I need a change of pace from Structures for a moment, and thought I’d share something I saw on the weekend that’s been in my head. I think it presents an illustrative example of how pay-to-play works. It preys on short memories, but far more often, presents incomplete information. This one is subtle, but telling.

Sometimes the narratives leave out the negatives, but occasionally, it leaves out positives when purpose is served.

It’s a story about Scotts Miracle Gro ($SMG), and their ‘entry’ into plant touching US based cannabis assets. This fluff – is not only factually inaccurate – its’ stuffed with emotive phrases (“hit the ground running”, “slam-dunk’, and the opportunity ‘isn’t like <any> on the market today”).

One of the only clean statements in the piece is that Scotts Miracle Gro ($SMG) is a titan. Yep to that. But. Unlike what’s implied, Scott’s has been rummaging around legal dope since 2011.

Scotts Hawthorne subsidiary was officially formed and funded in 2014, and is led by Chris Hagedorn. You might recognize the name. His father, James Hagedorn – who took over the company when his father wasn’t moving with the times – also hired Chris’ sister (Katherine Hagedorn Littlefield) as Vice Chair on $SMG’s Board. Yes, it’s a family outfit. Like Coors. And Busch.

Shortly after getting funded, Hawthorne dropped big cheques in the laps of several middling hydroponic and nutrient and lighting companies (hey, remember, the devil’s lettuce was still even more illegal then than now). General Hydroponics, Botanicare, Sun System, et al. Those are the names I’ve heard of (and used). There is now 42 brands in total owned by Hawthorne….who uses their “…..voice to advance legislation that supports the responsible legalization of marijuana. Because our goal is to enable all growers to seize today’s unprecedented opportunities and build the industry of tomorrow.”

Doesn’t exactly sound like a tourist.

TheCannalysts took advantage of a gracious offer by Flowr Corp to take a tour of their facility way back (I proudly state they are fans of ours)…..so Cyto and I spent a day there. We were interested in Flowr’s JV with Hawthorne, which was announced back in early 2018. The facility is in a standalone building next door, and the fiscal climate at the time saw Hawthorne doling out capital like a parent does with a child – setting clear expectations and inuring itself from risk. The first floor of the facility is grow rooms and core R&D. The second floor as planned: a genetics lab.

Flowr wasn’t exactly in the best position then or last time we looked – and I genuinely wondered whether it would get finished. Not the building and such – that wasn’t much in doubt. What was, was whether Flowr was the ones who’d be in the JV, or simply a different LP. Hawthorne was always full steam ahead.

As it is, in January of this year – just shy of three years after the announcement – they cut the ribbon.

I mention the tour, because Scott’s had sent up a person from their Board. A nice fella, and a real heavyweight. He wasn’t terribly interested in hearing the CEO talk, and I believe he was interested to know if Flowr was going to survive. I was introduced, and when he found out I was an independent analyst, he asked me what I thought. We spent the next hour together on the tour chatting, and he sat beside me in the debrief afterward (FWIW – he also liked the golf in the area and had a couple of games planned. Which, might’ve been half the reason he came. I’ve swatted many balls there, and can attest the experience is top shelf. Predator Ridge gets a lot of press, I recommend Gallagher’s Canyon).

To the point. The infomercial referenced above says almost nothing, other than RIV Capital – a relatively anemic mutt with a disparate asset array – is vying for attention, tying themselves to a big name, and paying for the coverage. In happenstance, RIV’s financials dropped today. And RIV will do exactly what and when Scotts says they will from here.

<An aside: The Dales Report is an aggregator, and from what I understand, decent people. They source material and present it. I put any negative intonation/connotation here directly on the specific author. Who, if they gave a shit, would have spent the 60 minutes it took me to find out the backstory. It has taken me 55 minutes write this. Did the author bother? Who knows. RIV likely paid for what was to be said…. and it was probably was sent out for pickup>

Anyhow. I’ve been noodling an entry into $SMG for awhile. I see their ‘cannabis’ entry the same way I see Couche-Tard’s entry into Fire and Flower: an asset play. They buy stuff that’ll make money sure. But at the bottom if it, they buy things that drive their core business. For Couche: that’s retail sales. For Scotts: it’s selling more dirt and fertilizer. I see nothing more to it.

It’s why I bought Couche, and why I’m looking at Scotts. These folks fly at high heights. Its’ simultaneous exposure and hedge to dope – and big money attracts big brains. Scotts has a family thing going on, of which I’m leery of reflexively. But, they’ve been getting spanked in the market, and it’s not only got me musing about the ‘why’, but also the ‘when’ might be an entry point.

Just a couple of thoughts. Back to Structures.

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 position in Couche-Tard, and I just found out my bid on Scotts got lifted while I was writing this. I hold no positions on any other company mentioned.