Earnings Szn: U.S. multi-state operators have been reporting quite stellar financial results for the past quarter, with companies like Green Thumb Industries, Cresco Labs, Curaleaf and Trulieve posting 20%+ quarter-over-quarter growth and (in some cases) positive adjusted operating earnings. The positive momentum has been reflected in stock prices, as U.S. players’ valuations have improved to erase the long-standing historical discount vs. Canadian peers and institutional investors begin dabbling in U.S. canna-stocks.
Why It Matters: This feels like the beginning of our fifth 2020 prediction from January. It’s certainly feeling like we’ve passed a bit of an inflection point in the industry, as COVID failed to slow (and maybe even accelerated) momentum in sales and general acceptance. Even in tougher markets like California, the worst fears of a “doomsday event” of business failures… hasn’t really occurred. Meanwhile,companies are already taking advantage of the improved environment with capital raises that should strengthen balance sheets. With the path to legalization clearer, the durability of cannabis now demonstrated and growth trajectories more substantiated, it’s possible the tough past two years have left companies leaner, meaner, and poised to succeed. Is cannabis back?
Tech, So Hot Right Now: It’s not just your regular players that are breaking through on the capital crunch: canna-tech players across the board have raised sizable rounds recently, as springbig bagged a $11.5 million Series B, Fyllo brought in $10 million in a Series A-2, and Dutchie raised $35 million in a Series B. The companies are fundamentally quite a bit different - springbig offers marketing and CRM functionalities, Dutchie facilitates online ordering from local dispensaries, and Fyllo focuses on compliance solutions, historically for marketing campaigns.
Why It Matters: Quite a few interesting takeaways from these fundings. First, both Dutchie and Fyllo appear to be entirely insider rounds (where existing shareholders fund the new round). On one hand, those are sizable checks that show the support and belief in the businesses moving forward. On the other, it’s often viewed positively to bring in new money as a validation of the businesses’ momentum. Secondly, while Dutchie and springbig are seemingly executing on their original ideas (boosted by COVID momentum), Fyllo’s “A-2 status”, deeper focus on compliance (vs. marketing), and mention of “other regulated markets” might imply a slight shift in strategy. I’d speculate (and it’s purely speculation) that the CannaRegs acquisition has impacted Fyllo in unforeseen ways. All in all, being able to raise new money is better than not (especially vs. other alternatives…).
Life Stuff: I know many of you have noticed - from the Wednesday newsletter two weeks ago, to the no show last week, Cannablurbs has been a little... varied in its releases. Between a very busy month at ATAI Life Sciences, a huge pickup in MBA applications (which affects my other hustle), and an absolute scramble to figure out my upcoming wedding amid COVID, it’s been a crazy month, and I’ve gotten off-schedule more than I’d like.
Why It Matters: I’m passionate about the future of the cannabis industry, and truly believe we’re still only in the early innings of unlocking medical potential, innovating in new products, building definitional brands, and impacting the world in a transformative fashion. Cannablurbs isn’t stopping, but, given the major life event approaching, next week will likely be a lighter issue, and I'll be taking the week of the 7th off for my mini-moon. Following that, I’ll strive to stick to schedule, and communicate breaks ahead of time!