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Monday, Feb 26, 2024
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.


Green Thumb stock drops despite record pot sales

With only 8% of the major US pot stock being held by institutional investors, the firm posted revenue of US$194.4 in Q1

Major U.S. cannabis company Green Thumb sells its pre-roll brand Dogwalkers in 12 states. Press photo

Green Thumb Industries Inc. (CSE: GTII) (OTCQX: GTBIF) stock fell 4 per cent Thursday, despite the American weed giant posting record revenue and solid profits the night before.

Late Wednesday, the Chicago-based company said it made US$194.4 million in the January–March quarter, up 10 per cent from the previous three months.

Revenue beat the Yahoo Finance average analyst estimate of $187 million by 4 per cent.

With the American cannabis industry barred from big exchanges due to the plant’s federal illegality, Green Thumb stock trades on the smaller Canadian Securities Exchange and over-the-counter market.

But U.S. Congress is working on passing a banking bill or a sweeping legislation to end prohibition. Either breakthrough could open American financial markets to state-legal weed businesses.

Analysts expect major federal cannabis reform would open the floodgates for major institutional banks to invest in Green Thumb and its peers, which are reporting some of the highest growth figures in any U.S. sector.

State-legal cannabis businesses say dealing only in cash makes them susceptible to theft. Photo via Medithrive

Only 8.2 per cent of Green Thumb’s issued shares are being held by institutional investors.

That’s despite the firm posting its third straight quarter of net income and eighth straight quarter of positive earnings before interest, taxes, depreciation and amortization.

In the first quarter, Green Thumb reported net income of US$10.4 million, or US$0.05 per basic and diluted share.

Adjusted EBITDA came in at US$71.4 million, up 9 per cent sequentially and almost a 37-per-cent margin on revenue.

Green Thumb has 56 stores and 13 manufacturing facilities across 12 states. The cannabis firm ranks third in revenue among its American peers.

Read more: Curaleaf plans to stay on top of US pot boom

Read more: Trulieve Cannabis to buy Harvest Health in US$2.1B mega-deal

Even if the U.S. government doesn’t move on major pot reform this year, CEO Ben Kovler says his company has the war chest to continue expanding into new state-legal markets.

Green Thumb finished the quarter with US$275.9 million in cash and cash equivalents.

Kovler says his company is excited to expand its East Coast footprint after buying private operator Dharma Pharmaceuticals to enter the Virginia weed market.

This follows the recent sweep of adult-use legalization measures across Virginia, New York and New Jersey where Kovler sees untapped potential.

The company is investing heavily in New York ahead of the state’s expected recreational market launch in 2022, and in New Jersey before adult-use sales start in the fourth quarter of this year.

Read more: Green Thumb enters Virginia market via Dharma Pharma deal

Read more: Green Thumb to convert NY federal prison into US$50M grow

Green Thumb says it’s been tapping debt financing at industry-leading rates to capitalize on those opportunities.

“A strong balance sheet, supported by a low cost of capital, is key to staying ahead in this fast-paced new industry,” Kovler said in a statement. “As the green wave continues to gain momentum, it is more important than ever to maintain our focus on strong execution and high-value capital allocation.”

Popular U.S. pot shop chain Cookies CEO Berner and rapper Rick Ross will be onsite for the grand opening of Cookies on the Las Vegas Strip with its partner Green Thumb. Press photo

On Thursday, the company also revealed a grand opening of a new mega-store with its retail partner San Francisco-based Cookies on the Las Vegas strip on May 14.

Cookies was founded by rapper and entrepreneur Berner, who has built a popular weed retail and product brand in California with his partner Jai, a respected cultivator and breeder.

While no specific financial details have been revealed about the partnership, Green Thumb will sell Cookies’ popular products and cultivars at its four Nevada stores, and Cookies will sell Green Thumb’s brands at the new Vegas shop.

Shares of Green Thumb dropped $1.30 to $34.50 Thursday on the Canadian Securities Exchange.

But in the last year, the pot stock has climbed 211 per cent overall.


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