Here’s What You Missed in Cannabis This Week

In this week’s “Rising High,” The Fly’s recurring series focused on cannabis and psychedelic stock news, The Fly looks back on a merger termination, price target cuts and a downgrade.

CRESCO LABS, COLUMBIA CARE TERMINATE MERGER: Cresco Labs (CRLBF) and Columbia Care (CCHWF) announced Monday on a mutual agreement to amicably terminate the arrangement agreement, pursuant to which Cresco agreed to acquire all of the issued and outstanding shares of Columbia Care. There are no penalties or fees related to the mutual agreement to terminate the transaction. “In light of the evolving landscape in the cannabis industry, we believe the decision to terminate the planned transaction is in the long-term interest of Cresco Labs and our shareholders. We want to express our sincere gratitude to Columbia Care for their valuable collaboration and dedication during this transaction,” said Charles Bachtell, Cresco Labs CEO. “Moving forward, we remain committed to our Year of the Core strategy, which involves the swift restructuring of low-margin operations, improving competitiveness and driving efficiencies in markets where we maintain leading market share, and scaling operations to prepare for growth catalysts in emerging markets.”  As an additional update, the agreements to divest certain New York, Illinois and Massachusetts assets of Cresco and Columbia Care to an entity owned and controlled by Sean Combs have also been terminated. (read more)

Additionally on Monday, Stifel lowered the firm’s price target on Cresco Labs to C$2 from C$2.25 and kept a Hold rating on the shares. The firm is reducing its broader core MSO market estimates by 9% in 2024 and modifying its valuation methodology for U.S. cannabis producers for “low growth.” (read more)

Columbia Care also announced on Monday additional corporate updates. The company has received commitments from several of its largest holders of its 13% senior secured notes due May 2024 to exchange into the company’s 9.5% senior secured notes due February 2026, on a one-for-one basis. The company is in ongoing discussions with a limited group of additional bondholders to exchange more 2024 notes under the same structure. These private exchange agreements will meaningfully reduce the amount of the $38.2M principal of notes due in May 2024, reduce the cash interest cost for the exchanged notes by 350 basis points, and extend the maturity of the converted notes to February 2026. Columbia Care has also completed the final phase of its corporate restructuring plan and expects to realize an additional net benefit to EBITDA of approximately $950,000 in 2023 and approximately $3.8M in 2024. The primary source of the additional savings is a 52-person headcount reduction as well as facility rightsizing and dispositions. These operational improvements are expected to be cash flow positive in 2023 and 2024. The company also closed on the sale of its Downtown Los Angeles facility, consisting of a single dispensary and approximately 36,000 square feet of cultivation capacity. Gross proceeds are approximately $9M, and the company expects to net $3M after taxes and the repayment of the outstanding mortgage. Columbia Care will also consolidate its equity trading activity onto the Cboe Canada, the new business name of the NEO Exchange. The company is submitting a request to voluntarily delist its securities from its secondary venture exchange, the Canadian Securities Exchange. Columbia Care has also named David Hart as President and COO and Jesse Channon as chief commercial officer. Hart will continue to oversee all revenue-driving functions and Channon, formerly chief growth officer, will oversee retail, wholesale, technology innovation, marketing, and communications. (read more)

CANOPY GROWTH PRICE TARGET LOWERED: Alliance Global Partners lowered the firm’s price target on Canopy Growth (CGC) on Thursday to C$0.60 from C$3.50 and kept a Neutral rating on the shares. Canopy’s recent efforts to address some of its near-term balance sheet concerns provided the company some breathing room, but EBITDA losses and cash burn will likely persist in the near-term and the firm cautions on future dilution to shareholders or incremental strategic initiatives, such as divestitures. (read more)

CURALEAF DOWNGRADE: Stifel downgraded Curaleaf (CURLF) to Sell from Buy on Monday with a price target of C$3.50, down from C$6.50. The firm, which is “surprised” at how resilient shares have been, having risen 33% during a period when four close peers are down roughly 10% with a valuation “double those same peers,” is reducing its broader core MSO market estimates by 9% in 2024 and modifying its valuation methodology for U.S. cannabis producers for “low growth.” Curaleaf has a “spotty track record,” with management halving 2023 guidance three months after initiating while “still being aggressive,” the analyst added. (read more)

