The Biggest Little Company In Cannabis: C21 Investments Dominates Reno, NV

By Todd Harrison via Cannabis Confidential (October 13)

After last week's trip to Chicago for the BZ Cannabis Capital Conference, I headed west, young man, for a long-overdue sit-down with Sonny Newman, the founder & CEO of C21 Investments CXXIF, Nevada's first licensed operator in 2015.

When we began advising this company five years ago, there had been a change of control. Prior management was overly promotional, we learned, and Sonny retook control with a unique twist: he loaned the company over $30M dollars.

Fast forward to today: five straight years of positive free cash flow retired Sonny's $30M in senior debt, paid $7.5M in 280E taxes and funded a $3M cultivation expansion. There have been no financings or shares issued. In fact, C21 reduced its fully diluted stack by 4% over that span.

Not only is C21 the only public cannabis company to pay off its senior debt via free cash flow, it's also the only public cannabis company to have the same number of shares outstanding as it did at all-time highs; in short, Sonny is a shrewd steward of capital.

I was keen to meet this man, the cannabis equivalent of William Wallace, as our primary points of contact on the relationship were Bruce Macdonald (Chairman) and Sammy Armenia (VP), both of whom were slated to meet me in the northern Nevada desert.

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With Sammy a late scratch (flu), I finagled my way from Chicago (to LV to) Reno Wednesday night to meet Bruce and, after stealing a few hours of shuteye, went to meet Sonny for breakfast before the planned cultivation and dispensary tours.

I didn't know what to expect when I walked into the restaurant Thursday morning. A pop culture stan, my perception of Nevada is shaped entirely by people named Ace Rothstein and Nicky Santoro. Sonny wasn't that; he was quiet, soft-spoken.

He didn't say much but what he said carried weight.

We headed to the cultivation facility, where the internally funded doubling of capacity was on full display. The operational expansion was initiated when they closed on a new retail dispensary, a combined effort they expect will drive double-digit growth and potentially double profitability.

The indoor cultivation facility is 104K sq. ft.

From there we headed to Sparks, where the very first dispensary in the state of Nevada—the O.G Silver State—sits in some sorta time machine in the back of the facility…

the first store in the state of Nevada

…while this 8000 sq. ft. dispensary with over 700 SKUs is the new front-of-house.

The numbers speak for themselves. Silver State crushes the in-state competition, averaging $12.5M in sales ($4M EBITDA) per store vs. state-average sales of $7M.

Until recently Silver State had two retail outlets: Sparks, and a 6K sq. ft. Fernley store that together service more than half a million loyal customers each year.

"We know our customer and our customer knows us," Sonny noted as he spoke to his blue-collar roots and drove to the new shop, a third dispensary in South Reno.

The first thing I noticed about the new store was its neighbors. Located in a busy strip mall, it was bustling with all sorts of consumers doing all sorts of things.

The inside was immaculate as we made our way around the facility at that early hour, and I monitored a steady stream of locals purchasing their favorite products.

In my enduring commitment to due diligence, I purchased their signature White Widow pre-roll and tucked it away for a later hour, but it was quite good. Cannabis might be a weed but growing great cannabis at an affordable price is a skill.

There are some solid stories in this space and more than our fair share of fugazis but only a unique few are debt-free with a proven track record and an easy-to-understand growth path, and that's before any help from the feds.

All that, with one hell of a card player at the helm…

C21 CEO Sonny Newman

…who's holding a stacked hand. Not that anyone is paying attention to this table…

CXXIF one-year chart

…but if I learned one thing during my quick trip to the desert, it's that it's prolly not wise to bet against Sonny Newman, particularly when his market cap is only $25M.

Have a safe journey and please enjoy responsibly.

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CB1 Capital has a position in C21 and Todd Harrison sits on the Board. Nothing contained herein should be considered advice.

Photo by Nicholas Ceglia on Unsplash

This article is from an external unpaid contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.