The Highlights
US cannabis stocks climbed higher last week, with the US cannabis MSOS ETF gaining 5.15%, while the global YOLO ETF lost 2.04%. Among the larger MSOs, Verano (NEO: VRNO, OTCQX: VRNOF) had the best week, jumping 9.84%. Verano rose after sharing it authorized a $50 million share repurchase program on Monday. This is its first-ever share repurchase program and represents 5% of the shares outstanding at the time of the authorization. Shares will be bought over a 12-month period ending June 13, 2025, or when they have reached the $50 million limit. As of March 31, 2024, the company had $194 million in cash. The buyback suggests Verano believes its stock is undervalued. As of the time of the announcement on June 17, the company was -15.52% YTD, while MSOS was +3.78%. Since the HHS announcement through June 17, Verano is +27.82% and MSOS is +49.90%. Critics have expressed concern about the company choosing investing in the stock, rather than assets that will drive future revenue growth. Others have pointed out Verano’s $445 million in total debt as of March 31, 2024, and how the company could have used proceeds to tighten the balance sheet. Note Verano prepaid $50 million on its senior secured credit facility following quarter-end. The Cannabist Company (NEO: CBST, OTCQX: CBSTF) gained 7.07% this week after announcing a corporate restructuring and Florida divestitures on Monday. Once fully implemented, the restructuring of corporate operations is expected to generate ~$10 million in annual savings. The company is also optimizing its operational footprint by divesting its Florida license and asset portfolio. While the exact proceeds and timing of the sale were not provided, it has LOIs for multiple transactions in place and $2.75 million of deposits in escrow. The company has 14 retail locations in Florida and three cultivation facilities. Florida is a key market for many MSOs, but in 2023, The Cannabist generated -$7.0 million in AEBITDA and -$18.9 million in net income from the Sunshine State. In addition, the company closed one underperforming location in Colorado and, as of June 1, is reducing hours of operation for its New York medical dispensaries in Brooklyn and Riverhead. It also closed both of its Manhattan and Rochester locations due to lease expirations and will continue to look for new locations. The Cannabist Company is focusing on wholesale opportunities in New York. The Cannabist Company CEO David Hart joined us on Higher Exchanges to discuss restructuring and divestitures. We also debated whether the Verano stock buyback program is the best use of capital at this point in the growth cycle. Those interested can listen to the episode on Apple Podcasts, Spotify, or X Spaces. A link is accessible in the full report.
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