Acreage Holdings Archives - Green Market Report

StaffMay 6, 2022
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4min6930

After the market closed on Thursday, Acreage Holdings, Inc. (CSE: ACRG.A.U, ACRG.B.U), (OTCQX: ACRHF, ACRDF) reported its financial results for the first quarter ended March 31, 2022. Acreage reported total revenue of $56.9 million, an increase of $18.5 million or 48% compared to the first quarter of 2021. However, revenue fell sequentially by $1.2 million or 2% versus the fourth quarter. It also missed the Yahoo Finance average analyst estimates for revenue of $58 million.

The company said that the growth was primarily driven by the acquisitions of Ohio, California, and Maine operations over the past 12 months, which was somewhat offset by revenue declines due to the divestiture of Florida operations in April 2021 and declines within the company’s operations that are being held for sale. Excluding the company’s California and Oregon operations which are not considered core, however, revenue for the three months ended March 31, 2022, increased slightly by 0.5% on a sequential basis as the company was able to overcome challenges associated with the pandemic and industry pricing pressures which negatively impacted revenues.

Acreage reported a net loss of $(12.7) million, compared to $(7.8) million in the first quarter of 2021.

“In the first quarter of 2022, we achieved our fifth consecutive quarter of positive Adjusted EBITDA and sequentially improved our gross margin, while continuing to grow revenue despite industry headwinds and pandemic related challenges in Q1,” said Peter Caldini, CEO of Acreage. “We remain focused and committed to delivering against our strategic priorities of accelerating our growth in our core markets, driving profitability, and strengthening our balance sheet.”

New Jersey

On a positive note, Acreage was able to begin adult-use sales in New Jersey as part of an inaugural group of cannabis operators permitted to launch adult-use sales in the state. Acreage’s products, including its flagship brand The Botanist, are now available for adult-use consumers at its Egg Harbor Township and Williamstown dispensaries in southern New Jersey.

Mr. Caldini concluded, “Following the end of the quarter we were thrilled to begin adult-use sales in New Jersey. We are well-prepared for this market having recently completed the expansion of our Egg Harbor facility in anticipation of adult-use sales beginning this year. We have had a very successful launch and are looking forward to leveraging our expertise from New Jersey as we prepare for pending adult-use sales in New York and Connecticut. 2022 has started on strong footing for us and we remain committed to further delivering shareholder value as we execute on the significant growth opportunities ahead.”


Debra BorchardtMay 2, 2022
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6min9740

A judge decided on Friday that a New York case against Acreage Holdings (OTC: ACRHF) can proceed. Judge Andrea Masley in the New York Supreme Court listened to a week-long case and following closing arguments decided that the case against Acreage would not be dismissed. The case is regarding a New York license whose ownership got muddled through a series of mergers and partnerships.

Leading the charge is David Feder, an attorney who is part of a group that is claiming that Acreage Holdings cut them out of a portion of ownership of the converted limited New York cannabis licenses. The lawsuit claimed that Acreage acquired a New York property and this particular investor (EPMMNY) wasn’t included in the sale. A review of the legal document shows that EPMMNY’s equity stake was never finalized and so it wasn’t included in the final application for New York Canna (NY Canna).

Lawsuit Background

When medical marijuana was legalized in the state of New York, only 10 licenses were awarded. EPMMNY was formed in 2015 and the group began partnering up with another group called New Amsterdam Distributors, LLC, which was also seeking a medical cannabis business license. Members of the New Amsterdam group include Dixie, Duval, John Vavalo – a co-owner of a co-owner of J. Michael Shoes –, Dominic Falcone – who owns a plumbing company in Yonkers, and a pharmacist named Patrick Harvey. The complaint names Daino was CEO of Terradiol MC, a shell company for New Amsterdam.

