Canaccord Genuity Archives - Green Market Report

Debra BorchardtDebra BorchardtJune 19, 2020
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3min4350

A new report from Canaccord Genuity analyst Bobby Burleson suggests that budget constraints as a result of COVID-19 impacts could generate faster support for cannabis legalization. Prior to the pandemic, several states were gearing up for ballot initiatives in the 2020 election. Social distancing seemed to cause many to table those efforts. Now only a few states look to be in play in November.

Burleson noted that prior to the pandemic, he had identified 16 states with cannabis initiatives planned for the election. A combination of medical and recreational programs were teeing up for voters. Fast forward to June and limited moves are expected except for New Jersey, Arizona, and New Mexico where legislation looks to continue making progress. South Dakota could pass medical and Louisiana’s governor signed a law expanding its medical program.

COVID Proves Expensive

“COVID-19 is driving a severe budget crisis for states across the country and an analysis by the Center on Budget & Policy Priorities projects an aggregate state budget shortfall of 10% for the current fiscal year (ends June 30) and for the shortfall to grow to 25% for fiscal 2021,” Burleson wrote. Tax revenues for states are forecast to drop by 12%in 38 states. he expects these budget shortfalls will motivate states to pass some form of legalization to generate tax revenues.

He cited Massachusetts as a prime example. It’s the only state in the northeast that has an established and growing recreational program. Demand has been strong and New Yorkers have accounted for as much as 50% of the sales. All of that tax money could be going into New York’s state coffers, but instead, it’s staying in Massachusetts. Michigan is seeing similar results. Demand in the state is also coming from residents in Ohio, Indiana, and Missouri who are driving there to make purchases.

Essential

Getting the designation as an essential service and being allowed to remain open during the pandemic further underscores the support for legalization. Despite social distancing, curbside service, and hastily arranged delivery options, dispensaries said that sales remained strong further supporting the demand from state residents.


Kaitlin DomangueKaitlin DomangueNovember 27, 2019
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6min12650

A year has passed since Massachusetts began sales its sale of legal adult-use cannabis and while the state showed no interest in rushing the matter, customers showed their interest as they rushed to the stores.  

It was a long road to get there. Massachusetts voters said yes to Question 4 in November of 2016, effectively legalizing cannabis for adult recreational use. In 2017, Gov. Charlie Baker signed a bill changing the law, successfully setting back the start of recreational sales by six months. After many other snags, the state’s Cannabis Control Commission finally approved key regulations in March of 2018. By October of 2018, just four cannabis shops had their licenses approved, with only two being open at the time of Massachusetts’ launch of retail cannabis sales. 

In 2017, the Massachusetts Department of Revenue had estimated that the state could collect anywhere between $44 million and $82 million in marijuana tax revenue in the fiscal year of 2019. Those estimates were based on what the state described as a “reasonable number” of dispensaries, which all admit was much lower than hoped and the DOR scaled back those original estimates. 

The program got off to a good start. Customers spent $2.2 million in the first five days of sales, with $440,000 being spent on the first day. The total number of units sold was 56,380, with an average price per unit of $39.33. 

One year later, the state reported that licensees generated $393.7 million in gross sales and that 33 dispensaries had been licensed. The customer demand is high, but the inventory is low. There aren’t many licensed cultivators in the state of Massachusetts, leaving little room for excess. Because the state has been slow to license businesses, only two testing facilities are in operation throughout the entire state, causing additional issues for dispensaries. 

“AmeriCann recognized years ago that Massachusetts was positioned to become one of the strongest cannabis markets in the country,” stated AmeriCann CEO Tim Keogh. “We expect to play an important role in providing much-needed cannabis going forward, with the recent completion of our initial building at our Massachusetts Cannabis Center development.” Building 1 at the MCC development is a 30,000 square foot cultivation and processing facility, 100 percent of which will be occupied by Bask, Inc., an existing Massachusetts licensed vertically integrated cannabis operator. 

“Marijuana Retailers and consumers should be commended for participating in an extremely smooth rollout of the legal adult-use cannabis industry in Massachusetts for the first year,” Commission Chairman Steven J. Hoffman said. “Hundreds of millions of dollars in sales are one measure of success, but I am even prouder of the way in which Marijuana Establishments have worked with the Commission to gain and preserve compliance with our regulations and patrons continue to inform themselves about the law and their responsibilities when they visit Massachusetts stores.” The state also said that another 54 Retailers with provisional or final license approval are in the process of completing the Commission’s inspection and compliance procedures towards that end. 

