Alan Brochstein On Cannabis Investing In 2022 (Video Transcript)

Summary

  • Cannabis industry expert Alan Brochstein on 2022 catalysts.
  • New York and New Jersey's path to legalization, how to look at consolidation.
  • Direct listings and SPACs, cannabis REITs, Curaleaf and Verano.
  • Unsurprised by MedMen/Ascend Wellness deal breakdown.

Editors' Note: This is the transcript version of the podcast we posted on Wednesday. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy!

Rena Sherbill: Hello again, everybody, and welcome back to the show, after a long hiatus. Thank you all for listening to us, again, listening to our Cannabis Investing Podcast in this New Year that feels a lot like the old one. I know I'm not alone in feeling many things, as we transition into a different numbered year, as we transition into a new phase of growth in the industry.

Personally, I know everybody's struggling with a whole bunch of different things, COVID-related, non-COVID-related, human-related. So many things are COVID-related without them being directly COVID-related. So all that is to say that I stand with you in your conflicted, confusing myriad feelings, as we tackle, challenge, get challenged by and get excited by a New Year.

And I also wanted to say in that vein, that's part of the reason why there's been a break, just kind of dealing with so many different things. One of them that I'm very excited about is becoming Director of Video Content for Seeking Alpha, which means a lot of really exciting video content coming your way on Seeking Alpha. Look for some big changes.

A lot of great cannabis content, because most of you listening to this want your cannabis content, and we have a ton of it, and CEO Interviews. That's the video show that has Jesse Redmond, Josh Kincaid, Jason Robinson, and sometimes some others, Josh Fineman, some really fantastic, expertly knowledgeable folks, interviewing CEOs, and we have a whole host of cannabis companies that are in the can that are already available on Seeking Alpha under CEO Interviews, and also a bunch coming up, including Schwazze (OTCQX:SHWZ).

We had Glass House (OTC:GLASF) on this week, we had a little California cannabis company called GABY (OTCQB:GABLF) on this week. Lots more to come. Lots of really great conversations happening over there. We have Wall Street Breakfast, which is a daily news source, like a summary of the news events. We have a Friday Show called The Weekend Bite.

Anyways, today really excited to bring you, Alan Brochstein as our first guest of 2022. Anyone listening to this already knows Alan, I'm sure from 420 Investor from New Cannabis Ventures, from Seeking Alpha back in the day. He doesn't write for us actively anymore, but you can get his insights on this podcast.

Really appreciate whenever Alan comes on because his erudite knowledge of the sector is famous for a reason. And we get into, I guess pretty much everything on this topic, and audios a lot better for folks that suffered through the last one.

Again, that last episode is available in transcript version on Seeking Alpha. But getting to today's topic, we talk about the stocks, what to look for New Jersey, New York, catalyst for 2022. What we should be thinking about as cannabis investors, what we shouldn't be thinking about as cannabis investors and investors in the stock market, a lot of great stuff to get into. I'll leave it there for you. Really happy to have you listening.

One more thing I forgot to mention is that all Cannabis Investing Podcasts, going forward, we're going to be doing video episodes, including this one. Videos will be released on the Thursday after the episode drops on a Wednesday. So audio on Wednesday, video on Thursday, Seeking Alpha's YouTube channel or on Seeking Alpha. Really excited to have you listening with us. Hope you enjoy this one.

Alan, welcome back to the Cannabis Investing Podcast. Welcome back to Seeking Alpha. It's great to have you back.

Alan Brochstein: Thank you. Great way to kick off the year.

RS: Exactly. It's a great way to kick off the year, a great way to kick off the first episode of 2022. We were talking about how last time we talked in August, there was a bunch of negative sentiment. What would you say as we cross this rubicon from one year to the next or as we've already crossed it, but as we're still in this kind of like outlook phase. How do you think about the last year? And then how do you kind of contextualize that, as you're thinking about 2022, in the industry?

AB: Yeah, I think last year was -- we all got kind of caught up. Everybody loves when what they like is being liked by others. And I think probably -- and I think we talked about this last time. The whole idea that a lot of investors come into the space betting on something that most of the people in the industry aren't expecting or betting on, which to put in plain English, a lot of people showed up last year after the Democrats took the Senate, thinking legalization was around the corner.

And you and I have talked about this a lot. That's a long drawn out process. And it's embedded with a lot of risk, potential risk for current operators. So I guess as the year played out, a couple things, kind of bothered me. Number one, we saw these delays. And still we don't have a date for New Jersey. And I think that's -- A, it's a big catalyst for the industry, because there's a lot of MSOs in New Jersey.

And B, that also, I think that may have put some competition, competitive forces into certain markets where these publicly traded companies want to meet expected revenue. They were hoping to get some from New Jersey. It's not coming. So maybe they cut prices in Florida or Pennsylvania and like that.

And then, I think the other -- so that was one kind of disappointing factor. I think another disappointing factor was on this legalization front. Most of us don't expect legalization, but we hope for certain changes in the regulations that would maybe permit uplisting, for example. And we made no progress in that. And I thought it was exciting to see Nancy Mace's legislation introduced. And amazing, actually, if you think about it, but unfortunately, it's not going anywhere. And so far zero Democrats have signed on, and there's been no Senate discussion. So that part, that's the second piece.

And then the third piece, that's been disappointing a little bit, and we may have talked about this last time. It was really hard to tell how much of the spike in cannabis demand was transitory versus long term. And the part of it that was long term was a structural change. We saw curbside pickup and delivery enabled, and certain e-commerce through payment processing that hadn't existed in the past. And that helps the legal market compete with the illicit market. But at the same time, the data was pretty bad. There's year-over-year comparisons, and it's almost impossible to know, was the spike due mainly to people having time, money and anxiety? Or was it also, there's other more longer term drivers?

So I think the good news right now is it sure looks like those slowdowns that we saw in certain Western markets, even in Canada, where the data is on a delay, but I believe that November was the first month ever, that the year-over-year growth didn't slow in Canada.

So that's official data from the State. We saw some data for December for Illinois and Michigan. It makes it look like some of these year-over-year comparisons are going to get better. So those three things, I think, really continued. And I'll add a fourth thing, I think a lot of people, including myself, were hopeful that the calendar year flip would bring back some people. And going into the year, end of the year, you couldn't expect it. There's the tax loss, actual tax loss realization or the fear of it. So that was going on.

And you also had potentially window dressing by institutions that didn't want to show positions in cannabis names at yearend. And then also I would add, there are hedge funds that play in the space and maybe they took the risk levels down. And so I think there was some optimism that maybe in 2022 the abatement of some of these factors would lead to an upswing. And unfortunately, there's a lot going on right now besides cannabis and I think the weakness that in the beginning of the year is related more to things that are making Bitcoin, Tesla (TSLA). Peloton (PTON), Netflix (NFLX), all this. I don't think it's just us but it's pretty somber mood right now.

RS: Yeah, I would say so. I said I would say in the world in general in the investing world there's a kind of -- definitely that type of sentiment in the air. New Jersey I wanted to touch on, because this is something you also talked about in one of your emails that I hope everybody listening or watching this subscribe to your Sunday emails. And you talked about the importance of kind of the catalysts that is New Jersey legislation.

How are you thinking about that kind of -- do feel like it's something that -- well, actually before we get started with that, sorry, I kind of just wanted to touch really quickly on Representative Mace's Bill, because I was talking about that a bunch on the podcast and feeling like if something's going to pass it could be this, because it was just realistic and it covered a lot of bases. Were you surprised that nothing before the end of the year in terms of safe banking came to pass and does that dissuade…

AB: No.