Essentially it was a pairing between a group with money and no cannabis experience with a group that had the experience and needed funding. The New Amsterdam group needed the know-how and agreed to partner with EPMMNY to apply for a license as a combined entity called New York Canna Inc. Feder is a New York attorney with experience in the legal cannabis industry, had been preparing to submit a license application and began assembling a team to operate in New York. Feder began working with Malcolm Morrison, an experienced legal cannabis businessperson, who had successfully obtained cannabis licenses in other states. With this team in place, Feder and Morrison created EPMMNY with barely more than a month remaining to prepare and submit the New York license application.
Feder claims in the lawsuit that the partners agreed EPMMNY would be allocated 25% of the business for preparing the application, New Amsterdam would provide funding and own 75% of the business. However, with the clock ticking for the application to be submitted, Feder wasn’t able to get the documents confirming this arrangement. Although there was correspondence between the parties about the agreement. Despite the lack of documentation for the partnership, the application moved forward and ranked number six for getting one of the 10 licenses. This greatly improved the value of NY Canna.
Feder claims at this point NY  Canna merged with NY Medicinal without its consent and diluted its ownership by 50% to 12.5%. NY Medicinal was owned in whole or in part by Acreage Holding LLC’s predecessor, High Street Capital Partners. On December 1, 2016, Feder responded to the merger notice by rejecting it outright and demanding NY Canna’s books and records. Feder claims that his group was asked to accept the smaller ownership percentage, but they refused.
The license was awarded in 2017 and even with the ownership dispute brewing, Acreage ultimately ended up owning all of NY Canna, also known as Terradiol NY. In 2018, a week before Acreage Holdings went public, the group decided to file a lawsuit. It has been moving through the courts ever since, but now it seems Feder has notched a win at this stage.

Millions At Stake

“It’s a pretrial evidentiary hearing on whether Mr. Feder had the capacity to go with the case, and the judge ruled that he absolutely did,” said attorney Lawrence Lonergan who is representing plaintiff David Feder. “We’re very pleased the court saw things our way.” The case noted that the plaintiffs are also hoping to block Canopy Growth from acquiring Acreage Holdings, which would include the New York portion referred to as NY Canna.
The value of the ownership, should the case tip towards Feder’s claim, is worth millions. He is asking for upwards of $200 million for his stake.

Debra BorchardtApril 13, 2022
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8min11220

With the news that New Jersey was finally approving some cannabis companies to begin selling adult-use cannabis, investors began salivating over who would triumph. Cannabis stocks have been in a decidedly long bear market causing investors to lose great sums of money (on paper at least). As the process to begin these sales went through a series of starts and stops, the companies along with the investors were getting frustrated. It’s incredibly difficult for a retailer to make staffing and inventory decisions when you have no clue as to when you when need either. Investors wanted to know who would reap the benefits of those sales and when it could be reflected in earnings releases.

Potential Market

Headset.io has predicted that the first full year of sales in New Jersey could bring in $740 million in sales. The company went on to write that New Jersey, with its adult-use transition expected in March 2022, is projected to boast a 21+ population of 7 million that will produce $1.6 billion in sales by 2025.

A Rutgers report wrote, “We estimate that New Jersey would collect between $118.2 million and $173.5 million per year after recreational marijuana is legalized and when the market is fully saturated.”

Acreage Holdings (OTC: ACRHF) said during its last earnings announcement that it increased cultivation capacity output nearly fourfold at the Egg Harbor facility in New Jersey to support the company’s own retail network and the rapidly growing wholesale market ahead of the launch of the adult-use sales. These are its approved locations and while the Atlantic City store wasn’t approved in the first round, it’s expected to happen eventually.

  • The Botanist by CCF, Egg Harbor Township
  • The Botanist by CCF, Williamstown (Monroe)

Curaleaf (CURLF) has three locations in New Jersey, but so far just two have been approved in the first round.

  • Curaleaf, Bellmawr
  • Curaleaf, Edgewater Park

TerrAscend (OTC: TRSSF has been also gearing up for the state to go legal. The company said that cash used in operations was $3.8 million for the three months ending in December 2021, mainly driven by an increase in inventory related to the anticipated start of adult-use sales in New Jersey. In the last earnings announcement, Executive Chairman Jason Wild, commented, “The strategic decisions we made in Pennsylvania have resulted in the highest quality product we have ever sold in this market. Additionally, the actions undertaken in New Jersey have our team prepared for adult use, where we have one of the largest cultivation footprints in the state, along with three ideal dispensary locations.”

