Earnings Preview and What’s Next In Cannabis Rescheduling
In today’s Trade To Black podcast presented by Flowhub, Shadd Dales and Anthony Varrell get a sneak preview of earnings season, starting with preliminary Q3 results from Glass House Brands. We also cover the escalating fight between Curaleaf and Aurora Cannabis, and Michael Bronstein, president of the American Trade Association for Cannabis and Hemp, returns for his weekly Insiders Edge segment ahead of a key week in the DEA rescheduling hearing.
Glass House Brands (NYSE: GLAS) reported preliminary Q3 revenue of $56.8 million, up from $47 million in Q2. Production hit a record of about 317,000 pounds, and cost of production fell to roughly $110 per pound. Cash came in at $39.7 million. But the average selling price dropped to $150 per pound from $211, and gross margin slipped to 26% from 34%. The company also turned off its at-the-market offering and announced a director’s resignation. The stock hit $1.78 intraday.
Curaleaf (TSX: CURA) responded to Aurora Cannabis’s (NASDAQ: ACB) latest recommendation that shareholders reject its enhanced offer of 0.4013 Curaleaf shares plus $1 in cash. Curaleaf argues that Aurora is giving other parties diligence access while locking Curaleaf out, and it calls the bid an 86% premium to Aurora’s unaffected price.
Ewing Morris has offered to buy up to 2.6 million shares of Decibel Cannabis (TSXV: DB) at $1.91, a 16% premium to the 20-day average, open until November 6. One analyst notes Decibel trades under four times forward EBITDA with roughly a 20% free cash flow yield. That’s a sign of value in Canada’s smaller, premium-focused producers.
Bronstein says many proposed federal hemp bills are backdoors to protect THCA flower and chemical conversions. He argues the simpler answer is to legalize marijuana. He warns that unregulated products are eroding public support for legalization, and he says ATACH filed a court brief arguing HHC is not legal under the Farm Bill. He also thinks the industry has been too quick to endorse federal bills, and that a STATES Act-style approach could unite it.
Chief Administrative Law Judge Derek Julius has given the DEA until Wednesday, October 21 to respond to opponents’ motion to reopen the hearing. He has not yet ruled on admitting the GAO report or the reopening request. Bronstein calls the report immaterial to the science and says opponents are simply trying to delay.
On Massachusetts Question 8, Bronstein calls repeal ballot fights existential for the industry. He argues that a decisive win would discourage similar campaigns in other states.
Catch the full episode for Bronstein’s take on what comes next.