RS: So it doesn't kind of knock you off what you had hoped?

AB: No, I wasn't expecting anything. And I think I may have even told you this before, I'm not going to name names, but there's certain people out there that whip up the crowd, and they're always -- maybe they have access to lobbyists. But these people are all in a bubble, and they all feed off each other and they're always bullish. And I don't understand. This is not the way I operate. I mean, I tried to find positive and negative factors and everything's -- it's a glacial pace. So I was expecting nothing at yearend.

But on Mace, so and I have to confess, I didn't even know who she was before she introduced that Bill really, and I listened to her. And a couple things. Number one, what she said and how she said it was just awesome. And by that, I mean, the idea of not having a heavy handed FDA involved, which is one of the big risks to our industry, I think. And then having lower taxation. That's what she said. Those were very different.

And we can be for or against the idea of social equity. But we can also have different opinions about how it's going to be implemented. There's a heavy handed approach there, where the federal government takes a hammer and just hammers everybody to do things a certain way. And that's not going to necessarily be the right way to do it. That's kind of the camp I fall into. So personally, I want to see more inclusivity and opportunities for others. And I sometimes think our industry bends over a little bit too much on this issue, unfortunately, because there's a trade off, and that's a whole another story.

But so that was what she said, but then the how she said it was amazing to actually listen to her and to hear her feel the cause and to learn her backstory. She's a great spokesperson. And before it was Matt Gaetz, do we really want him to represent the Republican view of how things should be? I'd much rather listen to her present it.

So I was optimistic, or I remain optimistic that she can hopefully get some bipartisan support for her ideas and frame this issue. But I'm not looking for legislation in the short term. I'm not even sure we're going to get -- everybody talks about this enhanced safe banking or even the traditional safe banking.

Now Congress is broken. I don't -- I can't trust any things going to happen. But I've been watching this for many years. And it always was a dead end in the House, number one, and still is. And -- but there was thoughtful discussion in the Committees of the house. I was kind of blown away. And it really seemed like almost all the Republicans on these Committees are fully embracing medical. And they even kind of support adult use, but they're a little bit wary.

And so when you have people like Nancy Mace, kind of taking charge and introducing legislation, my hope is that it engenders further thoughtful dialogue, so that we can get down the road. That's all I could find.

RS: Yeah, I totally agree. And I also agree that she's a great spokesperson for the industry and for legalization. What did you mean, when you said that we bend over backwards too much in the industry in terms of the social equity component?

AB: Yeah. So I think, publicly traded companies have an obligation to their shareholders. And I think, as well, we all have certain things that we want to see society do. And I think a lot of people in the industry want to solve all the world's problems by having the cannabis industry done a certain way. And while I'd like to see that done voluntarily, and I think your mandated legislation can be a problem.

And I think we've talked about this a little bit before. I'm not an expert. I read people that are a lot smarter than me. And I know the MCBA, which I support, and they're in big favor of it, is coming out with a piece, I believe next week, talking about ways to do this better. And I think that this is the big problem. There's -- we've seen these failures, and where there's a lot of tokenism, and I think rightfully a lot of the MSOs they give lip service to this. And that's kind of what I mean by bending over backwards when you say something, to please certain people to look a certain way, and you don't actually necessarily believe it.

So it doesn't matter who does that. But I just think it's unfortunate that this -- and I've been worried about this for a while when I watched AOC kind of take over the House Banking Committee, that was supposed to be talking about safe banking, and then she starts in on social equity. And then we also learned that perhaps the reason why Cory Booker isn't supporting safe banking is because it's not tied into social equity. And I just think it's a very complex issue, and I wish that we would all as a society, not only in the cannabis industry, but on a lot of these issues to make our society a better society, and to right these wrongs in a lot of ways, not just through the cannabis industry. That's all a mistake.

RS: Yeah, yeah. Speaking of lip service that might be a great segue to talk about New Jersey and New York and the path to legalization there. What's your sense of things and how they're developing and your kind of sense of -- your level of optimism there?

AB: Well, so I think New Jersey is going to happen. And I don't really know all the players and all the exact reasons for the delay. I know, they just awarded some additional licenses. Very frustrating. And to your question earlier, and I'll come back to the New York partner moment. So why I think New Jersey is so important, so first of all, there's a large MSO representation there. They basically now own almost that entire market of the current medical cannabis providers. And so it's direct. And a lot of times we've seen legalization over the years, where like, everybody got excited about Colorado, but there were literally zero companies that could benefit from it.

And then everybody got excited about California, very few companies that were publicly traded, were actually in a position to benefit at all in the short term, certainly in the long term. And so New Jersey is a very different animal in that regards. And one of the things I learned a long time ago, is that there's a lot of people in the northeast. I used to live there and I learned that from an investment standpoint, now, when a State like New Jersey goes legal, in the New York metropolitan areas driving over the bridge, and it makes the news in New York City and all that. This is going to be a lot more impactful than Arizona legalizing, in terms of kind of the media impact.

And so I think there's a couple different reasons why New Jersey actually physically going legal, will be important. So I don't want to say that that's the only thing we have going but that's low hanging fruit this year. You referenced what I wrote about. I think the most difficult thing to bank on is being able to uplist. That would be huge. But is that going to happen? I doubt it. Something else I've talked about is the -- we've seen a lot of creative structures that allow companies to invest in the industry without directly investing.

These have tended to go through Canadian LPs, which is really illogical. But that's the way it's been. And I think something that might excite people would be if we were to see a traditional company, do one of these contingent investments or some sort of strategic partnership, whatever it is, that is within legal, within its legal ability into a leading us cannabis company. I think that would excite people probably more likely to happen than uplisting. And then the least impactful, but most likely is this New Jersey.

But I want to get to this New York thing. And I lived in New York for eight years. And I think -- I don't think I ever realized this but New York alcohol industry, you're only allowed to own one store there. I don't think I ever realized that. I had my store I would go to but I never thought about they didn't have any other stores. And so when New York talked about their new legislation, which I thought was really favorable, by the way, for the existing operators. I don't think people appreciate that very much.

RS: The existing operators did, I think.

AB: Yeah, no, but the investors didn't. And they still don't. But so it's really interesting to me when you think about what New York's landscapes going to look like, which is okay. So if you're in Florida, right now, you do everything, everything you sell, you have to create it. So Florida is an extreme. It's like the Canadian Medical market, I guess still is but the way it used to be certainly, as well. Totally vertically integrated, which is kind of insane, but it's the way it is.

And then in other markets like say Pennsylvania, it's a decent sized market, yeah, you can be vertically integrated or you can be a retailer or you can be just a processor or you can be just a cultivator. And some companies have been in all those and some in one. And then now New York, they're telling you pick a side, you're going to be in production, or in retail, and there's no crossing that line unless you're an existing operator.

This is really interesting to me. It means first of all those 10 existing licenses are working a lot because they cannot only be on both sides have three stores instead of one store, plus the five medical stores, which I don't know what that's worth. But so that's one part. But it really means a lot for the producers have a lot of -- will have a lot of power there. Because when you're dealing with one retailer and the retailer has no buying power, any sort of bargaining power, it's really good for the producer.

So branded products are going to be really strong, I think in in New York. So bodes very well for those that are able to be on the production site, I think. We'll see. They haven't set the caps, though. So if they go too progressive, all of the sudden the markets going to be way too fragmented. So I do have an answer for that, by the way. And I can't believe how cheap the stock appears to be.