  • The Apothecarium, Maplewood
  • The Apothecarium, Phillipsburg

Verano’s (VRNOF) New Jersey footprint consists of three cannabis dispensaries operated under the flagship Zen Leaf brand in Elizabeth (117 Spring St), Lawrence Township (3256 Brunswick Pike), and Neptune Township (2100 Route 66), along with a 120,000 square foot cultivation and processing facility in Branchburg. Darren Weiss, Verano Chief Operating Officer, and General Counsel said, “The approval of personal use cannabis marks a huge step forward for New Jersey, the cannabis industry, and the nation at large. On behalf of our Verano New Jersey team, we look forward to welcoming personal use visitors to our Zen Leaf dispensaries.”

  • Zen Leaf, Elizabeth
  • Zen Leaf, Lawrence

Green Thumb Industries (OTC: GTBIF) must be thrilled that one of its approved dispensaries is just a 30-minute drive from New York City. The company had two locations approved, while the Paramus store will continue serving medical-only patients.

  • RISE Dispensaries, Paterson
  • RISE Dispensaries, Bloomfield

Columbia Care’s (OTC: CCHWF) outlook for revenue in 2022 included sales that it hoped would come from New Jersey. The company forecast $625-$675 million in sales for the year and specifically called out New Jersey as contributing to that estimate. Col-Care also had two locations approved.

  • Columbia Care, Vineland
  • The Cannabist, Deptford (Columbia Care)

Ascend Wellness (OTC: AAWH) was also thrilled to get at least one location in the first group to begin sales. The company tweeted, “We are thrilled to announce that we are among the first cannabis companies permitted to sell adult-use cannabis in the State of New Jersey. We look forward to opening our doors to 21+ customers. Stay tuned.” The company currently operates two of the state’s 23 medical dispensaries and expects to sell adult-use cannabis products at its Montclair retail location at 395 Bloomfield Ave. and open a third dispensary, located in Fort Lee, later this year.

  • Ascend New Jersey, Rochelle Park

StaffNovember 11, 2021
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4min10790

Acreage Holdings, Inc. (OTCQX: ACRHF, ACRDF) reported its financial results for the third quarter of 2021 ending September 30, 2021, with total revenue increasing 52% to $48.2 million, an increase of 9% sequentially. Yahoo Finance only recorded one analyst estimate for earnings of $34 million, which Acreage beat. Acreage also delivered a net loss of $12.3 million, an improvement from a loss of $40.5 million for the same time period in 2020.

Revenue Breakdown

Retail revenue was $30.8 million, an increase of $6.9 million or 29% compared to last year. Acreage said that the year-over-year growth was primarily driven by increased demand and production across various states, new store openings, and the consolidation of several Maine dispensary locations and their conversion to adult-use sales. However, the growth in retail revenue was slightly muted as a result of lower sales in the Oregon retail dispensaries and the sale of the company’s Florida operations. Sequentially, retail revenue for the quarter improved by $2.4 million or 8% compared to the second quarter of 2021.

Wholesale revenue was $17.1 million, an increase of $9.3 million or 119% compared to the third quarter of 2020. The year-over-year growth in wholesale revenue was primarily driven by increased capacity and maturing operations at the Company’s Pennsylvania, Massachusetts, and Illinois cultivation facilities, resulting in increased supply and improved product mix in each of the respective markets. Additionally, the Company’s wholesale operations in California, acquired in the second quarter of 2021, contributed to an increase in wholesale revenue in the third quarter. Sequentially, wholesale revenue for Q3 2021 improved by $1.5 million or 10% compared to the second quarter of 2021.

Peter Caldini, CEO of Acreage Holdings, said: “At the beginning of fiscal 2021, we introduced a refreshed strategy focused on our key priorities, which include delivering improved financial results and generating shareholder value. Our successes throughout 2021 are the culmination of these refocused efforts to drive profitability, strengthen the balance sheet, and accelerate growth in our core markets.”

Mr. Caldini continued, “Over the third quarter, we divested our retail assets in Oregon to reprioritize our operations and position our business to capitalize on growth opportunities in our growing core markets. This disciplined approach has delivered another solid quarter of financial performance, with sequential revenue growth, reduced operating expenses, and strong gross margins, resulting in a third consecutive quarter of positive Adjusted EBITDA.”

“With our latest acquisition of the Greenleaf group of companies, we have established a vertically integrated footprint in the rapidly growing Ohio market. This acquisition not only enhances our operational platform with high-quality cultivation, processing, and retail assets but will drive our financial performance from the fourth quarter onward. We are confident that the solid foundation we have built over the past year will position us for continued success as we close out the fiscal year and enter our next phase of growth in 2022.”


