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5 U.S. Multi-State Operators Investors Need To Know

Aug 30, 2018 • 10:31 AM GMT+0000
Cannabis (43).png
5 MIN READ  •  By Michael Berger
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The United States cannabis industry is in the early innings of a massive growth cycle and this is an opportunity that cannot be ignored.

Although the Canadian market has been leading the global cannabis market, the United States opportunity is becoming more significant. Today, we have highlighted five leading multi-state operators in the United States.

Green Thumb: A Leading United States Opportunity 

Although the cannabis industry has attracted thousands of new investors, there have not been too many high-profile names to jump on the bandwagon. This trend has been changing rapidly and we have seen several big players enter the space in the last few months.

This show of support is a major positive for an industry that has been under a lot of scrutiny. Yesterday, Green Thumb Industries Inc. (GTII.CN) (GTBIF) made a major announcement and reported that hedge fund billionaire Leon Cooperman has invested in the multi-state cannabis operator.

This announcement was reported by Green Thumb CEO Ben Kovler during the company’s second quarter earnings call on Tuesday afternoon and represents a significant development. Cooperman said that he has been friends with Kovler’s family for decades. Kovler is the heir to the Jim Beam liquor empire and has been doing a fantastic job with his burgeoning cannabis venture.

When it comes to multi-state operators in the United States, Green Thumb represents one of the most attractive opportunities. The company has expanded into eight markets in the United States (total population of over 94 million) and includes eight cultivation and manufacturing facilities and licenses for 59 retail stores. This is an opportunity that investors should keep an eye on.

iAnthus: Earnings Show Strong Growth

Another multi-state operator in the United States that has attracted some significant investors is iAnthus Capital Holdings, Inc. (IAN.CN) (ITHUF). Yesterday, the cannabis firm released second quarter financial results and the market responded favorably to this. 

Earlier this year, iAnthus received a $50 million investment from Gotham Green Partners. The proceeds were allocated to repay principal and interest on previously issued unsecured debentures, to continued cultivation and dispensary build-outs in the company’s key markets of New York and Florida, and for potential expansion activities.

The leverage to New York and Florida is exciting and we are monitoring how the team executes on this. In July, iAnthus opened its flagship dispensary in the Allston-Brighton neighborhood of Boston and has signed a lease for a second dispensary location in Lowell, the fourth-largest city in Massachusetts and the second-largest in the Boston metropolitan statistical area.

iAnthus is also capitalizing on the legal market in Colorado, Vermont, and New Mexico. The company has attractive leverage to emerging markets the United States and is led by a management team with a proven track record of success. This is a company that we expect to be a long-term player.

MPX: An Emerging Growth Story

MPX Bioceuticals (MPX.CN) (MPXEF) is a company that has been flying under the radar and we are favorable on the leverage to burgeoning markets in the United States. Although MPX has attractive leverage to states like Maryland, Arizona and Nevada, the market seems to be less favorable on this opportunity.

Yesterday, MPX released first quarter financial results and these number showed strong growth. During the quarter, the company generated $14.5 million in revenue, a 224% increase when compared to the same period last year. MPX opened its third dispensary in Phoenix during the quarter and is in the middle of a major expansion.

Last week, the company announced that it opened its first dispensary in Maryland and is in the middle of a major expansion. MPX has attractive leverage and we are favorable on the growth prospects. We expect fundamentals to continue to improve and expect MPX to benefit from a positive trend in the United States.

We think the market underappreciates MPX and will keep an eye on this one. The shares have come off its recent lows and have been trading higher with the market. When compared to its peers, MPX has a very attractive valuation with a market cap of approx. $400 million. This provides significant room for growth and this is a company to monitor.

MedMen: Where is this Company Going?

MedMen Enterprises Inc. (MMEN.CN) (MMNFF) is a high-profile multi-state operator in the United States with a market cap that is north of $2 billion. We have been favorable on MedMen due to attractive leverage to markets like California, Florida, and New York. While this leverage is exciting, the $2 billion market cap is tough to ignore especially when compared to someone like Green Thumb.

Earlier this summer, we visited the MedMen dispensaries in Los Angeles and were very impressed with the set up. The employees were extremely knowledgeable and the store traffic was constant. These locations have to be expensive and we are wondering if the company will need to raise more capital in order to execute.

Recent reports and site visits lead us to believe that the company is making a number changes to the store fronts in order to be more profitable. Specifically, MedMen’s product selection has been less than impressive as the company seems to be focused on selling products that it owns. While this is good for MedMen’s bottom-line, it impacts the experience and we are going to monitor how the company continues to perform.

Terra Tech: Approach this one Cautiously

Terra Tech (TRTC) was one of the first publicly traded cannabis companies and has a significant following. The company is levered to the cannabis market in California and Nevada, which are two attractive markets.

Although Terra Tech has attractive leverage, the management team has been more focused on putting money in their own pockets and this has impacted investors. During the last two years, Terra Tech executives have sold millions of shares and this has helped prevent the stock from breaking out. We are cautious with Terra Tech which recently completed a massive reverse split and believe that there are better opportunities available.

Over the next year, Terra Tech should see growth and we will be monitoring the shares from the sidelines. We are cautiously optimistic with Terra Tech but prefer other United States opportunities. The companies highlighted above represent much more mature businesses when compared to Terra Tech and are monitoring how the team executes.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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