But it's WM Technology (MAPS). I think this is going to be a Weedmaps work, where you have all these little onesies out there on the retail side, and probably lots of little brands, especially if they put these production council. So anyway that's…

RS: Talk to us a little bit about that stock. That's a stock I don't know. And I bet a lot of viewers don't know either.

AB: Yeah, I never really cared for that company. Honestly, they pissed me off, and I can hold grudges to a great extent. But I did finally decide to bite the bullet and, and I wish I hadn't, but because it's gone down, but everything is going to. The reason I didn't like them was that they supported the illicit market. And I think they really hurt the legal market in California and Canada. And I was watching this. And I was in shock. I was like how can you as a company, be on both sides. If you're cannabis growing, you do that, you can go to jail. But these guys were doing it and in both in California and Canada. And so they paid the price. They had to walk back that business, and it shows up in their numbers.

But I think they have a really interesting business. And I think what kind of got me excited about after it broke $10 was, I saw Dutchie raise a lot of money from a lot of smart people at a huge valuation. And I saw AM Technology trading at a tiny fraction of that valuation. And so when I look at the company, they seem to have sticky clients. I know they had to write off a little bit of revenue from some of their weak California customers in Q3.

But when I look at what's going on right now, and you have companies like ScottsMiracle-Gro (SMG), Hydrofarm (HYFM), experiencing 40%, 50%, 60%, same store or year-over-year growth, depending on what it is or organic growth. And then all of a sudden it swings to negative 30%, negative 40%. I think people make a mistake looking at WM or Weedmaps. And thinking that can happen. It's this is, you know, 92%, 93% gross margin business, there's not a lot of competition, it's recurring revenue. I think it's a great opportunity.

And I put aside my kind of moral issues with those guys, historically, I think they have a good business. They have smart people working there. They don't have debt, they have cash, they have positive cash flow. So it's kind of interesting story to me.

RS: So do you feel like you let go of your resentment because they changed their business model? Also they kind of made amends for it to some degree, I guess,

AB: I guess, to some degree. I know, does a leper change its spots? So I don't know.

RS: Do you think they're still on the illicit side?

AB: No, I don't think they are. I think that's behind them. So no, that's good. But I just -- I think character's important, and that was a sign of bad character. And so I'd say for the way I think about it is, my job to my subscribers is to find stocks, they're going to go up over time. And so is the fact that these people did something wrong, in my opinion in the past, does that mean their stocks going to go down? No. Does it mean that I have maybe a little bit less trust for their management team? Probably, but I can factor that in. I wish I could say I trusted all management teams, but who can.

RS: I think that would speak poorly of your character if you say you trusted all management.

AB: Exactly, right. I mean, I think as investors and I'm not talking about just in the cannabis space. I mean, I followed Peloton, in those people jammed the public with a billion dollar stock offering as their business was tanking and they knew it, and just horrible so…

RS: Yeah, yeah, a lot a -- speaking of kind of sussing out management and stock versus company and all of that, what are your views about the Ascend Wellness (OTCQX:AAWH), MedMen (OTCQB:MMNFF) deal kind of falling apart speaking of the whole New York scene as well?

AB: Yeah, okay. Well, there you go. I don't like to call out people like the Serruyas, but it's been my experience. If you see Serruya involved, don't get involved. And so I've had no involvement with Hydrofarm. And I don't know if I'm right or wrong, but this is just based on my observations and my reads. And the Serruyas were running Liberty into the ground. And so I'm sure Serruyas if they're listening to us, or me, what the hell is that guy talking about?

But this is the way I see it. I'm not saying I'm right. But so, as it relates to MedMen, they're not the only -- if they're bad actors, the Serruyas, I don't necessarily want to call them. They're certainly not the only ones. MedMen's been involved -- there's all sorts of bad actors there. So I can say that, I run away from Gotham as well. For the most part, let's just say, I don't keep my head in the sand, about Gotham. And so on the Serruyas I kind of saw this one coming in, listening to the Q3 call from Ascend and Abner, who has no fear of litigation anyway, if you read their filings, there's a lot of litigation involved.

You could see this coming from a mile away. And it was pretty obvious that MedMen made a bad deal. It seemed like at the time, they were desperate. I just can't believe that they're pursuing the strategy. I don't understand how they're going to win. I mean, but I'm not a lawyer. Sure seemed like an ironclad deal. And for them to say, well, now that we've seen the legislation, we don't want to do the deal. So we're not going to, seems well. But I feel badly for Ascend and their shareholders because they were kind of counting on it.

Now I will say this, I don't think -- now there were some analysts that put those New York numbers in, and it's more of a 2023 thing, and they're starting to come out. I never did, and I didn't -- I never assumed the deals are going to close. I wait. I mean, I like to think about what they might mean. And I just told you, I think those licenses are super valuable with the way, the legislation was crafted, it remains to be seen how valuable because of this cap on production, that's still -- the ability to be vertically integrated, have three stores is worth a lot.

And so unfortunately, this is a time where if Ascend could close that deal, they being beginning to expand their capacity, like some of their peers are doing, and they're not able to do that. So I don't know how this is going to get resolved. If it were me, I would sue MedMen, for a lot, not just for not closing the deal, but for that opportunity cost, they're missing out on. I don't know how it works.

So I think they're compelling them to close. But if that's all they're suing them for, it's going to be a lost cause. It's like, fight a battle, that's going to take a year or two and win and by that point, they're way behind.

RS: Right, it definitely seems like at this point, kind of a lose-lose, just in terms of exactly what you're saying, the energy and the -- like any bad divorce, kind of no winners. Yeah, it's really interesting to kind of talk about management and how much weight we give to certain things and things to steer clear from. When you're looking at companies, and when you're looking at companies come to market and kind of figure out these new markets, and figure out in many cases, new acquisitions, because we've seen a lot of consolidation over the past year, over the past few months.

How do you look at management kind of -- like you mentioned, Liberty Health, let's use that as an example. So like when Ayr (OTCQX:AYRWF) comes and takes up Liberty Health, how much attention are you paying to kind of the ability to conjoin two different cultures, and for Ayr to be successful in raising Liberty's culture up? How much weight, and how do you look at that, as these deals get announced?

AB: Yeah, I think this was a great question. And I'd also say it's a very challenging area in general. And a lot of times we don't have enough information to answer that question. And so but for Liberty, I did because I knew Ayr and I knew Liberty and I knew what was going on at Liberty. And I knew their lack of leadership, and I knew exactly what was going on. I also knew, that the folks at Ayr kind of knew the new grower and all that. So I don't want to say it was so easy to predict, but the numbers show that they have done a great job.

I mean, I've been watching their market share go up on MMJ and I think Jon's a smart guy. And he knew what the problem was. And he -- I thought he detailed it very well. And he had to deal with a lot of people who were pissed off, that thought he was stealing the company or something when I thought they were actually getting a decent deal when it was all said and done. And I think they would kind of say, well, no, look at Ayr now. But I'd say no, look at the market now. So where do they think their stock would have been? A lot lower, I would imagine.

But anyway, I think, it's really hard. And so I've been watching things, like, less about -- because I don't know, like when you buy a private company, it's hard for me to make those judgments. And I think it's important, but I remember when Columbia (OTCQX:CCHWF) bought Green Leaf? And I happened to know the CEO there. And I reached out to him, and I said, why did you do the deal with Columbia Care, and I tried to learn, and I liked what I heard, by the way. But it's not worth going into.

