Potential Cannabis Buyouts

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.

Friends,

The cannabis sector closed at an all-time low yesterday, with the New Cannabis Ventures Global Cannabis Stock Index dropping 2.0% to 6.84, down 15.7% year-to-date. These stocks are way down for quite a long time! Interestingly, two stocks soared, including WM Technology (NASDAQ: MAPS) and Vireo Growth (OTC: VREOF) (CSE: VREO). They are now both up a lot in December:

WM Technology, which is part of that index, ended at $1.39, near the low of the day, and it traded as high as $1.56. With the 13.9% gain, the stock has rallied now 93% year-to-date. A group led by two co-founders that owns substantial shares has submitted a non-binding bid of $1.70 per share, as they reported on 12/17 in an SEC filing and then late yesterday in a press release. This rally is a good thing for holders of the stock, including those who may have added the name in June when we called it a bargain. The stock was then $1.12, so it has rallied 24.1% while the Global Cannabis Stock Index has dropped 23.2%.

I think MAPS is still cheap, but the deal is not a done deal and could fail. I had liked it before because the company’s valuation is very low, it is debt-free, it is growing its adjusted EBITDA and it is down so much over the past few years. I believe that cannabis rescheduling, which will wipe out the 280E taxation that its customers face, will help it substantially. The upside to the $1.70 bid is good at 22%, but investors can find other ancillary stocks that will rally more.

Vireo Growth, which is working on exiting New York and currently operates in Minnesota and Maryland, announced that it is buying cannabis operators in four states. It shared a lot of information in the press release about these companies, and it concluded that the purchase prices are between 4X and 5X adjusted EBITDA. The company announced that it is raising capital at $0.625 per share and will issue stock to fund the acquisitions. It also announced a new CEO.

The rebirth of Vireo Growth is quite interesting, but the company hasn’t closed the acquisitions and may not get the deals done. M&A can be very difficult for cannabis operators, but these don’t have the red flags that the Cannabist deal with Cresco Labs had. The stock has been a horrible stock for many years but has more than doubled in 2024 after the 100% rally today. At $0.50, it is down from its recent peak and still down more than 90% from its all-time high in early 2019. Good luck to Vireo!

We have seen some MSOs implement insider buy plans and take some action. Green Thumb Industries, which has a better balance sheet by far than its peers, has bought back a decent amount of stock. It has seen the price decline, though. On Tuesday, after the close, Ascend Wellness announced that it had repurchased 11 million shares. It rallied sharply yesterday on this news.

I am glad to see some M&A action. Organigram bought an LP in Canada earlier this month, and it’s nice to see some activity in the U.S. What happens with 280E matters the most right now, but it’s good to see that many who think that cannabis stocks are cheap can act upon it.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:

Exclusives

Florida Cannabis Market Remains Under Pressure

Michigan Cannabis Sales Increase in November

Financial Reports

Organigram Increases Revenue and Adjusted EBITDA in Q4

Mergers & Acquisitions

Vireo Growth to Acquire 4 Cannabis Companies

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View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

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Sincerely,

Alan