Financings are coming hot and heavy in the US space right now, with TerrAscend ($TER), Curaleaf ($CURA), and Columbia Care ($CCHW) all raising within the last week.

Planet 13 Holdings ($PLTH) announced the same this morning, raising $50MM CAD just that quick. There’s been a lack of sweeteners and inducements seen in the US relative to Canada – the three at the top all went out with no warrants attached ($CCHV granted an over-allotment as bought deal). A raise in early November saw another $28MM CAD come in to $PLTH as well.

First look for myself at this shop – a 1 dispensary operation with cultivation.

All values in $USD unless noted.

To the financials!

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• $58MM in cash on hand, and that was prior to the raises mentioned above.

• $PLTH’s $50MM CAD raise went out with one half of a 2 year/$9 warrant. I calculate the cost of that at $1.64. So, one may safely assume a risk premium was requisite. Cost to equity: $14MM.
• Revenue of $23MM in the last quarter, a brisk 57% margin reported before GoB. Previous quarter was *only* $10.7MM. Wow.
• First quarter of the year they pulled in $17MM. Given they are in Las Vegas (comprised of 1 storefront, the ‘Superstore’ and another in ‘Medezin’ which isn’t open), likely reflects COVID impact. Heck of a rebound though.
• SG&A of $7MM, which is not a lot for the sales levels, translates to 30% of them. Previous quarter, it ran at 53% of sales, and in the first Q of this year, it was 42%. Another sign that COVID hit these guys right in the foot traffic in Q2. Excluding COVID, trend is good.
• Definitely something to watch for correlation next quarter on same or increased sales.
• A $2.6MM provision for income taxes. As GoBlue has demonstrated, this is going to be a significant and ongoing drag on earnings in the absence of change by lawmakers.
• They got over the line though, and reported a positive net income of $208k this Q. Loss of some $5MM YTD.
• Total of 433k options exist, all under a $3 strike. And man, is that ever lean in-sector. They’re also valued on actual historical volatility.
• 8.6MM warrants, more than half of them are at $3.75, expiring in December of this year. Both warrants and options are relatively near dated, with nothing extending past late 2022. 1.7MM RSUs.
• Kinda odd to look at a place with a civilized capital structure. The MD&A details every single option strike throughout the year, including date and price. I think I’m in love.

• 179MM shares in the float, implying a market cap of $1.2B at todays share price. Yep, that confirms it, $PLTH is a legal cannabis company all right.
• The Superstore is open 24/7/365. Woot.

Ok. I’m going to stop writing there. I like just about everything I see: It’s a good thing I’m sitting down. There isn’t a single thing I’ve come across that I don’t like.

They have clean financials, and it looks like we have a winner in terms of disclosure. This is my first time through, but I like how they show, and comparatively, I don’t think I’ve seen US or CDN based operations presented as well anywhere. Really. A breath of fresh air.

They’re heading to California via an acquisition made in May of last year for $6MM where they picked up a licence for a dispensary in Santa Ana, and a CA distribution licence. In mid July, they bought a 25k ft² grow-op in Nevada for some $5MM. All clean transactions without much complexity. So distinct from most of the deals I’ve seen over the past year. A charitable take would be they waited for a the right moment, and the timing of the purchases would support that.

There are currently no actual operations in California – and they’ve committed to building a distribution centre where they intend to operate….current budget of $6MM for which they actually provide detail. It’s currently initiating.

$PLTH has a pretty decent level of cash for what they are: a 2 store outfit with cultivation, with sales running at $80MM/yr (should this latest quarter’s run rate continue). To me, this is an example of how a clean capital structure helps share price. Anecdotal at this point, but in what is almost a direct comparative, C21 Investments ($CXXI) – with a similar run rate and commercial footprint – has a market cap less than a fifth of $PLTH. And while the $100MM cash balance is a hard delineator between the two, still, that shouldn’t add up to a difference of $1B in asset value. A premium for management perhaps.

I’m going to spend more time on these guys, but I’m not really sure how. It’s an odd feeling looking at a shop and not having something – anything- negative to note. I’ve looked in the attic and crawl spaces for potential surprises – I can’t find anything. I’ll head in to the Annual Information Form, and try to flush out any boogeymen. There’s no multiples or supers.

Hell. Even those sales – they didn’t even have their 2nd dispensary open by the time these financials were put together – Medezin only opened on November 20th.

Share based compensation here is not only civil, but civilized. Related party transactions exist, but could be described similarly. Management compensation…ditto. I’m getting dizzy.

The only thing that’s kinda ‘wrong’ with this place to me is their market cap, and they aren’t in charge of that. The stock’s been on a rampage since mid-2020, with no end in sight. I’m going to try to see where their potential is being priced in, they hold more licenses and such in Nevada and that cheap pickup and relatively cheap ($6MM build) in California do hold promise to be sure, but I seriously get the feeling I’m missing something. I must have. Surely.

I lack words at this point, and don’t really know what else to say. I’ve not come across a weed company running a margin like this with $80MM in the bank and profitable operations…… and a capital structure I would eat off of. These guys make $TRUL look like $GTII.

Seeing a company like this in the cannabis sector is almost surreal.

The cash balance won’t get them far out of state if they have dreams of going big. I don’t know projections around the CA thing, I’m going to find out. And I’m going to find out about what they really have in both states. But this thing…….as is…..I’d buy them this minute if their share price was half what it is now. That might not stop me. I’m miffed I’ve missed them so far.

Definitely more to come from me on these guys – they have my complete attention.

he 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 $PLTH.