But -- and so I can -- sometimes I'm able to do that, because I actually knew the guy. If I didn't know him, and I called him up, the guy wouldn't even talk to me. So I see things like, Curaleaf's (OTCPK:CURLF) deal in Bloom Dispensaries in Arizona, and I have to scratch my head on that one. And I don't know the operation or the people behind or anything. But I don't like these kinds of deals, it was all cash. And so I'm like, whoa, where's the alignment on that one. And there maybe is a little bit of alignment, maybe I don't know, because the last payment has something to do with stock option of Curaleaf.

But anyway, so they can like, issue them fewer shares out, whatever it is, but the way I look at that is like, I don't know if I like that. So and I look at GrowGeneration (GRWG) as a great example. And I was scratching my head on that one, how it went up, and just kept going up. And I saw insider selling and I saw -- he just left but I saw the -- I think his title was Chief Operating Officer, his name is Tony Sullivan. The guy had just shown up like a year and a half earlier. And then he had a made a fortune in a stock and sold it all. And I'm like, I see things like that, I'm like, whoa, so -- and it wasn't just him selling, there were others selling.

And then I see the structure of their deals changing to be more cash and less stock. And so these are the kinds of things that I try to look at. I wish I had a clear line of vision into those cultural fits like you talked about.

RS: Yeah, definitely. It's interesting to kind of pay attention to all the moving parts as these deals develop. Speaking of, I know that this kind of was linked to I think your emails, what's your update? Do you have an update on the Leafly (MCMJ) SPAC?

AB: I don't know about, it's really weird. First of all, for any investors out there, to me, there was like 100 year flood when that stock price fell. There was no reason for that stock. I don't understand it. Maybe I'm not a SPAC expert. But maybe I'm missing some reason. But it's a SPAC. If the deal doesn't go through, everybody gets their money back at $10. Why would it be trading in the eights, it was crazy. So unfortunately, I think SPACs are probably not as bad as people think. They're definitely some structural problems. And we've seen kind of the best.

Yeah, but so in the cannabis space, Columbia Care and Ayr, which I think trade kind of cheap. Maybe they're still little to their peers. Maybe part of that is they were SPACs. They're the two of the early SPACs. But if you look at all the rest of the SPACs, I'm hard pressed to find any SPAC that should be happy that they went public that way.

Akerna (KERN), no. TPCO (OTCQX:GRAMF), no. I mean, Glass House, no. And so the SPAC, so a lot of people might want to blame the SPAC. I don't know, honestly. But on Leafly, you have to wonder if going public that way is really the best way. And I've been doing some work on the concept. So I don't know if you can follow it. But there's this thing called direct listings. Do you pay attention to that? And I haven't seen a lot of research or even like financial media commentary on whether it's a good thing or not. And I've seen some -- well, this is what's good. This is what's bad. And I'm getting way off track here. I'm sorry. But maybe people will learn from what I'm learning.

So on Seeking Alpha, somebody wrote about Warby Parker (WRBY), and I'm like, I don't know that company that well, but wow, my wife was so impressed by that company and the experience she had. So I looked at it, I was like, holy crap, the stock's expensive. And the article is a really good article, really explained a lot about it. It didn't get to the punch line, which I'm going to give you. Direct listings are horrible. And nobody talks about why. But the reason is basic supply and demand. And I'll bring it back to the SPACs in a moment.

So in the case of Warby Parker, which I've studied, and I think there was another one I studied too. You're not necessarily doomed, but investors have to understand that the eager beavers are going to buy the stock, and very few people are going to sell it. And then so in the case of Warby Parker, when the New Year flipped, a lot of people have a lot of gains. I'm sure the early investors or maybe the employees, whoever owns the stock, and so they waited until January 2022. They didn't want to sell in December 2021. And so it's just an interesting thing.

And so, as it relates to SPAC, I almost think, you have this situation, where if the people keep their stock with you, which they often do, they vote for the deal, they keep the words and the stocks change, okay, they keep it. They're very quick to sell it. So you've got to transition that whole investor base to people that really want to own that company. And it's unfortunate. It's a big structural problem, I think, with the SPACs, but then if you layer on that, and for cannabis investors, I think it's pretty obvious.

Nobody wants to touch the SPACs. And yeah, we mentioned WM Technology earlier, I forgot to say there's another bad SPAC, right? It was a great SPAC until it wasn't. And now it's a SPAC. And so you get this thing. So is a company like WM Technologies going to zero because they went public as a SPAC. This makes no sense. But I see commentary out there. It's like, well, look at this SPAC, it's at two or whatever. So all SPACs are going to two, that's insane. That's the way people think. And I think unfortunately, in a negative environment like this SPACs, there's just another negative to layer on to some of the other negatives right now.

RS: Do you feel like we're going to see much less, much less SPACs come to market?

AB: Well, yeah, so this week, it was kind of funny, speaking of WM Technology, which went public through something called Silver Spike. There's a silver spike to what they do this week. I don't know if you know, I just happened to see it. They went -- they bought something called Elysian or something like that. It's a psychedelic, so -- and I didn't even go back to look to see if they kept that open. But it was supposed to be a cannabis SPAC.

That was -- I don't know if it was 100% supposed to be that or if that was just one of the areas. But I think this is bullish, like when I see all these companies that are kind of scams to begin with, that used to be trying to scam the cannabis space from OTC or CSE, all of a sudden shift to psychedelics, I'm like, thank you. I think it's in some of the media, I won't name names. And maybe you guys do this a little too. I don't know. I'm not. I don't think so.

But the idea that like, okay, well, cannabis is dead. I'm going to psychedelics and to me, they're very different. And I'm not saying that somebody bought -- like, you guys shouldn't be doing that. But some of the stock promoters out there's really know what I'm talking about that really shifted their attention away from cannabis to psychedelic. The fact that the SPAC decided to go the psychedelic route, I'm just like thank you. We've got enough SPACs already.

RS: Yeah, it seems also that like when SPACs -- I mean, I've seen that in a few different sectors where they kind of have to pivot from their initial idea of what they were going to be. And I feel like it's almost like them telling on themselves like, do I have this figured out enough in our cannabis and psychedelics.

It's also funny vis-à-vis Seeking Alpha and psychedelics in cannabis. For a while, I was like questioning should we cover psychedelics on The Cannabis Investing Podcast? And in the end, I decided not to. And now we cover psychedelic companies like, with CEO interviews. But I also I mean -- yeah, to me, it's a separate thing.

AB: It's separate.

RS: They're mind altering, but is kind of where it ends and even in cannabis, it's not all mind altering. So…

AB: When I see companies trying to do both, I really like red flag, red flag.

RS: Yeah. And then metaverse and that, any buzzwords that they can kind of cobble together and throw out.

AB: Yeah, and crypto, I'm a crypto cannabis company.

RS: Yeah, exactly. Exactly. The next billion dollar idea. So I was going to ask in terms of this year, as you see it playing out, what are you most excited about in terms of kind of speaking of moving on from the kind of doldrums of this past year? Are you still in that sentiment? Or are you kind of excited about certain things that you can point to?

AB: Well, I got to tell, this has been a horrible month. And so I don't want to let the last three weeks overly influence me. And I think what's going on with the cannabis space is, as I think I said earlier, it's all this other stuff. But we can't ignore this other stuff. I mean, one of the questions I've received a 420 investor over and over and over the years, it's good question, what does a recession or what do declining stocks, what do these mean for cannabis investors?

