The Week In Cannabis: Banking, Insurance, NY, Earnings, Financings, M&A, And More

Major earnings reports, financings, M&A announcements and policy moves flooded the cannabis industry this week.

A bipartisan marijuana insurance bill — The Clarifying Law Around Insurance of Marijuana (CLAIM) Act of 2021 — was introduced in Congress by New Jersey Senator Bob Menendez. The bill proposes enabling insurance coverage for cannabis and related businesses.

House representatives also reintroduced the SAFE Banking Act on Thursday. If it passes, it would enable cannabis companies to utilize much-needed banking services. The act is supported by Democrats Ed Perlmutter and Nydia Velázquez, as well as Republicans Steve Stivers and Warren Davidson — with around 100 cosponsors.

Reports out of New York suggested that a final deal for a bill to legalize recreational marijuana in the Empire State is imminent.

Benzinga Cannabis content is now available in Spanish on El Planteo.

In addition, we learned New York Governor Andrew Cuomo may have agreed upon two provisions of submitted legislation in regards to home growing and social equity funding. The effects of this decision could greatly affect the fate of a number of large and medium-sized multi-state operators, or MSOs, within the Empire State and New Jersey. Check out Cantor Fitzgerald’s report explaining why speedy marijuana reform in New York may crush New Jersey's market potential, and which publicly traded companies stand to benefit the most.

Despite the good news, cannabis stocks experienced high volatility this week, ultimately trading down. Over the last five trading days of this week:

The ETFMG Alternative Harvest ETF MJ: lost 0.9%.
The AdvisorShares Pure Cannabis ETF YOLO: tumbled 1.1%.
The AdvisorShares Pure US Cannabis ETF MSOS: dropped 0.5%.
The Cannabis ETF THCX: was down 1.7%.
The Amplify Seymour Cannabis ETF CNBS: slipped 1.25%.
The SPDR S&P 500 ETF Trust SPY was down 1.22%.

Earnings Reports

Notable players like Green Thumb Industries Inc. GTII GTBIF, Hexo Corp. HEXO HEXO and Sundial Growers Inc. SNDL disclosed their quarterly earnings, posting relatively strong results.

“As we start to get more earnings reports for the fourth quarter, we continue to see some of the largest cannabis companies put up huge numbers. Unfortunately, there is some concern over the increasing amount of debt some of these big firms are taking on. The fear is that at some point these debt payments will come due and it won't be pretty,” Debra Borchardt, editor-in-chief of Green Market Report, told Benzinga.

Green Thumb Industries Inc. touted a pop in revenue and a proclamation from CEO Ben Kovler that "the real fun is just beginning.” Fourth quarter revenue increased by 12.8% as of Dec. 31, 2020, and 133.8% year-over-year, to $177.2 million.

Hexo Corp. achieved a positive adjusted EBITDA of $202,000 in the second quarter of 2021. This represents the seventh consecutive quarter of adjusted EBITDA improvement for the Ottawa-based company.

And Sundial Growers Inc. SNDL reported fourth quarter sales of $13.9 million — exceeding analyst expectations of $12.07 million by 15.16%.

Following the report, Fitzgerald analyst Pablo Zuanic maintained a Neutral rating on the stock. Sundial "is in a transition phase," he said in a note, citing ongoing cost cutting efforts and a "regearing" of its cultivation facilities.

Also this week, Sundial and SAF Opportunities LP entered a 50/50 JV to focus on cannabis related verticals. Sundial made an initial commitment of $100 million. “The Joint Venture expects to pursue additional potential mandates, including a Canadian SPAC and other investments,” a press release added.

Find all the details on these and other earnings reports on Benzinga Cannabis’ Earnings Center.

