🧹 Cannabis Companies Are Cleaning House

The name of the game is boosting shareholder value. Plus, check out our chart of the week.

Author

Asli Coskun
August 21, 2024

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Good morning, Zingers! Nicolás Rodríguez and Patricio Liddle here, with the news you should be reading today to stay tuned with the latest developments in cannabis finance.

Today we’ll dive into how cannabis companies are boosting shareholder value through strategic buybacks amidst a volatile market. Understanding these financial moves is key to staying ahead in the cannabis industry, where strategic decisions drive shareholder value.

We hope that with the right insights, you can navigate these developments and capitalize on opportunities that others might overlook.

Recent moves in the cannabis sector underscore a growing focus on financial resilience and shareholder value.

TerrAscend (TSX: TSND) (OTC: TSNDF) launched a $10 million share repurchase program, the company’s first, signaling strong confidence in its future growth. This initiative allows the buyback of up to 10 million shares, representing about 5% of its public float. Executive Chairman Jason Wild highlighted the program as a testament to TerrAscend’s robust cash flow and commitment to enhancing shareholder value, following a solid Q2 with a 7.5% revenue increase.

Meanwhile, SNDL (NASDAQ: SNDL) is making is making strategic strides by acquiring the remaining shares of Nova Cannabis (TSX: NOVC) for CA$40 million. Expected to close by October 2024, this acquisition aims to bolster SNDL’s retail portfolio, streamline operations, and deliver cost savings, positioning the company for sustained profitable growth.

High Tide (NASDAQ: HITI) (TSXV: HITI) also made headlines by closing a CA$10.8 million subordinated debt facility, aimed at debt repayment and ongoing development. This move, characterized by a fixed interest rate and flexible drawdown, showcases High Tide’s strategic financial management, ensuring it maintains strong free cash flow while pursuing growth.

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In this scenario, investors should closely monitor the Total Liabilities to Market Cap ratio, as highlighted by Viridian Capital Advisors. This ratio is a key early warning sign of potential credit issues, offering more timely insights than traditional metrics like Debt/EBITDA. Companies with ratios above 7x, like Schwazze (CSE: SHWZ) (OTCQX: SHWZ), warrant scrutiny, as they may face serious risks of default or restructuring.

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Nicolás holds a B.A. in International Relations, an M.A. in International Affairs, and an M.Phil in Public Policy. He is a doctoral student in Public and Urban Policy at The New School in New York City. After working for the United Nations in 2014, Nico pivoted his research to studying the relationship between the cannabis industry and economic development.

Patricio is a development economist with extensive experience in IT, finance, and banking. He writes about the economic and social opportunities obscured by over fifty years of drug prohibition. Beyond his professional expertise, Patricio is a committed advocate for social change, passionately working to promote harm reduction and reform drug policies.

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