And it's not an easy thing to predict, right? But we know how highly correlated certain types of assets are -- like all assets, seems like bonds and all other assets on the other end. So I didn't necessarily see this coming. I did kind of see this end of the year, become beginning of the year, some pressure on names, due to tax issues. That happens a lot. I saw that but -- and I don't want to weigh in too much on what the Fed might do and what it might mean.

But if this is going to continue to weigh on investors in general, and if we're going to see all these retail investors leave, and that's a whole another thing. We talked about the cannabis consumption rates soaring. How much of that was sustainable versus transitory? Well, same on the investor side. Not only did investor show up because of legalization, hey, investor showed up, right. And so if investors in general are going to be going away, because they're tired of losing money, that's not good for our sector, whether we like it or not. But at the same time, from the industry development side and growth, and ultimately, that's what's going to drive the stock prices, ultimately, right.

If companies like Canopy (CGC) that can't grow, their stock prices are sinking, companies, like GTI (OTCQX:GTBIF) that can grow, their prices are sinking slower. So hopefully, over time, that we see in the long haul, five years from now, Trulieve (OTCQX:TCNNF) is earning $10 a share. I'm making up that number, the stocks not going to be $20, right? It's just not. So -- but how's it going to get there? What's it going to look like? And 280E part of that $10, for sure. There's a lot of things to figure out.

So as I think about this year, I have to say, after these first three weeks, I'm really nervous about the market that everybody is right. So it's a big caveat. Let's just put it that way. Because I really think it's going to be hard for our sector to do extremely well. If all stocks are -- risk assets are under pressure because everybody is fearful of -- I don't think that should happen, by the way. But if it does then that's a problem.

So I told you, I'm excited about New Jersey, I think that's actually a catalyst and a lot of states have legalized over the years. I don't say that. I mean, I said California was a catalyst, but a short term one, and I explained to my subscribers trying to why it would be important. Unfortunately, Jeff Sessions ruined that one. But this is an important one. I wish I knew about the strategic investment. But I don't know. But if it happens, I'm excited about that.

I think we're going to continue to see M&A. It's been that and the access to capital. And I think investors really need to pay attention, because in this environment right now, and this is a change for me, as I see this year start off kind of poorly, it becomes more important to really know your company's balance sheet, cash flow generation, and access to capital. And so at the margin, I think some of those companies that have -- that checked those boxes, like GTI is a great example. It's probably the best example of a company that has good cash flow, net cash on the balance sheet, and great access to capital.

So there's an example and I'll just disclose, I think GTI is a little expensive to its peers. So I don't have any right now. I have some of the peers. But at the margin more on the other side, there are other companies out there, I'm not going to name them that I like. But I have to be a little bit more concerned at the margin, about their access to capital and their balance sheet and cash flow generation. Because in these types of environments, we've seen it all too often. We saw the capital approach after the vaping crisis.

I think that the larger MSOs in general, which do have the access to capital and better cash flow generation and balance sheets, they also have better reputations, and they're going to be able to do more M&A on their terms, I think and they're still a highly fragmented industry. And it's hard for a lot of large MSOs to do certain transactions. I think Trulieve, Harvest maybe changed that perspective, that dynamic a little bit, because the regulators appear to be willing to maybe bend the rules, change the rules, whatever it is.

But in general, you have states like Massachusetts that it's very strictly limited to what you can do there. You can have three stores and certain amount of growth. So if you're in Massachusetts, you can't do another, if you're at your max, you can't do it, you can't grow through M&A in that state. So I do think M&A, no matter what, it's going to be a big story this year, because the established people are actually able to use their stocks, their stock's a well-accepted currency.

RS: Do you think that there is value in going for investors to go after the acquirees as opposed to the acquirers?

AB: Yeah, I do -- I think, it's tough, though. I'll give you what I think's a decent example. Indiva (OTCQX:NDVAF) is a company in Canada, and they've had some financial struggles and a lot of hand a mouth type of financing and stuff like that. But at the same time, this tiny little company has dominated what's unfortunately a tiny space the edibles in Canada, and they've done it through licensing brands, and one of those brands is Wana, done a really good job there.

And so they have the exclusive right to manufacture and distribute Wana branded products in Canada. But guess what, that contract includes a cancellation clause if Wana is acquired, and there's a certain amount of money that would be paid to the company. So I'm sitting here looking at -- like, seems to me that Canopy should buy Indiva, because then they can get the Wana brand under their revenue banner and do it their way, whatever it is. But then all of a sudden, it looks a little bit more real than by the way, that was the stupidest deal ever, if you want to talk about it, but the Wana deal.

RS: Why briefly, why do you say that?

AB: Because it's super risky, and I've written about it. Canopy is not -- was not in a position to be pissing away that amount of money on -- it's speculative, very speculative. There's no way they get that money back ever. I -- I don't even think that -- I don't think Wana even understands that that deal may never close. So for that deal to close, they have to be able to keep their exchange listing, basically, I think is the right way to say that. And so they could, but it may never close. And so they paid $400 million to buy 85% of the company. They left the company with very little incentive to do well.

And I questioned that. I'm not saying that they won't do well. And I think those are great people from what I understand. I'm actually really friendly with Joe Hodas. And I think Nancy is great for the industry, a great person. I've met her. So I'm not trying to say that they're weasels or anything. I think they did this deal, really thinking it was going to close. So I don't think they tried to pull a fast one.

But Canopy, which I've written about publicly had some serious financial challenges, should not have been borrowing money at like 10% to do that transaction, that may never close. And I don't want to say, I'm right already. But that stock is -- I think people are figuring this out that was -- literally there have been a lot of stupid deals, but I think that was probably the stupidest deal I saw last year. And…

RS: And would you say that's just like kind of chasing a brand name, kind of getting a…

AB: I think it was desperate. They needed to change the narrative. They have too many failures in Canada, not enough success in the U.S. They wanted a marquee company. And I think they quote-unquote, got the marquee company, but they didn't get the marquee company. It does zero on the revenue or profit, zero until they close the deal. But the money went out the door in their balance sheet. It's shocking that the amount of money that they received from Constellation (STZ) I believe was $4.5 billion, I forget if it was Canadian or U.S., whatever it is.

And they had, I believe zero debt at the time. But it was a lot of money and a little debt. And they just sold off one of their assets. That was bought, after Constellation showed up by the way at $0.50 on the dollar best case. And so it kind of killed my prediction because they closed it in December. But had they not closed that deal, they would have zero net cash. Their debt is going up, their cash is going down. Now because they closed that deal, there will be a little bit I predict by March 31, or fiscal year end, which we'll learn about in May, unless things change.

In the next few months, they're going to have no net cash, which just blows me away. Because they have so little to show for that massive amount of money, and to go take what was literally, 8% of that money and do this transaction, it should have been done, we're going to pay like Cronos (CRON) did with PharmaCann. Well, maybe that's not a great example, because again, these -- they're paying too much for these options. They're paying the full price, it appears the full price for something that may not close, pretty much the full price.

I think the two options should be well, we're going to pay you like -- I think what they did with Acreage was a better idea to pay a small amount for the right to buy in the future, as opposed to pay a huge amount to know -- I don't even understand why they did that. But anyway, so to your question about M&A, so for example, okay, whether you buy Indiva, or there was an example 48North (OTCPK:NCNNF), and I actually thought that company was kind of interesting. And they had a little niche.

