This is so bittersweet. I’d been holding Supreme Cannabis Company ($FIRE) since March 15th, where I entered a position based upon CEO Beena Goldenberg’s clean up of the shop, and improvement in the financial statements. Now? I face the prospect of owning Canopy Growth ($WEED). Ugh!
There’s a couple of questions one could ask about this. Namely, did Beena sign because she didn’t see an ability to get her company into the same position/value on its’ own? Is mid-tier really in that tough a spot?
Or perhaps the ‘thud’ she heard from that bag of cash landing on her desk was big enough – and at enough of a premium – that it was an offer she couldn’t refuse. Either or, I’m disappointed – inasmuch as we’ll never know what and where she could have gone. My initial thoughts are that the road she was taking – going deep into CPG and 3.0 – isn’t going to be a cheap nor certain route to success. That she saw a lack of capital and the years it will take to fully execute a vision that needs to exist within a mature and competitive industry. As I type that, I am becoming even more convinced that that’s the driver.
I’m gonna resist making the easy (really easy) jokes about $WEED’s ability to walk in and screw it up. There’s already the bad joke of $WEED burning billions to repeatedly prove they can’t build a viable company on their own. And that’s after having acquired a raft of companies they’ve claimed that’ll make them a viable company.
Ah well. Barring me and my shares voting against the offer and being able to stop it (LOL), $FIRE will soon be within the constellation of Canopy’s brands. And Canada’s legal dope business will have lost one of the few businesspeople I saw as a really bright light. Hell, maybe she’ll stay on and run the show as a divisional president, and enjoy getting a free box of Corona beer every Xmas.
This buy signals that Constellation ($STZ) has utterly given up in trying to be anything but a roll-up outfit. And I’m guessing there’s much lipstick being put on and texts being sent to David Klein’s phone at the moment. There is little surprise in them being on the hunt, although this was done with paper.
As we’ve predicted, merger and acquisition activity has been strong over the past while, and it’ll continue to be strong as sector consolidation and scaling up is an inevitability. Within a margin constrained business – where State Monopolies confiscate 30% of the value chain – oligopolies are an inevitable result.
This also signals that other less attractive mid-tiers – who were already going to have a rough 2021 – will need to demonstrate their own viability sooner than later. The runway is only getting shorter.
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 no longer holds position in $FIRE. I sold it while writing this.
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