Canaccord Genuity senior analyst Bobby Burleson said, “Massachusetts has been a slower rollout than people had hoped originally. There were a lot of stale expectations out there. It was certainly partially due to the slowdown in Massachusetts, but also the immaturity of the cannabis sector as a public sector. The companies might have been dealt with better if they had more history.”

Burleson went on to say that additional operators are getting licenses and more dispensaries are opening closer to population centers like Brookline and Newton, which are suburbs of Boston. “We are increasing our 2019 estimate to approximately $600 million from $578 million. By 2022 we continue to forecast Massachusetts sales to exceed $1.2 billion.” 

Some companies like Sland Worldwide (SLNG) scaled back its efforts in the state as the program launch crawled at glacier speed. Still, others remained committed and are in for the long game. The state hasn’t reported the amount of taxes that were collected for the first year.


William SumnerWilliam SumnerJuly 10, 2019
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4min7940

It’s time for your Daily Hit of cannabis financial news for July 10, 2019.

On the Site

Canaccord Genuity Increases Its Long-Term Growth Outlook for U.S. Cannabis

Analysts with Canaccord Genuity (CG) have increased their 2019 to 2022 long-term growth outlook for the U.S. cannabis industry from 19% CAGR to 20%. According to the report, the modest increase was attributed primarily to increased expectations for Illinois’ adult-use market, as well as recent positive trends in the Nevada and Massachusetts market.

Gotham Green

Gotham Green Partners, with participation from Wicklow Capital, has agreed to an additional $30 million in an equity commitment to MedMen Enterprises Inc. (CSE:MMEN) (OTCQX:MMNFF), bringing the total financing commitment to $280 million. To date, Gotham Green Partners has funded $100 million of the total commitment.

KushCo

KushCo Holdings, Inc. (OTCQX: KSHB) announced its financial results for the third quarter ending on May 31, 2019, after the market closed on Tuesday. Net revenue was $41.5 million, representing a quarter-over-quarter increase of 17.9%.On a GAAP basis, gross profit was 17.8%. On a GAAP basis, the net loss was $10.6 million, up from $9.2 million in the same period of the previous year.

Extractors Celebrate Their 710 Holiday – Dab Day

Extractors get their own holiday every year. July 10, also known as 7/10 has been fondly named “Dab Day” within the cannabis community. Spelling “OIL” when flipped upside-down, 7/10 is the day when cannabis concentrates and extracts are celebrated, and sales data is showing that cannabis consumers are eagerly participating in the celebration.

In Other News

GrowGeneration Corp.

GrowGeneration Corp. (OTCQX: GRWG) announced today that former Home Depot CEO, Bob Nardelli, will join the company as a strategic advisor, providing advice to the company’s CEO and Board of Directors on matters related to supply chain, merchandise, branding, distribution, new product introductions, pricing and channel selection. “Bob is a globally recognized business visionary.  He comes with a strong track record of executive operations to generate accelerated, profitable growth and shareholder value across many industry verticals that are of great interest to us,” said GrowGeneration CEO Darren Lampert.

Veritas Pharma

Veritas Pharma Inc. (CSE: VRT) (OTC: VRTHF) (Frankfurt: 2VP) announced that it has sold its 50% interest in 3 Carbon Extractions to Yari Nieken for $375,000. According to interim CEO Peter McFadden, the sale of its interest is part of the company’s wider restructuring efforts. “The sale of our interest in 3 Carbon was taken as part of the restructuring of the Company with aims to consolidate and focus the Company through assets that directly contribute to the advancement of our mission. Currently neither our research nor our operations aligned with our interest in 3 Carbon,” McFadden said.


William SumnerWilliam SumnerJuly 10, 2019
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5min22840

Analysts with Canaccord Genuity (CG) have increased their 2019 to 2022 long-term growth outlook for the U.S. cannabis industry from 19% CAGR to 20%. According to the report, the modest increase was attributed primarily to increased expectations for Illinois’ adult-use market, as well as recent positive trends in the Nevada and Massachusetts market.

Illinois

Earlier this year, the Illinois legislature passed a law legalizing the use and sale of recreational cannabis. Although regulations for the state’s adult-use market have not yet been formed, CG is making a bet that existing operators in the medical market will be among the first to receive licenses and that recreational sales will begin sometime next year.

As a result, analysts are upping their estimates for the Illinois cannabis market from $277 million in 2020 to $488 million. By 2022, that figure is expected to grow to $987 million, up from CG’s initial estimate of $395 million. Acreage Holdings (ACRG.U), Harvest Health & Recreation (HARV) and MedMen (MMEN) are expected to benefit from this market expansion as they already have existing medical cannabis operations in Illinois.

