Welcome to the Cannabis Investing Newsletter Forum. Feel free to find your favorite cannabis stocks and contribute content as you please; content that continues the discussion of and analysis of cannabis stocks. – D. H. Taylor
Possible Acquisition Target
I have said this before, and I will say this again and again until it happens: SHWZ stock is a possible acquisition target.
First, their numbers are impressive and improving. They are the biggest player in the state of Colorado. Any big player wanting to get into Colorado could more easily just acquire Schwazze instead of launching a new business model inside the state.
That being said, there is unusual activity on SHWZ stock lately with a big move upwards. This is outside of what is happening with other cannabis stocks, and there may be something going on here.
Continuation on Schwazze; something is happening with the stock lately, end-of-session notwithstanding.
There was a comment about Dye Capital not selling out their position of Schwazze. I don't see that as a hinderance since Dye Capital has done other transactions previously.
Not certain what is going on with the recent stock price movement, but, I see Schwazze as a potential acquisition in a far bigger picture. Price action is interesting the past few days.
@cannabisinvestingnewsletter I see it came back to Earth by end of day though. Something seemed fishy, but then again, lately any time a cannabis stock goes up it seems odd (bad joke)
@mike-korner Still bucking the trend. There may be something there. The move at end-of-day could have been small fish getting out of quick positions. But, I feel there is something to the movement. Maybe a big whale came in to eat. Low interest levels in cannabis stocks may be driving this.
I'm going to keep an eye on this.
Curaleaf has big interests in Colorado as does Columbia Care. Big players that are profitable and sitting on cash could scoop up SHWZ while it is cheap if they wanted to move into a new state with a profitable, rapidly growing small company and stick their name and brands in the state. Companies with lots of cash like TCNNF, VRNOF, GTBIF could easily snap it up.
Pro forma ADJ EBITDA 2021 was given as $30-36M by SHWZ at Q2 earnings announcement. I read that a "normal" cannabis company fetches usually 5-7 times the pro forma EBITDA for that year. Someone correct me if I am wrong. Using that math SHWZ could be bought at 150M-250M using diluted shares (42M) or 270M-378M using undiluted shares (54M). That seems pretty cheap for one of the big players to get established in Colorado with licenses, 19 profitable dispensaries with acquisition growth (Star Buds) and organic growth (total 70% retail revenue), and wholesale growth (30% of revenues).
So a "normal" cannabis company with SHWZ' numbers would fetch $4-$6 a share in a buyout right now because SHWZ is so undervalued. So what would a buyout of SHWZ be worth if it keeps coming in with great numbers? $8? $10? I certainly don't think a buyout of SHWZ would get cheaper; only more expensive from here.
Fact: 2020 Canadian Cannabis sales=$2.6 B Canadian dollars= $2.06 B USD.
Fact: 2020 Colorado Cannabis sales= $2.0 B USD. Canada and CO close to equal in sales.
Looking forward to that Q3 earnings report on 11/15/21.
Happy cannabis investing everyone. We will be rewarded.
@gr8day4alemonadegmail-com Thanks for this.
With SHWZ, it is a matter of when, not if, they get acquired.
See my post from last week. Columbia Care comes right behind Curaleaf with its own Colorado acquisition:
The sales price was 4.5 times the Medicine Man pro forma 2021 EBITDA according to the above news article. I don't know how motivated that Medicine Man was to sell the company.
Things are happening in Colorado.
You will recall that Medicine Man split. This is the other half of Schwazze. I have said it a ton of times, Schwazze gets bought up.
For the record, I think there were cash-flow issues with the Medicine Man side of things and, due to that there may have been motivation.