction

Cansortium (OTCQB:CNTMF) is a fast-growing Florida-focused cannabis company with assets in three other states. While Cansortium hasn't received much attention from investors compared to other MSOs and has faced balance sheet issues that led to debt restructuring, its Florida operation is likely a highly coveted asset for acquirers looking to enter the market.

Cansortium Inc (CNW Group/Cansortium Inc)

Business Overview

Cansortium does business under the Fluent brand and has assets in four states. Florida is the largest operation and comprises most of the value for Cansortium in our view. Before going into more details on Florida, the company also has one of the three medical cannabis licenses in Texas which is still a very tiny market and likely one of the last states to legalize, in our view. The other two Texas licenses are held by Acreage and Parallel which is going public via a $1.9B SPAC deal called Ceres Acquisition Corp (OTCQX:CERAF). The company also has a partnership in Michigan to grow cannabis and it operates just one store in Pennsylvania. For reference, the Florida operation made up 88% of Cansortium's Q4 2020 revenue.

(Source: Investor Presentation)

It is important to know that Cansortium faced capital structure issues in 2019 which led to a special committee that worked on reducing corporate expenses and a debt restructuring. Additionally, the company also divested its various businesses in Canada, Puerto Rico, and Colombia to scale back operations. The debt restructuring extended maturity but also led to dilutions and limited access to capital markets. Now the company has made it clear to investors that Florida will be its main focus for the near future. Considering Cansortium's limited capital and recent financial distress, it makes sense to focus on the fast-growing Florida market where it has a

This article was written by

Cornerstone Investments profile picture
22.98K Followers
We are your best guide to cannabis investing. Read our 2021 Cannabis Sector Outlook here. We also provide in-depth industry analysis and coverage of 70+ cannabis stocks to help you get started.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (63)

J
This company was formerly run by Jose Hidalgo, but then he "resigned" to the curb. He was the only one that made out on this dog. Hopefully, the stock and company will not be liquidated.
E
“We view the stock as speculative as its cheap valuation is negated by a shaky balance sheet and past debt restructuring.”

I’m out.

When will Florida be too crowded with dispensaries? Rec legal will, of course, give the group in Florida a boost.
C
@Could Be need another 25c for break-even, still holding on for a buyout...
b
@Could Be I switched to RWBYF
C
@blome been in $rwbyf since .56c, awaiting another earnings report or two to see if they're for real. They have had a slew of acquisitions, hopefully they won't employ the dilution model to fund growth...
n
How does Cornerstone reconcile this story on the "Gem" Cansortium to its attack piece on Vireo? Both MSO's have its assets spread out. And Vireo does not carry Cansortium's debt. Seems like Cornerstone's view is Tier 3 MSO's don't matter unless their focus is on FL, IL, PA or MA. Sadly, the opportunities for Vireo are expanding right in front of us.

NM will go rec legal after Mexico and AZ legalization. No competition.

MN sales for 8 dispensaries will double when the Republican Senate bill allowing flower sales passes (the compromise).

AZ wholesale sales of concentrate will be gobbled up in a rec State with huge supply constraints.

MD 100,000 sq. ft. indoor grow just went live. Another supply constrained State.

And latest article out today suggests NY rec legal seems to be back on track for April 1 budget introduction.

Wherever Vireo has chosen to refocus, their business decisions seem to be working. The fact that they have mothballed NV and MA suggests that they could be acquired at any time.

That's my bet.
Cornerstone Investments profile picture
@normboyz23 Cansortium is really a Florida company and we made it clear that its assets outside Florida is not worth much. Florida is the best market hands down - no one has been able to replicate Trulieve's success in any other market
WarrenJF profile picture
@Cornerstone Investments Thanks for pointing this out.

Truelieve's success in FL is strongest selling point for me--it has an unfair advantage because it dominates this large and lucrative (FL) market, and, in the process, has gotten its financing, growing, storage, logistics, and retail/marketing operations down.

That gives it a running head start in other states if and when the Fed decriminalizes. Plus, no need for a bunch of "what if's" to be long because TCNNF is crushing it right now.
B
@Cornerstone Investments ,
Florida's Supreme Court just shot down Rec. legalization
R
Could you provide their fully diluted share count?
WarrenJF profile picture
Why purchase stock in a company this troubled, financially with questionable ability to meet its debt obligations going forward, and which doesn't seem very attractive otherwise, given that it's low total sales per store.

You're basically betting on it being acquired. That may in fact be true, but I don't see it sitting in the driver's seat in any acquisition deal.

Cannabis is hot in FL for sure, but that doesn't make every bit player hot by extension. Seems that they can be scooped up for a (non-charting) song by cash-rich TCNNF, for example, to give it even greater market dominance.

Otherwise, there's nothing particularly desirable about its history, growth, logistics, innovation, current licenses, greenhouse ops, from what's stated in the article. No new product, method, dominance in other (Non-FL) states, or even star power (e.g. Snoop Dog).
j
@WarrenJF

Up until early in April I would agree with your opinion regarding
the future prospects of CNTMF......

However since closing its $17 million private placement, the
stock has been on fire during a month when most other MSOs
have seen pullbacks.

