Just an update for subscribers: both AYR Wellness ($AYR.A) and Glasshouse ($GLAS.U) have announced financials, but the full suite of statements aren’t up on SEDAR yet (oddly, $AYR.A’s MD&A is up, but not the balance sheet/income statement/notes).

I’ll be running them the minute they are.

A couple of sidebars.

• I shut down my position in TerrAscend ($TER) this morning, having gotten stopped out at $6.80. No need to hold volatility like this a month ahead of a regulatory catalyst. I’ll look to re-enter a position should we end up back in the low 6’s….there’s plenty of time for an opportunity to emerge. <NB: it took no less than 26 transactions to close out 5,000 shares. Market is as shallow as a wading pool, and another risk factor one needs to be aware of.>
• Speaking of $TER, the short form of their earnings says to me they lost $52MM on $210MM in revenue – and booked a positive Net Income solely because of a $58MM gain on optionality, booked because the share price has tanked QoQoQ. Yeesh. A run in share price will squelch reported net income for years. The folks who yell ‘non-cash charge‘ whenever this is pointed out are typically only the carnies – or their marks. Any liabilities that are booked will head straight into the cost of capital, and worn by shareholders.
• I’ve been connecting w/Graham Farrar of Glasshouse lately. A bottom feeding capital firm has been predicting the future lately on Twitter, and took a few pokes at him as well. Rather unfairly in my view. I don’t have a position on $GLAS.U, and can’t see any reason for one at this point (the latest revenue announced for 4th quarter looks soggy too). Why do I mention? Graham’s a fan of TheCannalysts, and is familiar with our research. He also engages us – despite our general dourness about his business model – and he appears to act/approach in good faith. Many C-Suites and executives hide under their desks when TheCannalysts ask questions or make posits. Graham doesn’t: that deserves a good word imo.
• The Canadian Public Accountability Board (yeah, it’s a thing) put out a report on the quality of financial statements in legal cannabis companies in February. I think it’s pertinent for investors in the space, and a must read. TheCannalysts have been surfacing many of the issues identified in the report since our formation in 2016. I see the main drivers of (potential) deficiencies in the extensive use of spreadsheets in companies, and, capital structure complexity. The former due to rapid business formation (spreadsheets keep CFOs and Controllers up at night), the latter due to capital market buggery vis a vis optionality and the use of exotic financial instruments in the sector (see: Slang ($SLNG); 4Front ($FFNT); Clever Leaves ($CLVR); AYR Wellness (AYR.A); and Sundial ($SNDL) for examples. That list is very ‘partial’ as well.
• Some of our older subscribers will recall the movies Bonfire of the Vanities. I expect a sequel will be coming out this year about the cannabis sector called ‘Bonfire of the Intangibles‘. As we get a glimpse of the wider MSO space over this earnings period, look for the where any write-downs occur (regions), and the what they are writing down (specific sales generating unit). If a trend is showing in one part of the value chain – or region – I think it’ll be very insightful for the investor.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in any of the companies mentioned.