Debra BorchardtSeptember 16, 2021
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5min14560

Acreage Holdings, Inc. (OTC: ACRHF, ACRDF) is selling its four Oregon dispensaries to Chalice Brands Ltd. (CSE:CHAL) (OTCQB:CHALF). The divestiture is part of Acreage’s strategy to target only core states versus trying to be the largest MSO in the most states.  The deal is valued at $6.5 million. Acreage’s four Oregon retail dispensaries are branded as Cannabliss & Co. and the sale will end the company’s presence in the state. The company said in a statement that the Oregon stores were negatively affecting the company’s bottom line and utilizing management resources.

“This is a fantastic opportunity for Chalice to edge closer to our goal of achieving our targeted market share in the state of Oregon while entering the Eugene market, and immediately enables the deployment of our Chalice products to more stores. Adding the Cannabliss retail stores increases our footprint from twelve to sixteen stores, represents nearly a 130% increase in retail footprint for this year alone. The Cannabliss team has done a tremendous job in Portland, Eugene, and Springfield, Oregon in building historic businesses and a strong reputation for friendly customer service – exactly aligned with what Chalice looks for in a partner,” said Chalice CEO Jeff Yapp. Chalice believes it can turn around the Cannabliss stores, which have apparently lost market share.

Chalice retail footprint increases from twelve to sixteen stores in Oregon, making this nearly a 130% increase in the current fiscal year. Cannabliss is expected to carry Chalice Brands products immediately once the services agreements are completed providing the opportunity to increase total gross margins gradually from approximately 42% to at least 52% within a year. Vertical sales of Chalice branded products are expected to be approximately 25% of products sold within a year. With the Cannabliss acquisition, Chalice said it will strengthen its customer base in the Oregon market, while also significantly increasing vertical margin contribution through the distribution of its Bald Peak flower, Chalice, Private Stash, RXO, and Elysium Fields branded products into the Cannabliss stores.

“The sale of our Oregon operations represents another strategic step in our previously announced operating strategy,” stated Peter Caldini, Acreage Holdings CEO. “As we previously communicated, Acreage remains focused on our three key strategic objectives – driving profitability, strengthening our balance sheet, and accelerating our growth in our core markets.”

Oregon dispensaries include two in Portland, one in Eugene, and one in Springfield. Two of the store locations are in buildings that are on the national registry of historic places – Sorority House in Eugene and Firestation 23 in Portland. The Firestation 23 location was the first adult-use dispensary to open in the city of Portland and was Oregon’s first medical marijuana dispensary.

“This deal structure demonstrates our disciplined approach to capital allocation, as we avoid dilution while growing both our top line and profitability. The positive cash flow generated by this acquisition will partially fund the deferred payment, providing an immediate opportunity to enhance value for Chalice shareholders. With the addition of these four retail assets,  Chalice continues to cement our leadership position in Oregon as we execute on our stated market share objectives for 2021,” noted John Varghese, Executive Chairman of the Company

Terms

Under the terms of the Asset Purchase Agreement, upon regulatory approval Acreage will divest the assets of its four Cannabliss retail stores (inclusive of a working capital surplus of US $500,000) – located in Portland, Eugene, and Springfield, Oregon – for total consideration of US $6,500,000, consisting of a US $250,000 cash payment at the time of signing and a 10-month secured promissory note for US $6,250,000 bearing interest of 6% for the first 5 months and 10% for the remaining 5 months.


StaffAugust 10, 2021
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3min9810

After the market closed on Monday, Acreage Holdings, Inc. (OTC: ACRHF, ACRDF) reported its financial results for the second quarter of 2021 ending June 30, 2021. The unaudited results showed that consolidated revenue increased 63% to $44.2 million, versus the same period in 2020 and a sequential increase of 15% compared to the first quarter of 2020. This beat the Yahoo Finance average estimate for revenue of $34 million.  The net loss attributable to Acreage in the second quarter of 2021 was $2.6 million, an improvement from the net loss attributable to Acreage of $37.2 million for the same period in 2020.