Even after the dilution of the transaction CNTMF current price
is now 30 % above the 90 cent exercise price for the warrants.

After firing the CFO in December and how shoring up the
balance sheet, the market is now strongly supporting the
management strategy of CNTMF.

Cansortium has most of its assets in Florida and stated
it will use the proceeds from the private palacement to
fund cultivation and processing along with add a few more
retail locations. CNTMF happens to be in the best MSO
state in the Union. They are smart to invest in that market
......at least that's what I think the market is telling us this
month.

I am long a small sleeve of CNTMF, but will wait for a
pullback to add to this firm which now seems to have
stabilized its balance sheet.
WarrenJF profile picture
@jackmaster20 happy to be proven wrong Jack! I’ll stick with TCNNF, which seems (to me at least) to have a permanent unfair advantage (dominance) in FL, has relatively low debt, and throws off bundles of cash. Plus it’s positioned to go national once restrictions are removed. Just bought more on its recent dip.
j
@WarrenJF

Regarding TCNNF in Florida........you can't go wrong...!

I just opened a TCNNF (small) position on the premise that
Florida rec is coming ''fairly soon'' but from what I read, the
FL Supreme Court has other ideas..........

I do not know how much advantage TCNNF has by leveraging
their Florida operations to expand in other states across the USA.
Time and license ownership seem to be independent of operating
cash flows when it comes to carving out a leading position in
a specific state.

TCNNF has surely killed it in Florida.......but not sure that will
totally transfer to its other beach-head states it is now trying to
open.....against existing stiff competition.

But time will tell.

regards
b
Off the pace: I have schwab account. Has anyone here been credited with ayrwf shares if they previously owned lhsif? So far I have not had any of my lhsif exchanged for ayrwf.
c
@bingolittle I called this morning (schwab client here, as well) they said the shares will be added in a few days. I was thinking they'd be there this morning. Schwab is aware ayrwf shares are on the way in, though.
b
@calcio fiorentino thanks. by the way how long where you on hold before you got a person? I was on hold over an hour and they did not really give any real info. Yours is the most info I have received. Thanks gain
c
@bingolittle total call time lasted 9 mins and 2 sec according to phone history.
B
100% agree with this read , all the way to the reasoning of those other Florida assets ...
R.W.B.'s $60 Million is a lot for a License , and IMO , the avg. sales Acreage had in Florida , Prob. is their cost basis to run those Operations , IMO ..
Let's see what Sandelman can do with those Liberty assets ..
.
Hmmm , SOL involved with another Lawsuit , now in Canada for $550 Million , same type already going on in N.Y. ....
Verano's M/A of Alt-med , wonder how that's gonna be affected ..
SOL's divesting of these Florida Co.'s to make the Verano merger fly with Florida , and now , another investment Co. wanting their piece of the
' Verano-Alt-med Pie ' in the form of shares owed , ( Or Not ) , puts an unbearable stain of greed , and IMO , stinks to the high heavens ..
Eating popcorn , while watching this develop ...
paw7800 profile picture
I have LHS, Bluma Cura, Cresco, Ceraf, RWB, Trulieve, Solcf and GTI for my Florida basket
Cornerstone Investments profile picture
@paw7800 that's a Florida cannabis ETF!
M
@paw7800 Where's Verano on this list ?
paw7800 profile picture
@MoneyMaker5o1 I went with CERAF over Verano.
C
@Cornerstone Investments FYI, the $RWBYF transaction includes assets, not just the licences. From the $RWBYF PR - seekingalpha.com/..."Acreage Florida is licensed to operate medical marijuana dispensaries, a processing facility, and a cultivation facility in the state of Florida. The deal also includes the sale of property in Sanderson, Florida that includes over 15 acres of land and has an 113,546 SF facility for cultivation and a 4,360 SF freestanding administrative office building. In addition, Acreage Florida has 8 leased stores in prime locations throughout the state."
VC3 profile picture
@CannabisPat Do you or the article authors know anything about the status of ITHUF in Florida and other states? I know the article (interesting, thanks) isn't about ITHUF but it made me wonder about their status.....they looked like they would be important in the Florida market at one time.
Cornerstone Investments profile picture
@VC3 in their current state it's unlikely they will make any move. They need capital which they don't have now. Unless the company is re-capitalized or someone buys their license, they will not become a meaningful player
OneStrawRevolutionFarming2023 profile picture
CNTMF has good market access :-)

The FL regulated market is substantially overpriced (compared the "informal" market) and which companies will survive when the price drops come :-)

CNTMF could do well if they can build out in all four markets :-)

CNTMF might not need sell out if their access/licenses in all four markets become profitable :-)
b
I bought it as a buyout candidate
C
@blome Agree, recently tripled down on position anticipating a buyout. So who's the most likely suitor? I'm thinking possibly $ TRSSF or $CNPOF...
S
@Cornerstone Investments
Not of a lot of big US operators who lack FL presence at this point. Do you see anyone as a serious bidder? I thought about picking some up a few weeks back but went SOLCF as a trade instead. Figured the suitor for cansotrium may not be an operator id want to own.

I also considered picking up some Parallel spac units for the Sun Terra exposure. Still researching that one. Doesnt seem to be generating any attention.
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