AURORA LAUNCHES SOURDOUGH SHORTCUTS INFUSED PRE-ROLLS: Aurora Cannabis (ACB) announced Tuesday it has launched its first high-potency infused pre-roll for medical cannabis patients, with more than 50% total THC. Sourdough Shortcuts, launched under the San Rafael ’71 brand, are infused with pure live resin THCA diamonds, delivering 50-56% THC, and giving patients a shortcut to get the benefits they rely on from their medical cannabis. The first lot to hit the Aurora Medical channel were tested at 52.8% total THC. Available in a three-pack of individual 0.35g pre-rolls, Sourdough Shortcuts contain a proprietary blend of live resin and whole milled flower from one of Aurora’s most popular original cultivars, Sourdough. Sourdough Shortcuts are now available to patients on the Aurora Medical website. (read more)

DELTA 9 EXPANDS DISTRIBUTION IN MANITOBA: Delta 9 Cannabis (DLTNF) announced Wednesday it intends to expand its distribution and cross-docking business in Manitoba as a result of Manitoba Liquor & Lotteries Corporation changes to wholesale distribution regulations. Effective July 31, MBLL implemented a set of new regulatory enhancements intended to improve lead times for the delivery of cannabis shipments from suppliers and distributors to Manitoba based retailers. The enhancements will allow the company to bring additional cannabis inventory from third-party suppliers into the province, closer to the operating retail network, and significantly improve the lead time and fulfillment cycles experienced by retailers. This inventory no longer needs to be subject to a purchase order to enter the province. MBLL also announced it will remove the previous 8-day holding period for retailer orders, allowing purchase orders to be shipped immediately. The company anticipates that the move to warehouse inventory in Manitoba at its Winnipeg based facilities will allow it to shorten lead times for deliveries to 3 – 5 business days, from 3 – 5 weeks previously. The company currently operates an 11,000 sq ft cannabis warehousing and distribution operation licensed by MBLL and the Liquor Gaming and Cannabis Authority. The company intends to begin executing expanded distribution agreements with suppliers immediately and anticipates that distribution shipments of locally stored products will begin in Q3. (read more)

CANNABIS/PSYCHEDELIC STOCKS: Publicly-traded companies in the space include Aleafia Health (ALEAF), Acreage (ACRHF), Atai Life Science (ATAI), Audacious (AUSAF), Avant Brands (AVTBF), Awakn Life Sciences (AWKNF), Ayr Wellness (AYRWF), Body and Mind (BMMJ), BZAM (BZAMF), Cannara Biotech (LOVFF), Chicago Atlantic (REFI), Clearmind (CMND), Clever Leaves (CLVR), CordovaCann (LVRLF), Cronos Group (CRON), Compass Pathways (CMPS), CURE Pharmaceutical (CURR), CV Sciences (CVSI), Cybin (CYBN), Delic Holdings (DELCF), Entourage Health (ETRGF), Enveric Biosciences (ENVB), Fire & Flower (FFLWF), Flora Growth (FLGC), General Cannabis (CANN), Greenlane (GNLN), Green Thumb (GTBIF), GrowGeneration (GRWG), Goodness Growth (GDNSF), Hemp (HEMP), HEXO (HEXO), High Tide (HITI), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), InterCure (INCR), IM Cannabis (IMCC), Wellbeing Digital (KONEF), Khiron Life Sciences (KHRNF), Lowell Farms (LOWLF), Lotus Ventures (LTTSF), MediPharm Labs (MEDIF), MedMen (MMNFF), MindMed (MNMD), NewLake Capital (NLCP), Numinus Wellness (NUMIF), Organigram (OGI), Planet 13 (PLNHF), Reunion Neuroscience (REUN), Revitalist (RVLWF), RIV Capital (CNPOF), Relmada (RLMD), RYAH Group (RYAHF), Safe Harbor (SHFS), Small Pharma (DMTTF), SNDL (SNDL), Sproutly (SRUTF), Skye Biosciences (SKYE), Stem Holdings (STMH), Sunniva (SNNVF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Tryp Therapeutics (TRYPF), Verano (VRNOF), Village Farms (VFF), Wesana Health (WSNAF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).