Newer subscribers (Welcome!) may not be familiar with some of TheCannalysts earlier work.
We’ve been putting original content out for more than 4 years now – and much of our earlier content lays out the philosophies and approach we take to financial analysis. It explains the reasons and reasoning that informs our perspectives. We are an open book at TheCannalysts, both in disclosure, and in being accessible to subscribers.
The reader might note that while we refer to our previous material occasionally – in support of a current analysis or use as comparison – TheCannalysts do not ‘repackage’ content to bridge slow news periods, nor do we republish older material as standalone. We don’t believe a consumer in this day and age receives much value by getting what they’ve already ordered……delivered over and over again. Creating original, independent content is our mission.
Today, I am very glad that our material is archived and available. Because the US cannabis market is continuing on the journey of cannabis legalization. In Canada. TheCannlaysts were there from the start. And we watched and lived and analyzed and documented it……in real-time.
Yes, cannabis has been available for years (at least in CA/CO/WA/ORE). But now with more states coming online and the federal landscape perceived to be changing (with movements in law expected), the sell-side touts will be changing the messaging and approach to get folks to part with their hard-earned dollars…..and put them in the investing flavour of the day.
Now, economically, it’s different down there. Far different in formation and anticipated expansion, within a cultural and commercial landscape that’s many figurative miles away from ‘The Great White North’. GoBlue and I have extensive experience within the United States in a business context. And over the past couple of months, subscribers will know some of the reasons why TheCannalysts believe this is so.
For retail investors, I penned this article on ‘Trading versus Investing‘ in early 2017. There were many retail investors conflating the two during the run, it simply had to be said. Touts muddy the two intentionally – obscuring distinctions between a pumped outfit …..and those that aren’t. While all companies engage in self-promotion (to varying degrees), there are both ethical and reputational aspects to promotion that provide insight to the character and quality and mind of management.
I was asked by a subscriber a few weeks ago why I’d waste my time on a mutt like Heritage Cannabis ($CANN). It’s obvious I don’t like them or their management much. The answer is: it stands as a fantastic educational tool. What I see is a shop and management that reflects low-calibre talent – and even lower ethical standards – in their ‘leadership’. There’s a ton of this around in-sector (and beyond) to be sure. But $CANN presents so many clear examples, I can’t avoid using it.
During the run, $CANN was paying some $80k/mo on average during pre-revenue on binders, and had spent more than $1MM in a 13 month period during market froth, aggressively mis-representing commercial prospects and even actual deals. The company never got offside. That’s why proxies are used.
Didn’t catch the reference to binders? ‘Binders’ is the term TheCannalysts use to describe paid placements of the low kind: anonymous employees of call-centres pretending to be an actual person. For these call-centre businesses, there is an actual aftermarket for buying/selling ‘clean’ social media accounts that look like real people. An account of a good ‘person’ – with multi-year social media history on several platforms with ‘personal’ material interspersed to appear as life-like as possible – can sell for as much as $100k. If you didn’t know that, now you do.
I’m not trying to induce paranoia here. The existence of binders is simple reality. You are – and have always been – surrounded. It is far more pervasive and purpose-built than most investors will ever know. Critical reasoning and awareness is the defence and vital. The touts and their activity are most acute during times of emotion and volatility.
I see the pseudo-equivalent of ‘binders’ within TheCannalysts own ‘industry’ – that of financial analysis in the legal cannabis space. To my knowledge, we are the ONLY independent outlet of original content and information in the market.
That every other single outlet that specializes in or provides coverage on the legal cannabis sector suggest payment is required from companies before they go beyond putting up stock ticker and market cap information. Rate cards exist. I don’t know specific details (confidential and sensitive commercial information that), but I can compare what is being said with what is reality. And hey – any decent commercial analyst with experience will see exactly what I do. We might differ on forward views or whether it’s material or whatever. And it’s always about what is not said in the paid stuff that’s important. What is said is a pitch deck with the odd caveat or sculpted criticism carefully placed. I’d wager much that final output is subject to client sign-off.
I strongly encourage the reader to think hard about that.
Now, the US space will be hunting undiscovered gold in cannabis properties – in new or established markets. Is there an unknown but profitable chain in Colorado, perhaps privately held but now either up for sale or acquired by an aspiring MSO set on expansion? Perhaps a 3 outlet Mom and Pop in Washington State that’s been killing it……but laying low. An unknown property that’s been banging 25% returns for three years, but being private, never had cause to mention.
From here on, I expect the tout will becoming fast and hard in the properties on the periphery of the MSO’s. Perhaps from a desire to present themselves as a target for acquisition, or to claim that they too will become the next $TRUL. This is different than the ostensible stock promotion I see by funds in say, a C21 Investments.
It’ll differ because the touts (and the folks paying for them) will be in existing properties that were passed by during this phase of MSO beauty pageants. They’ll be looking to break stale stock patterns (driven by stale business results and staler capital structures), and to get rich.
As if by magic, The Harborside Group moved up 5% this morning, and is getting attention from various corners of the ‘short- attention span sorts. I refer to ‘short attention spans’ because, well, it’s a literal descriptor. And a good percentage of them and the noise they make comes from posts made by the binders. Or they are binders. One can’t tell.
The nature of the internet allows content to often look like it’s coming from a genuine, sincere person. A person just like you, with similar interests and goals.
I am looking at ways to get more proactive in identifying those companies undertaking aggressive marketing programs when they begin. I’ll also be going into every backwater and (front water) of the US market to see if I can find some actual potential that’s been left behind, or perhaps, finally coming into its’ own.
More Structures and optionality calculations for MSO’s coming soon, and I needed a break from the latter today. This was it.
The preceding is in the opinion of the authors, and is in no way a recommendation to buy or sell any security or derivative. the author(s) hold no position in any of the companies mentioned.
ADDENDUM: Don’t get me wrong. Companies – like people looking for a job – need to sometimes get out there and hustle and sell themselves. They are after the same thing (money), except a company’s motive is to sell their business as being the right place for an investor to get returns in the future. Cool. They put out advertisements and pitch decks and road-shows and beat any bush that looks promising. They want money to deploy to buy assets to generate returns to repay investors in share price gains or dividends. That’s called capitalism. And yes, paid placements are done by the most reputable and profitable companies in the world. Small companies too. My distinction is where the marketing takes liberties with reality, binders are used, and stories told that the financial statements don’t support. It’s easy for us to spot, and we will continue to keep pointing them out.
Twitter is a natural home for many binders. If you want to see the enemy, search a ‘Cash Tag’ – a ‘$’ sign in front of a ticker symbol – and you’ll see what’s being posted by people who used it on the specific company. Be careful though, there is no way to tell who’s who, and some very effective marketers don’t sound like it. After all, that’s what they get paid to do.