Adjusted EBITDA in the second quarter of 2021 was $8.1 million compared to a loss of $6.5 million in the same period in 2020. Adjusted EBITDA as a percentage of consolidated revenue was 18.3% for the second quarter of 2021. This marks the second consecutive quarter of positive adjusted EBITDA for the company and validates management’s refocused strategic plan.

“I am once again pleased with our financial performance in the second quarter as we reported our second consecutive quarter of positive Adjusted EBITDA*,” said Peter Caldini, Chief Executive Officer of Acreage. “Additionally, our revenue growth accelerated to 63% year over year, and our gross margin remained strong at 54.0%. On an operating basis, our team continues to be focused on both driving profitability and accelerating our growth in our core markets.”

Total operating expenses for the second quarter of 2021 fell 39% to $30.6 million from the corresponding period of fiscal 2020. Excluding equity-based compensation expenses, losses and write-downs and depreciation and amortization expenses, all of which are non-cash in nature, total operating expenses for the second quarter of 2021 decreased $3.6 million or 17% compared to the corresponding period of fiscal 2020.

The company ended the quarter with $37.8 million in cash and restricted cash. During the second quarter of 2021, the company closed on the previously announced sale of its Florida operations for total proceeds of $60 million. The cash provided by this sale, including the proceeds from the subsequent sale of notes receivable received from the buyer of the Florida operations as consideration, and together with restricted cash, were used to repay $44.1 million in debt during the quarter.


Debra BorchardtMarch 10, 2021
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3min17350

Acreage Holdings, Inc.  (OTCQX: ACRHF, ACRDF) reported financial results for the fourth quarter and full-year ended December 31, 2020, after the market close on Tuesday. The fourth-quarter revenue for Acreage increased 50% to $31.5 million, while the net loss was $36.9 million. The stock was lately down over 3% to $6.71.

The full-year revenue increased 55% to $114.5 million, while the net loss for the year was a whopping $286 million. The operating expenses for the year fell from $56 million in 2019 to $50 million in 2020. However, the impairment losses were $188 million in 2020. In addition to that, the company spent roughly $91 million in 2020 on equity-based compensation plans according to the company’s presentation. Acreage also laid off 11 employees last week.

“I am pleased Acreage continued to improve its financial and operational fundamentals during the fourth quarter and throughout the entire year of 2020,” said Peter Caldini, Chief Executive Officer of Acreage. “It is clear our refocused efforts on delivering profitability and generating long-term shareholder value are beginning to pay off. I am excited to continue this journey with an energized team that I am confident will reestablish Acreage as a leading, and profitable, MSO in the U.S. cannabis industry.”

Highlights

The company said it began adult-use sales at its medical dispensary in Worcester MA and opened a new adult-use store in Shrewsbury MA. The company also began ault-use sales in South Portland ME and began consolidating those results. Acreage also said it completed the initial 10,000 sq. ft. expansion of a cultivation facility in PA.

The Acreage-owned same-store sales grew 27%, marking the eighth consecutive quarter of double-digit same-store sales improvements. Same-store sales growth for managed entities rose by 71% during the fourth quarter.

Geographically, in the fourth-quarter Acreage sales increased 18% in the New England market, 91% in the Mid-Atlantic, 124% in the Midwest, but fell 18% in the West.

Last month Acreage announced its subsidiary, High Street Capital Partners was selling Acreage Florida, Inc. to Red White and Bloom Brands, Inc.  (OTCQX: RWBYF) for $60 million.

 


Debra BorchardtFebruary 25, 2021
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4min21590

Acreage Holdings, Inc. (OTCQX: ACRDF, ACRHF) announced its subsidiary, High Street Capital Partners was selling Acreage Florida, Inc. to Red White and Bloom Brands, Inc.  (OTCQX: RWBYF) for $60 million. Acreage Florida is licensed to operate medical marijuana dispensaries, a processing facility, and a cultivation facility in the state of Florida. The deal also includes the sale of property in Sanderson, Florida. The stock was dropping over 6% to lately sell at $7.39.

The transaction will be an up-front cash payment of $5 million upon execution of the definitive agreement and an additional $20 million in cash, $7 million in the buyer’s common stock, and $28 million in promissory notes upon closing the transaction. Acreage said it expects to close the deal during the second quarter of 2021.