They had, again, financial problems, lack of leadership, and HEXO announced they were buying them for stock. Oh, my god, the stock went down that day, and it just kept going down, and it's worthless now. So when you say, is there a chance to invest in the acquireries, I think you have to be really careful, because a lot of times it's going to end up being a distressed sale. But the answer is yes. And I definitely think about companies that could be acquired and why. And it's not a big secret out there anymore. But I've been talking about business growth for a long time.

I kind of analyzed what their New York license was worth in Minnesota and stripped away all that other something like, wow, now that stocks held in really well. So I wouldn't necessarily say it's the best thing to buy now, because of this idea that it would -- this I wrote about a lot. It was -- I wish I'd have actually been more convinced that the stock would do better than other stocks, because when you buy something, because you think it's going to be bought out. And part of your thesis is, it's not a great company, it's kind of a weird way to invest, right?

You're buying something that you think they're going to sell, because they're not going to win on their own. It's kind of challenging. But with that said, yeah, I think about who might be bought out and why and by whom, but I think it's -- you got to be careful.

RS: Would you say that you need to have the same kind of criteria that you would have when you're buying any stock, right? Like, you have to like the stock, even if you think it's going to be acquired, you have to like it going in, otherwise, you're setting yourself up for…

AB: I think you have to kind of look at it like, okay, I think it could be bought out here, and by whom, and the win part's really hard. For example, I had heard that Trulieve and -- it was in conversations. And that was a deal that should have been done in my opinion. I don't know, what the hang up was. It was right before COVID. It was terminated the talks, if they even took place, but I heard from multiple sources.

For whatever reason, it didn't happen. But wow, that was -- those are, we just saw GTI buy the other Minnesota company. And so for whatever reason, it was the stock was really low back then. I don't know, whatever. But I think you want to have all that lined up, but to your point, what if it -- What if you're wrong? What if it doesn't happen? Are you investing in a zero? Are you investing IN something that's going to slowly bleed to death?

And so a lot of times these potential acquisition -- I'll give you a great example, one I just never fell for, Flower One (OTCQB:FLOOF), seemed like it might be a good acquisition candidate, all these brand relationships. But they had just a horrible capital structure. And I don't want to say I never fell for it. But I figured it out at one point, and at a good point, and said, no, can't touch this. And so now that stocks probably about to be seized.

Another example would be PLUS Products (PLPRF), I would say. They had a dead issue. And so you can look and you can see these mortally wounded companies, and I think it's very challenging to bet as an equity holder. So I guess my advice would be, if you're going to look for that kind of company, make sure kind of that point I was saying earlier, make sure you have the cash flow generation, the strong balance sheet and even the access to capital.

And so I mean, I'll throw this out there again, I have no position Planet 13 (OTCQX:PLNHF) in my model portfolios right now, but there is a potential acquisition candidate and they check all those boxes, I believe. They have no debt. And they have very focused operations and focused states. They're in Nevada and they're not just in Nevada, they're huge in Nevada. They're in California, they're obviously small there. I think they just did a scary deal that I bet doesn't close. That's a whole another story. But they have this -- they've spent some of their cash. So they will be in Florida, which could go adult use, and you can imagine, their kind of stores, the superstore could do very well in certain parts of Florida.

And then they're going to have a superstore in Chicago. So there's like, easy to get your hands around, they're probably overly conservative. They have no debt, no sale leasebacks. So there's one, where you can say, I'm not saying you should necessarily, but that's one, when it's beaten up like it is right now, you can start to think about that. That's I just made a new low, got blown out on Friday. And I keep that in mind. It's kind of a premium company. So you're taking a risk, if you buy at this price, the premium will continue. But that's -- I think you can own it just for that, and maybe they get acquired too.

So that's probably the best way to think about it. Like, who might be acquired, but are they a good company?

RS: Which deal of theirs do you think isn't going to go through?

AB: So this company, Next Green Wave (OTCQX:NXGWF),

RS: The California acquisition.

AB: Really kind of struck me as odd. I kind of get what they're doing. But the day after the deal was announced, there's some pretty nasty litigation against Next Green Wave. I did reach out to the company, they said they're aware of it. But the way they responded to me sure made it sound like holy crap. Yeah, we're aware of it. I don't know. So we'll see. I don't think it's integral if it closes or not. And the way they presented the numbers, like California assets are really cheap. So it seemed like -- maybe they paid too much for it. But maybe it's a really good asset. I don't know it that well. It never really did well as a public stock and never caught on, and never got any following at all, really didn't have trading volume, didn't have great price performance really, one way or the other.

RS: Let me ask you this as we kind of close out the conversation, another scintillating one. What's been something in your years covering, I mean, you've discussed kind of how your expertise meets the cannabis industry? And how you've sussed a lot of things out and some things have taken you by surprise. What's something in your years of covering the industry that has kind of shaken you or changed something where you're like, oh, I wasn't looking at that, right? This was actually kind of different than I thought it was going to be.

AB: Yeah, I'd say most of these things happen a little bit early on. But I think I used to sometimes lose a little sleep in trying to trust these people. And I'd say, I was a newbie, when I showed up to the OTC. I had no idea how corrupt it was, or anything. And so I guess my view was, okay, I have to kind of embrace these or have to consider embracing these companies, and then stay with the CST. And I had to, like, take off my CFA hat a little bit or kind of put the blinders on a little bit, accept certain types of financial instruments that I don't think people should accept. And luckily, we've evolved there.

But there have been some examples where companies were lost because of these financial instruments. And I'd say that kind of -- when I was an equity investor, I didn't invest in distressed situations. I used to work in the fixed income market. I didn't do high yield. So that's kind of my own lack of history training, whatever you want to call it. So I'd say kind of the way certain assets can get stolen, in my opinion, has been one of the big lessons and I think it's still going on this whole thing with iAnthus (OTCPK:ITHUF).

And to me, it's super disheartening. And there's another deal about, where kind of like MedMen doing a bad deal. The Board or the executives, whatever, they did a bad deal. And so some would say they're just trying to get out of a bad deal, where they basically gave the company to the creditors, but I think it's a little different. And so there were definitely some bad actors, and there's some bad instruments. And I think this has been disappointing to me and a little eye opening to me. And I guess I can say, I'm really happy that things seem to be evolving. But we still see some, and yeah, if you were to ask me, maybe you were about to. So I don't mean to pull on you, but yeah, what worries you right now.

And so I'd say one of the big stories of 2021 was expanded access to capital to capital. And it was really in 2020, as we began that year, even before the pandemic, we were worried about lights out for a lot of companies because of the vaping crisis, and then the pandemic hits. And we're like, we're worried about lights out for every company. And also like, whoa, wait, this is an essential services industry. Whoa, look at all the consumption. They have gotten capital flows in, they do all the equity offerings in early 2021. I'm like why are they -- someone's equity stocks going to keep going up. They're so low prices.

And of course, the prices did keep going up for a little bit. And as the year played out all of a sudden, equity markets weren't exactly open to most. And so what we saw was the capital markets really, really open up and so we've seen the debt capital. We've seen these public companies now, Chicago Atlantic, FC Gamma go public. We've seen more sale leaseback companies, New Lake, there's more coming. We've seen them raise and deploy capital. So the sale lease backs in the debt. And we've seen private debt, Polaris backstopping Harborside's deal and all that. So this all seems great.