Nevada

Growth estimates for the Nevada market have also been increased. Nevada cannabis sales are expected to reach $745 million in 2019 and grow to nearly $1 billion by 2022. Although there is pending litigation surrounding the state’s 2018 licensing rounds, analysts expect the matter to be resolved in over the next few months, which either will result in additional licenses being issued or a completely new series of licensing applications. This, in turn, will help drive the creation of more cannabis businesses.

Furthermore, several large-scale cultivation operations are expected to become operational in the short term, which should help alleviate supply issues and help drive down cannabis prices. CLS Holdings USA Inc. (CLSH), DionyMed, Green Growth Brands (GGB), Harvest Health, iAnthus, MedMen, Planet 13 (PLTH), Plus Products (PLUS) and 1933 Industries (TGIF) are expected to benefit the most from growth in the Nevada market as they have significant exposure there.

Massachusetts

While Massachusetts’ adult-use market has been incredibly slow in rolling out, CG analysts expect the market to experience accelerated growth in the coming months. In addition to natural growth, they note in the report that a number of operators have secured licenses for retail stores close to population centers, such as the Boston suburbs of Brookline and Newton, which should spur growth.

By the end of 2019, Massachusetts’ cannabis market size is expected to reach $600 million and grow to $1.2 billion by 2022. The companies that are expected to benefit the most from this growth are Acreage Holdings, Columbia Care Inc. (CCHW), DionyMed Brands Inc. (DYME), Harvest Health, iAnthus (IAN), KushCo Holdings Inc. (KSHB), Slang Worldwide Inc. (SLNG), TILT Holdings (TILT) and Trulieve Cannabis Corp. (TCNNF).

New York/New Jersey

Pushing down CG’s overall growth estimate for the cannabis industry were the markets in New York and New Jersey. Despite expectations, New York this year failed to pass legislation that either legalized adult-use cannabis or expanded its existing medical market. Given this legislative failure, it is unlikely that the state will attempt to pass another legalization measure for the next two years.

The most likely scenario is that adult-use cannabis will make it on to the 2020 ballot. Assuming the measure passes, which many expect that it would, New York’s adult-use cannabis market would come online by 2021 at the earliest. Because of this, CG has reduced their 2019 and 2020 New York estimates from $458 million and $604 million to $261 million and $265 million, respectively.

Similarly, New Jersey also failed to pass adult-use cannabis legislation this year, although the expansion of its medical cannabis program remains a possibility. Consequently, CG now estimates that 2019 and 2020 New Jersey medical sales will be approximately $123M and $227M, respectively. Should the state expand its medical program, those figures could change.


StaffStaffDecember 7, 2017
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3min15830

 

DOJA Cannabis Company (CSE: DOJA) announced a C$15 million bought deal private placement of convertible debenture units with Canaccord Genuity as the lead underwriter on behalf of a syndicate of underwriters. The underwriters agreed to purchase 15,000 units of the company priced at $1,000 per unit and the deal is expected to close on or about December 28, 2017.

DOJA is a premium cannabis lifestyle brand that grows high-quality handcrafted flower. The company was founded by the team that started SAXX Underwear. Each convertible debenture will be convertible into common shares at C$1.24 per share for three years following the closing date. The stock was lately trading at C$1.25. The debentures bear an interest rate of 8% per year. The company intends to use the proceed for capital projects and general corporate purposes.

In October, DOJA said it was buying a 22,580 square foot building in Kelowna, British Columbia. The completion of the new facility called “Future Lab” will bring the company’s production capacity to 5,000 kg. per year. It is expected to be ready for its first cultivation prior to July 2018.

Canaccord Leads Deal For Delta 9

Delta 9 Cannabis Inc. (TSXV: NINE) announced that it was also doing a deal with led by Canaccord Genuity for C$20 million. 7,410,000 units at a price of C$2.70 will make up the bought deal with an option for an additional 1,111,500 units at a price of C$2.70. The stock was lately trading at C$2.73.  The proceeds will be used for expansion capital expenditures and general corporate purposes. It, too, is expected to close December 28, 2017.

Delta 9 Cannabis owns Delta 9 Bio-Tech, a licensed producer of medical marijuana in Canada and operates an 80,000 square foot facility in Winnipeg, Manitoba. The company is focused on small batch, hand trimmed medical cannabis. Just a few weeks ago, Canopy Growth announced that it entered into a distribution agreement with Delta to offer their products through the CraftGrow line via Tweed Main Street’s online store.



About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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