Brad Rogers, Chief Executive Officer of RWB, said, “Our core strategy has always been to focus on a limited number of markets within which to operate at scale, and Florida has always been one of those targeted markets. Today we have our path to entry into the third-largest market by revenue in the US and are excited with what we can do with the brands we have amassed as well as the skill to execute on our vision.” The company also recently announced an acquisition in Illinois, expanding its presence in the States with limited cannabis licenses. Upon closing of the deal, RWB will have a presence through licensed operations and/or the licensing of its brands in six states.

“The sale of our Florida operations is a significant step in our previously announced operating strategy to focus on those core markets that we believe will accelerate our path to profitability and position us for significant long-term growth and cash generation,” said Peter Caldini, Chief Executive Officer of Acreage Holdings. “The cash proceeds will significantly bolster our balance sheet and position us to accelerate our cultivation expansion projects and open additional dispensaries to support our growth into key adult-use cannabis states such as Illinois and New Jersey.”

Last summer, Acreage had announced it was scaling back from its initial plan to be the cannabis company in the most states to one that was more focused on core-markets in just nine states in the Northeast, Mid-Atlantic, and Midwest. The company said it currently has active operations and licenses in 13 states and continues to pursue divestitures of its remaining non-core state operations and licenses.

In November, Acreage reported revenue of $31.7 million for the third quarter, a 42% increase compared to the same period in 2019. It also was a 17% increase compared to the second quarter this year. Partner revenue was $17 million, which was a drastic increase of 79% compared to the second quarter of 2020. Acreage Holdings reported a net loss of $35.7 million, while adjusted net loss attributable to Acreage was $14.3 million.

 

 


Debra BorchardtOctober 7, 2020
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6min1018610

Acreage Holdings, Inc.  (OTCQX: ACRHF, ACRDF) announced that both its new Class D “floating” shares (OTCQX: ACRDF) and Class E “fixed” shares (OTCQX: ACRHF) will commence trading on the OTCQX Best Market on October 7, 2020, and graduating from Pink Sheet status. For shareholders, it’s the latest step in the tangled relationship between Canopy Growth (NYSE: CGC) and Acreage.

Acreage Holdings has never followed a simple path for its shareholders. The company’s initial stock ACRG.U was confusing in that it was traded on the Canadian exchanges but using American currency – hence the .U in the symbol. Most cannabis companies just had dual listings with Canadian stock using the Canadian currency and an American listing using U.S. currency. Then the company agreed to a most unusual deal with Canopy Growth, where Canopy would buy Acreage when the U.S. federally legalized cannabis – called the “triggering event.” That deal was recently amended and resulted in the creation of two new share classes.

OTC Share History

In the original deal, Canopy would buy all of Acreage. In the new deal, Canopy decided it didn’t want to be locked into a fixed deal. Canopy will buy only 70% of Acreage at a fixed price, but the remaining 30% will float with the market. The idea behind the floating shares was that the Canopy shareholders should be able to participate in any upside in the stock, should that happen. Canopy is not committed to buying the 30% of the company. It has the option to buy these shares if the triggering event happens or they decide to waive that condition.

The original symbol for Acreage on the OTC Markets Group was ACGRF. There are now two new symbols ACRHF, which are the fixed shares and ACRDF, which are the floating shares.

ACRGF  Old symbol. Delisted. No longer trading

ACRHF  Fixed shares. 70% of Acreage that Canopy is obligated to buy at .30xx

ACRDF  Floating shares. 30% of Acreage that Canopy has the option to buy at 30-day VWAP (volume-weighted average price) or $6.41, which is higher.

Which Is Better?

Shareholders understandably can’t figure out which one is better. For now, it looks like retail investors prefer the fixed share class. They know that Canopy will buy these shares. The floaters are only an option to buy. Canopy could change its mind and not buy the other 30% rendering these shares mush less valuable..

Analysts, though, have been using the floating shares for their basis of valuation. So, when an investor reads an analyst report, it is based on the floaters, not the fixed shares. This is a rare disconnect for investors. The company is the same so that analysis is intact, however, any figures related to the market price will be referencing the floating shares – not the fixed shares.

New Loan

In the midst of all these changes, Acreage also managed to close a financing transaction with an institutional lender for $33 million and used a portion of the proceeds to retire its short-term $11 million secured convertible note. The loan is unsecured, matures in three years, and bears a 7.5% annual interest rate.