So but it kind of gets me thinking, not so much the bad actor and bad instruments necessarily. There may be some of that. It gets me more to the point like is our industry, are the American operators becoming a little bit too leveraged. So I'm starting to pay more attention to that and it's -- I'm not an expert in some of these things, but when you do sale leaseback and I know someone like Jonathan Sandelman will talk about their low or minimal amount of sale lease backs and tariffs, hasn't done any -- people are starting to look at that and Verano (OTCQX:VRNOF). I think that's one of the reasons why people warmed up to that name. There's another reason too, I think, but -- a couple of reasons, but the prime three -- that's a whole another story.

But now, it's great, right, that they don't have to sell stock, and they're issuing some debt. They're doing sale lease backs. But at some point, do we go a little bit over our skis on that front? So I'm watching that? And that's what I'm not saying that we've hit that point? I don't think we have I did a pretty exhaustive review of where we are in the debt coverage and all that. The reality is if something goes wrong with the industry, whether it's I don't know, Jeff Sessions runs for President, let's make that one up and gets elected.

But whether it's something like that, or whether it's something that we aren't anticipating where there's all this growth seems to be and the future doesn't appear soon, or federal legalization happens really quickly and speed it up. I don't know what it is. But I do worry a little bit about -- and I say that Rena, because I watched this play out in Canada in these companies, and I had conversations because I was so negative about what they were doing. And I did not like the answers and I kind of regret that I didn't think harder about it and take a different approach.

They would sell these convertible notes. And I questioned why aren't you just issuing equity. They had no cash flow in, but they were like, why issue equity, we can do these convertible notes, and we'll just refinance them if we have to. Now that's not what happened. And this was a big story in 2020 in Canada, and even in '20, I guess in 2020. So Tilray (TLRY), Aphria, Supreme (OTCQX:SPRWF), all these companies had to renegotiate their debt, Aurora (ACB), I shouldn't leave that one off.

And so we've seen it playing out already. It's not big companies, but in certain small companies like Plus, which ended up in bankruptcy. They had already done some renegotiation on their debt. And so this is something we should worry about. I'm not saying to obsess over it, but be aware that when these companies are taking on debt and locking themselves into what's ostensibly expensive lease terms, this could be a risk factor. So I do worry about that a little bit.

RS: Do you have any thoughts about NewLake Capital (OTCQX:NLCP)? I ask because we had them on CEO Interviews and they -- I know that a lot of people are asking about them. Do you have in speaking of that, what's your thought?

AB: So I don't follow them formally. We've interviewed them. I paid cursory attention. I'm not a REIT expert. They have a structural challenge that they're on the OTC and I don't know if there's any more to the story than that. But investors should expect big time that it's going to trade cheaper to peers and I'm sure there's a good answer like, here's what they're doing good and this is different all that but that is a huge factor, not being able to trade on higher exchange. It goes back to supply and demand. And so the whole thing about IIPR is just amazing. I think the whole thing is hypocrisy, total hypocrisy.

The exchanges list certain companies. I'm going to start at the top. They list banks. Many of these banks will take money from cannabis companies, not all but many, publicly traded banks take money from cannabis companies and exchanges are okay with that. Power companies, publicly traded power companies are providing power to federally legal cannabis operators, but they get to be listed and they should. I'm not complaining.

Then you take something like IIPR and apparently I've never seen this in writing, but I've heard it enough to believe that it's probably true. New York Stock Exchange goofed. I think IIPR said they were medical only or something like that, for whatever reason they let them on. I'm glad they did. But they won't let anybody else on, so really screwed others okay. But they -- the NASDAQ, they let GrowGeneration on. They let all these other ancillary providers, Akerna, whatever it is. They take money from federally legal companies, but they get to trade. I don't get it.

This whole hypocrisy with the exchanges is infuriating, because I'm a logical person. And dirty money is dirty money. If that's your idea, that's dirty money. Why are you leaving power companies and the bank on, why are you letting the ancillary companies on? And the right answer is if people are operating in state compliant manner, then they should be on. But -- I mean, I do understand the exchange's position, but this is kind of illogical. You can't be a little dirty. You're dirty or you're not dirty.

RS: Yes. Another question to add to the list of what's happening here, yeah for sure.

AB: Anyway, on NewLake Capital, this is a big problem, unfortunately, that their investor universe has to either be just people that want a higher dividend ultimately, because that's what will end up happening. You have same economics, but a lower price will give you a higher dividend, or people that might be willing to bet that they can get uplisted at some point and recapture that premium. They think it's going to be sooner rather than later.

But not only is your investor universal, I assume I don't pay that much attention to it but I assume the liquidity is worse. I know that NewLake Capital doesn't trade that much. It doesn't trade like a million dollars a day, trades less than that. In our index that's the minimum, a million dollars a day on average. And so as an investor, if you're trading that's bad, if you're investing that doesn't matter that much.

RS: Can I press you for the three reasons that you were going to give about Verano, and then I'll let you go?

AB: Oh, boy. So okay, so part -- probably five reasons. So some of the reasons why Verano has done better. And I went from my largest position to no position. And it's not necessarily that I'm negative on Verano. But it was really cheap. And so I think fear of the unlock, which proved to be warranted, unfortunately, because I got in -- start to get in a little early. So that was one reason. So the unlock passed and they got past that. So I think that hammered the stock's recovery.

I think the company isn't really well-known in a lot of people have kind of -- and I pointed that out to my subscribers. I think a lot of people kind of picked up on the idea, and we interviewed them and kind of made this point in our interview that the company is not a new company. It's just as old, pretty much as these other ones. It's just the New Republic. And so I think people started to understand that point a little bit better. And so I think that's a reason -- and there were some -- there's some people out there that are really -- I don't think they're paid to promote them necessarily. So I don't want to say it that way.

But that really started promoting them publicly. And then the cheapness became apparent. And then the other thing is, they have a really weird balance sheet, and a really weird margin profile. Their margins are really high, almost too high to believe that they're true. And that has me a little kind of nervous about the future and they said their margins have come down. They've maybe un-invested in so that's part of my near term, kind of -- I don't want to call it caution necessarily, but more like why I want to be in something else.

But the balance sheet and cash flow statement, they have some weird things on. These are things that I don't necessarily understand, but I talked to the company a lot about it just to get a handle. And it relates to acquisition accounting, which I'm no expert in. But when you see these mass -- people were afraid of them. So I figured that was -- that and the unlock's were part of the reason why the stock was so cheap.

So these things -- I think people understand these things are acceptable a little bit better now. The other point, Rena is -- so MSOS we just wrote about this one today. A lot of people are worked up in a tizzy, because they had all this cash. They first they got mad, they didn't spend it all like, who the hell are you to take in cash and not spend it, sell their ETF if -- they got a ETF. They're just bag holders of companies. They want their companies bought. So they're complaining.

Now people are complaining that they spent all the cash, you can't win, right? So Verano, disproportionately benefited. This was one of the reasons I had a big position in Verano, because I saw what was going on, with the funds going in, cash flowing in MSOS. And I knew that their position was too small for what it should be. They were like the fifth or sixth position. And they should have been like the fourth position. And unless Dan had some negative view, which I don't think he did, so that was one of my bullish thesis. And sure enough, since October 29, when all those floats started, positive flow started, I think it was 155% increase in the number of shares held by MSOs.

