As I work my way through analyzing the cannabis industry, I wanted to know how much the "Big 5" MSOs and LPs have been paying out to employees/management in the form of stock-based compensation. In line with what I expected, the LPs have been significantly larger issuers of stock-based compensation than the MSOs. Dialing into … Continue reading MSO and LP Stock-Based Comp Analysis
As a quick follow up to Part 1 of Backtesting Short Seller Ben Axler’s Performance at Spruce Point Capital, I analyzed total open interest on all put options for Ben Axler's respective short reports. I looked at the median % change for total put options starting 20 trading days out from the release of the … Continue reading Backtesting Short Seller Ben Axler’s Performance at Spruce Point Capital (Part 2)
Summary Due to adjustments in fair value of inventory and biological assets, I am wary of potential earnings management/manipulation.Using traditional methods to measure cash flow and balance sheet accruals, during Q2'20 Trulieve measured with the highest earnings quality, but otherwise reported the worst earnings quality in FY'19.Curaleaf reported the lowest earnings quality relative to the … Continue reading The Significance of Accruals and the MSOs
Summary Background I have always been in the camp that if a company is committing fraud, then I would like to know about it. About a year ago, Grizzly Research, now known to be ran by Siegfried Eggert, put out a report called Trulieve Cannabis Corp: Why we believe the Company is a Fraud. At … Continue reading Backtesting Short Seller Ben Axler’s Performance at Spruce Point Capital (Part 1)
As we head into Q3 earnings, I wanted to put together a quick cheat sheet to reference upon releasing of results. I will update this before GTII reports on the 11th, but as an easy reference to glance back on: (Updated on 11/2 via TerrAscend's early results)
Call Options & Warrants @CCINVEST2 on Twitter made me wonder - are warrants for the MSOs appropriately priced? https://twitter.com/ccinvest2/status/1321121450615603200?s=20 I started by taking a step back and looking at 2022 LEAPS for a few of the U.S. listed LPs. In line with what I expected, call options expiring in 2022 imply breakeven prices that trade … Continue reading Potential mispricing between MSO Warrants and LP Call Options
Let's say that Florida continues to grow at its current rate through the end of 2021 - what would that look like? I recognize that THC/CBD and Flower dispensed is a function of qualified patients and locations, but let's just say the current trend continues through the end of 2021. Running a linear regression on … Continue reading What could the Florida market look like in 2021?
This is a quick post to highlight that sentiment from Wall Street is materially different between the LPs and MSOs. While obvious, I thought it might be helpful to visualize the difference. Looking at the LPs, APHA single-handedly accounts for the Buy ratings, coming in at 92.3% vs the group average of just 33.4% (skewed … Continue reading Wall Street Coverage of the MSOs (vs the LPs)
Considering the lack of capital available in the cannabis industry, I wanted to know how efficient (or inefficient) the "Big 6" MSOs are at managing their working capital. One way to evaluate the quality working capital management is by analyzing the the Cash Conversion Cycle (CCC). In plain English, the CCC measures 1) how quick … Continue reading How Efficient are the MSOs at Generating Cash?
This past week, I was on a conference call with a private MSO. State-by-state dynamics were mentioned and the IRO from the MSO mentioned how Florida is "different." In short, the IRO gloated at Trulieve's success and how Kim Rivers has done a phenomenal job wrangling the Florida market. This reminded me of Barry Ritzholtz's … Continue reading Lessons from Will Danoff