Financings And M&A

GrowGeneration Corp. GRWG went on an acquisition spree, acquiring:
Char Coir, a professional grade growing medium made from 100% coconut fiber;
Hydroponic and organic fertilizer store, 55 Hydroponics; and Aquarius Hydroponics, a garden supply center with hydroponics equipment, lighting, and nutrients.
Cannabis e-commerce platform Dutchie closed a $200-million Series C funding round led by Tiger Global, boosting the company's valuation to $1.7 billion. Separately, Dutchie agreed to acquire Greenbits and LeafLogix — two enterprise resource planning and point-of-sale software solutions serving the cannabis industry.
Cannabis-focused commercial real estate finance company AFC Gamma Inc. AFCG started trading on the Nasdaq, following an offering of some 6.25 million shares of its common stock at $19 per share. Shares closed at $23 on Friday.
Greenrose Acquisition Corp. GNRSU acquired Shango Holdings Inc., Theraplant, LLC, True Harvest, LLC, and Futureworks LLC (d.b.a The Health Center) for approximately $210 million.
Innovative Industrial Properties Inc. (NYSE: IIPR) agreed to purchase a cannabis cultivation site in Illinois for $6.5 million. The REIT also secured $45 million in financing to complete a buildout of the facility, which will subsequently be leased back to 4Front Ventures Corp. FFNT FFNTF as part of a 20-year agreement with two five-year extension options. Phoenix-based 4Front will fund some of the construction. The deal totals some $51.5 million.
Cresco Labs CL CRLBF is taking over Massachusetts-based Cultivate Licensing LLC and BL Real Estate LLC for a total of $158 million.
MedMen Enterprises Inc. MMEN MMNFF raised CA$20 million ($16.05 million) by selling units at a price of CA$0.40 per unit.
The Flowr Corp. FLWPF raised $15.9 million by selling units.
MWG Holdings Group closed a Series B Preferred Private Placement for aggregate gross proceeds of $10.8 million. “The investment will accelerate our cannabis retail expansion and vertical integration, positioning MWG to open up to 12 new California dispensaries in 2021,” MWG and Perfect Union CEO David Spradlin, told Benzinga. “MWG's management team has consistently grown our asset base, increased store sales and achieved positive EBITDA, which fuels the company's ability to provide communities with quality cannabis products, one-on-one service and good-paying jobs with benefits and career opportunities.”
TILT Holdings Inc. TILT TLLTF expanded its operations in Ohio with the closing of the company’s acquisition of Standard Farms Ohio LLC. TILT President Gary Santo told Benzinga, “As the evolution towards a traditional CPG industry takes place, we look to be on the forefront of cannabis 3.0 by opening new markets to our brand partners. Standard Farms Ohio furthers our growth strategy and will bring a consistent supply chain solution to other multistate operators, licensed producers and brands operating or looking to enter the seventh most populous state in the U.S.”
IM Cannabis IMCC acquired Canada-based Trichome Financial for some C$101 million, effectively entering the North American market.
Hero Technologies HENC will buy 40 acres of land in Moffat, Colorado for cannabis operations.
NewLake Capital Partners Inc. and GreenAcreage Real Estate Corp. confirmed a merger and the creation of the combined company.

Other News

California granted $15 million to 10 cities and counties that are part of social equity programs.

CbdMD Inc. YCBD formed a new wholly-owned subsidiary that will focus solely on research and development activities. Regulatory consultant Sibyl Swift, a former U.S. Food and Drug Administration (FDA) official, and general counsel Lance Blundell will serve as co-chairs of the new unit.

“The vast potential of CBD, as well as other cannabinoids, has yet to be uncovered,” Martin Sumichrast, chairman and co-CEO of cbdMD told Benzinga. “cbdMD Therapeutics' mission is to strive to discover these opportunities that can have a meaningful, positive impact on people's health and wellness and unmet medical needs.”

Vertosa announced new developments for infusions into the rapidly growing category of cannabis and hemp-CBD gummies, including a patent-pending emulsion system that ensures faster onset and offset, uniformed distribution across each batch, and consistent target potency. The water-based emulsion system for gummies, validated in effectiveness by extensive research, offers greater technical benefits than a classic distillate infusion.

Vertosa founder and chief science officer Dr. Harold Han told Benzinga, “It was important for us to develop a solution that addresses the biggest obstacles in the booming gummy market, including ease of production, accurate potency, and faster onset. We performed substantial research and third-party testing to verify our patent-pending technology so our brand partners can bring the most effective cannabis gummies to market.”

The Coalition on Cannabis Policy, Education, and Regulation made its debut, seeking to bring together regulated industries and subject matter experts on a diverse set of issues (ranging from social equity to traffic safety) to examine what a comprehensive federal regulatory framework for cannabis should look like.

With nearly 1 in 3 Americans living in a state with legal access to adult-use cannabis, the coalition feels now is the time to move the cannabis debate beyond if it should be legal to how best to regulate it at the federal level. The coalition’s belief is the answer to this question lies in bringing all stakeholders – from industry to advocacy – to the same table to have a forum for building consensus together.

Andrew Freedman, the Coalition’s executive director, told Benzinga, “Public support for cannabis legalization has never been more widespread than it is now, but critical questions relating to interstate commerce, taxation, impaired driving, youth use prevention, and standards for packaged goods remain unanswered. The mission of the Coalition on Cannabis Policy, Education, and Regulation is to bring the best minds in their respective fields together with the best practices learned from highly regulated industry and legacy state systems, to create a thoughtful framework for the federal regulation of cannabis.”

Origins Council announced several initiatives to help empower and strengthen their regional partners and the membership they represent. Together with their partners Trinity County Agriculture Alliance, Mendocino Cannabis Alliance, Sonoma County Growers Alliance, Nevada County Cannabis Alliance and Big Sur Farmers Association, Origins Council has launched a $100,000 Matching Funds Campaign this month help the collective associations’ 500+ members; predominantly licensed small cannabis farmers.

Per Origins executive director Genine Coleman: “Having had the privilege to collaborate with Origins Council over this past year, particularly on our policy work around appellations - in the context of historic wildfires and this pandemic - has been an unexpected gift from 2020. The legacy cannabis farming community of California is a living cultural treasure that must be protected and respected, in uniting we can realize this vision.”

Agrify Corp. outlined the main terms of a partnership currently being negotiated with Atlantis Hydroponics to build out a 2,500 square foot research and development facility. The new R&D facility will be at the Atlantis location in Georgia, where Atlantis has a license to grow hemp in the state.

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