The next best one, I believe, was GTI, or I think GTI at like plus 50%, something like that. So huge. At the margin, there was a lot more of that money flowing into Verano than others. And I also pointed out in this article today, by the way, for people that care about power REIT that really benefitted. And so the number of shares there only went up 50%. So what happened was, I think there's probably a rule. I'm not sure that you can only own 10% of the float. And then for whatever reason, he ramped that company up. It's a really small market cap. And so there the increase was like from 7% of the float to 10% of the float.

So not necessarily -- the percentage increase wasn't as big, but more important, because it was a lot of dollars on a small company. So yeah, that stock over that time period went up a ton. And I think that was part of it. So I tried to pay attention to these little technical dynamics. But that was on Verano. I just think that stock got really beaten up. It wasn't well understood. They -- George plays his cards a little bit too close to the vest sometimes, or has in the past, I believe, and I think the company will do a better job of telling their story.

And it seems my view of the nine largest MSOs that I really track most closely, is that they're all really cheap, in my opinion. But some are cheaper than others. But the one that stands out as being too expensive, is Curaleaf. That's the one. And then there's a couple of other ones that I think are a little bit more expensive, but probably warranted. And then the rest of them all seem too cheap to me or like those are the ones that are of most interest to me. So I don't have positions in like GTI, and I give them a premium. I think it's -- of all the companies, they probably deserve the highest multiple, let's say of the same metric.

Whether that will always be the case, I'm not sure. But I do give them a higher one. And maybe I don't give them high enough. But I pointed out that they've never missed a revenue estimate. I think EBITDA as well. They have never cancelled a deal. Sometimes deals need to get cancelled. So I'm not saying that's necessarily bad maybe, maybe they should have canceled one, I don't know. But I think in the industry where your word is your bond kind of thing that's a positive. They have the best balance sheet. They've demonstrated the best access institution.

So does that make it the best stock? Not necessarily. But for some people, they're like, I don't need the best stock. I just want a damn good one. So I would put that in the damn good category. And that's kind of the way I think about that one.

RS: And Curaleaf you call expensive based on its fundamentals?

AB: So I think -- so it's hard for me to elaborate fully on the issue. I think the fact that it's so big, maybe people pay more for it. It's more liquid, things like that, and I don't think it should have a premium valuation. So I don't give it a premium one. I kind of use a similar multiple, maybe to other companies. So knock out the size multiple but the reality there is so a lot of their growth has been inorganic.

And I just -- I look at the numbers and their numbers came down, like most of it after Q4, after Q3, sorry. In Q4 November, when all the analysts did their updates, the Curaleaf numbers really came down for the out years.

And so I -- the way I approach it is, okay, we know where the stocks have changed today, maybe some people are comparing them to what they did in 2021, probably most people are comparing to 2022. That's the way I think about it. So a year from now, what are people going to do. They're going to compare him to the way things are going to look in 2023. So when I do that, Curaleaf just seems expensive. Their growth in 2023 doesn't seem as high as some others.

Now I will say this, I think one of the things I learned was, when I was doing this exercise most recently is the companies, a lot of the companies seem to have to be the cheapest in terms of offering the best return to what I think the target should be. They tend to have assets in transit, either deals that haven't yet closed, or CapEx projects that aren't yet completed.

And we know that, for example, Ayr and Ascend, which are two of the cheaper companies, they struggled in Q3 on some of these CapEx, their supply chain issues, whatever it was, but the numbers did come down a little bit, because they don't have these assets. They're going to have them but they're not there right now. And so it's, I think, for analysts, it's a little risky, so they should have a higher return. So if you don't think these assets will come online, don't buy the stocks.

RS: Well, that's a good place to end. Alan, a lot of great insight, as always, really thrilled that you came on. And thank you for coming on. So 420 Investor, New Cannabis Ventures. Are you writing on Seeking Alpha. I know, they took away the blog option. So your weekly -- your weekly posts, I guess are…

AB: I understood that, by the way. Some people were upset, but I get it. And by the way, I mean, I can personally testify a lot of stock promoters would use those blogs, and then the scammy companies would put out a press release to this article on Seeking Alpha. So I don't have any problem with that. I appreciate -- I know, you made an effort for me to be able to write again on Seeking Alpha, but it's just a return on investment. And I'm not ruling it out forever.

But my time is finite. I spend an inordinate amount of time working on 420 Investor and New Cannabis Ventures, including the newsletter that I put out. That's really my writing that I do. Publicly I used to write at Forbes, they put a paywall up. I quit writing, and it's not -- I don't want to write for 1,000 people to read. It's just not really a good use of my time. And so honestly, I don't want to blame Seeking Alpha, because I think Seeking Alpha has a really smart audience to a great degree. I read some of these articles, and the comments can sometimes degrade. I learned that you can -- or at least I've seen some authors, just turn the comments off.

I sometimes think that might be smart for some people, because there's just -- unfortunately our society is like this. I got into some sort of Twitter blame war too, I'm like why do I waste my time interacting with random people. It just doesn't help. But I will say that time I did the article on Seeking Alpha I just didn't get that many page views. We've been in a very negative environment. So I keep that option open. And I love Seeking Alpha. I am a paying user of the platform. Through my personal investing, it's a good source of ideas for me.

There's some quantitative -- you're doing a commercial for Seeking Alpha. I paid for, I like it. And my partner Joel -- I keep telling him pay for it, come on because he gets frustrated by the paywalls, and what have you. But there's some great things. There are some things as simple as keeping a portfolio and sorting on the performance or sourcing news, things like that. And maybe that stuff's available for free. I don't know.

RS: No, yeah, it's a premium feature. And I feel like it pays for itself. I think that you would agree. Yeah.

AB: Yeah. And I pay a lot for a different product to get transcripts, but they don't always have every transcript, and sometimes Seeking Alpha will have the transcripts of -- that my source that's supposed to have them, doesn't have for whatever reason. That's getting a little bit better. But so the transcripts and the other one, anyway.

RS: And the comment streams, I mean, it's a great -- that's one of the things that I love most about Seeking Alpha, that's how you know, like, a lot of our audience is through the comment streams. And it's something that I find very edifying a lot of times and I know that you're in there, keeping up that level of edification.

So well, I'm really happy that you're part of Seeking Alpha still, even if you're not writing for us, but that you're sharing our insights and you'll always be a part of the community and a treasured part, because you've been here for a long time, Alan and I appreciate as always you sharing your thoughts with us today. Thank you.

AB: Yeah, thanks. Keep up the good work. I mean, another great feature on Seeking Alpha is your podcast, so thank you.

RS: Thank you, sir. Thank you very much.

Thanks so much for listening to The Cannabis Investing Podcast. Subscribe or follow us on Seeking Alpha, Libsyn, Apple Podcast, Spotify, Google Play or Stitcher. And we'd really appreciate it if you would leave us a review on Apple podcasts. It helps other investors find our show and makes us feel fantastic. If you have feedback or questions we'd love to hear from you at rena+canpod@seekingalpha.com. Thanks so much for listening and see you next time. Nothing on this podcast should be taken as investment advice of any sort.

I'm long Trulieve, Khiron, Isracann Biosciences, The Parent Company Ayr Wellness, and the ETF MSOS. You can subscribe to us on Libsyn, Apple Podcasts, Spotify and Stitcher.

This article was written by

On The Cannabis Investing Podcast, host Rena Sherbill provides actionable investment insight and the context with which to understand the burgeoning cannabis industry. Interviews with C-level executives, analysts and sector experts give you investment ideas to consider, help you think through your investing approach and give you a new lens with which to understand this ever-growing sector.
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