“Access to low-cost capital, even in a very challenging capital market environment for cannabis, has always been a core part of our strategy,” said Bill Van Faasen, Interim CEO of Acreage. “The retirement of the potentially dilutive, short-term convertible debt, and the additional cash infusion bolsters our balance sheet enabling us to continue to deliver on our shareholder commitments to accelerate our path to profitability.”

Viridian Advisors wrote in its weekly tracker, “We believe that some other loan feature is likely to have been involved because we find it difficult to believe that investors would have loaned money to Acreage on an unsecured basis at 7.5%. The Viridian Credit Tracker ranks Acreage #10 out of the 14 U.S. Cultivation & Retail sector companies with market caps over $100 million. The company ranks at the bottom in both profitability and liquidity and #9 on our leverage ranking. Acreage’s last debt raise in June was done at an effective cost of over 50% and, although recent news regarding the distribution of Canopy beverages is undoubtedly credit-positive for Acreage, it’s still quite a stretch to get to 7.5%. So, it seems likely that there are some convertibility/warrants, a significant OID, a large premium due at maturity, or some other investor-friendly features that were not disclosed in the press release.”

 


Debra BorchardtOctober 1, 2020
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4min19080

Canopy Growth Corporation (NYSE:CGC) and Acreage Holdings, Inc. (OTC: ACRHF, ACRDF) announced today that following the implementation of their amended arrangement, Acreage developed a plan to market Canopy Growth’s THC beverages in the legal adult-use markets in the U.S.

Beginning with Illinois and California in summer 2021, Acreage said it will launch Canopy Growth’s THC beverages into markets as well as in its own dispensaries. Acreage said it will access existing distribution channels through its strategic corporate relationships of both Acreage and Canopy. At this time there are no beverages in the marketplace from the company. The website says that it has “Developed a proprietary process that distills whole flower cannabis into a clear liquid. We are using this liquid as an active ingredient in a wide variety of THC and CBD beverages, offering consumers an alternative to traditional drinks.”

“We have had an incredibly successful introduction into the Canadian cannabis-infused beverage industry with over 1.5 million cans of our THC-infused RTD beverage sold to date,” shared Canopy Growth CEO, David Klein. “We introduced a new product category to cannabis consumers that we knew had the potential to disrupt one of the most mature industries and since launching in Canada, Canopy Growth now owns 5 of the top 6 SKUs in the beverage category with a 74% market share. We are excited for Canopy’s beverages to be introduced to the U.S. market and know from recent BDSA reports that the United States represents a market that achieved roughly $60M in beverage sales in 2019.”

Constellation Brands (NYSE:STZ), which has a big stake in Canopy Growth reported its earnings for the second quarter with revenue falling 3% to $2.26 billion. The losses from its position in in Canopy were $31 million. On a reported basis, earnings for Constellation edged up to $2.76 a share vs. $2.72 a year earlier. Despite bars and restaurants being closed in the U.S. due to the pandemic, the company said that liquor store sales made up for the closures. The pandemic though is causing slowdowns in Mexico.

“We see THC-infused beverages as a game-changer in U.S. cannabis, and we are excited to launch Canopy Growth’s unique beverage offerings to our core markets offering the greatest growth potential next year,” said Bill Van Faasen, Interim CEO of Acreage Holdings. “We are already working on our beverage production capabilities, and look forward to tapping the wealth of experience and research Canopy can offer following its successful entry in the category last year.”

Amended Agreement

Canopy and Acreage recently amended their previous agreement in which Canopy would acquire Acreage once the U.S. legalizes cannabis at the federal level (Triggering Event). The deal was originally valued at $3.4 billion. Instead, Acreage shareholders got an initial up-front payment of $37.5 million in connection with the modification of Canopy Growth’s rights, including the extension of the term, and give Acreage shareholders the ability to participate in upside potential upon the Triggering Event.

There are now Acreage “Fixed” shares and Acreage “Floating” shares which is causing a great deal of confusion amongst investors. The basic gist of the difference is that the fixed shares represent the 70% that Canopy is obligated to buy at .30xx and the floating shares are the 30% they have an option to buy at 30 day vwap or $6.41, whichever is higher.


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