Much has happened in the US MSO market since our last look at the Tiers, and MSO valuations back in May. Those ‘happenings’ have been largely share price decline, while MSO’s have been delivering almost universal ‘progress’ quarters.

Sales are ramping, adult use states are multiplying, and ‘good’ margins (for the most part) are relatively static. Good right?

The market hasn’t thought so since NY State and Schumer put a stick in the spokes, and placed the sector into a high volatility rinse and repeat of regulatory uncertainty.

Don’t take my word for it. This chart of a US cannabis centric ETF lays it out:

I could point out that Trulieve ($TRUL) is off $36(!) from it’s highs in mid-March. In a little over 5 months, some $8B in market cap has been erased from MSO valuations.

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I’m going to get serious here for a moment.

TheCannalysts have taken a lot of heat publicly from folks who’ve drunk heartily from the MSOGang Kool-Aid barrel. These are the people who follow the peddlers of sound-bites…… who toss around phrases like “inter-generational wealth”…..or…..”I sleep soundly at night knowing I’m in <insert MSO name here>“…..or….. ‘total addressable market!’. Take your pick. There’s a hundred more of them, some soft-sell, some not.

When I’m doing what I do, I honestly think about the person with $10k who wants make returns….but happened to buy at a moment of hype……losing $5k of it before they even got their first proxy for the AGM in the mail.

It’s also the reason why might TheCannalysts appear edgy at times: We aren’t part of the ‘Machine’.

That ‘Machine’ – like a car – has many parts: The mainstream media. The proclaimed (and always neutral!) sell-side analysts. The financial industry businesses that demands money to offer fawning ‘coverage’ on a stock. A visual You-Tube investor ‘interview’ channel who charges companies $2k/mo (and up) to produce professional wrestling level theatrical videos with CEOs. Virtually everything you see out there is advertising. Whether pay-to-play, nudge/wink signalling, or simply ‘mutually beneficial’ relationships – almost all of it is torqued commercial bullshit.

I’ve been called many names online, and several in-person at events. GoBlue got called out for a fight at an event by a hater (FFS).

What TheCannalysts are – is independent. We are not part of the ‘Machine’. And that’s why the vitriol is so harsh.

What you hear from us is exactly how we deal with our own portfolios. We are experienced financial professionals with more than 60 years of experience, who have seen many midways come and go first hand. We are risk adverse.

One of the guiding principles I write to….is to provide analysis as if it was my own money being put into play. I strive to that every single day.

If some of our takes sound like a record player scratching – it’s because we aren’t the soother that ‘Machine’ presents to consumer’s mouths, and what most people are so accustomed to.

We aren’t contrarians. We are realists.

Like the hapless individual who bought Tilray at $299, there’s more who bought $TRUL at $55+. Can it come back? I can’t tell the future. I do remember the din on Twitter and Reddit back in 2018 from people who were saying $WEED was bound for $100.

If we’re wrong: you might lose upside, but you’ll keep your money. If the peddlers are wrong: you’re fucked. And sure as hell…..they won’t cover your losses.

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Most of the equities in our list this time have backed up price wise, but notable are $TRUL and $TER.

Trulieve’s stock has taken a hit – perhaps stemming from CEO Kim River’s husband’s legal travails, and perhaps contributed to by the threat of verticality’s removal. Either or, $TRUL’s market cap has taken it in the knee caps since last March, yet remains flat on a market-cap-to-sales measure relative to peers.

Terrascend sees its’ former ‘premium’ turn into a deficit over the past 9 months.

Tier 3 has seen some tightening in deltas, and $PLTH keeps right on skewing the whole group. I’ve included Chalice Brands ($CHAL) (formerly Golden Leaf Holdings) – to bring in a comparative ‘legacy’ cannabis PubCo. I think its’ notable – and while it’s been hammered since a recent share consolidation – it remains at a ‘premium’ in terms of share price to revenue.

Tier 3 has also seen the largest relative price declines (in general), which is what would be expected from higher risk profiles (more expensive capital structures combined with limited production and sales outlets).

Across all Tiers, there is a general narrowing of deltas.

I mentioned earlier this week about 2 MSO’s I think might present a dud quarter – prior to a blowout. They are $FFNT and $TER. In terms of speculation, we anticipate $TER to drop an ugly set of financials next time, to be followed up by an eye popper. I expect $FFNT (God, how I dislike that outfit) will present a steep growth in sales, that relatively speaking, might be appealing to the market. The table though suggests this is already priced in, so ‘m backing off of it.

As speculative trades go, there they are. I wouldn’t click the mouse just yet though….this trough likely has plenty of depth until Schumer speaks again.

The challenge is in guessing what he’ll ultimately say.

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, except for a small position in $TER