Truth Seeker

1/ $GRUSF: The takeaway from today's results—IF they didn't add back $1.9M of magical "other income" to EBITDA, their EBITDA is down a whopping 72% vs the 9M avg. For 9MFY24, other income was $51K. In Q4'24, it jumps to $1.9M. What exactly is this other income? (1/n)

Live on Z&A: Shane Pennington on Rescheduling @BlankRomeLLP @admindotlaw #cannabis #Schedule3 x.com/i/broadcasts/1…

@420Odysseus @BlankRomeLLP @admindotlaw The cannabis industry is so fortunate to have a smart, straightforward and articulate person like Shane and his former partner Matt Zorn. I always appreciate hearing you both speak on pretty much any issue. Thanks guys and keep up the good fight!

@cupofcoffeecap Lastly, the rest of the universe trades at much lower multiples despite for some 40-80% of EBITDA being from medical states that have inherent growth in them. Should none of that be priced in? But it should be for this company?

25x EBITDA on a forward basis? If the projection is $11M EBITDA with a $110-120M market cap, that's roughly 10x FWD P/EBITDA. I understand that it's not true today and that you INCLUDED it, but don't these things ostensibly get priced on the future. At minimum, shouldn't that at least be a consideration? To your point on $1,800 pounds, that's one way to frame it for thought experiment purposes. However, you've already stated that you suspect they're not at full sell through and averaging like that would mean that they haven't sold any "A" flower at $2,495. Therefore, the $1,800 figure is a contradiction to both what you and $GRUSF have stated.

Is 11x EBITDA really that egregious for $GRUSF in either relative or absolute terms, let alone for a business that's increasing its EBITDA from $2M (base business) to $11M (base business plus NJ)? “Also has no 280E benefit from resched.” I’m not sure how you figure, just in the last quarter $GRUSF added $178,000 to their UTP with a collective $1.3M in UTP. Sounds like there would be some benefit. $GRUSF does have brands (Grown Rogue Reserve, Grown Rogue, Yeti), now the prominence of those brands is a different question. Are all the pre-rolls white label? If not, that must suggest some brand presence. They don’t need to scale in existing markets to take advantage of their cost superiority. Their cost superiority is inherently an advantage in and of itself. How is the flywheel entirely made up slop? At best, it’s only partially made up slop. They are indeed expanding into new states. Yes, their first state they entered (NJ) was delayed from their initial projections. But is this the consequence of growing/learning pains or systemic failure? You seemingly assume the latter without giving the former reasonable consideration. The goalposts aren’t being moved. They’ve explicitly stated that they’re attempting to enter a new state each year. Goalpost is a weird way to say they’ve explicitly and thoroughly communicated a business plan. I’m also confused about their inability to fund their state expansion. I thought you said they were going to dilute shareholders in order to fund it. Which means that state expansion is fundable. Also they have $21M in working capital due, in part, due to their recent credit facility. Will all of that be tied up in OR, MI, NJ with non being available for expansionary efforts?

@cupofcoffeecap On your first point. Consider this (i) We have an insider sale of a significant minority position at a $10M valuation for their MI asset and (ii) you’re valuing it at 11x EBITDA on peak EBITDA from NJ. I’ll let you use your own judgement to decide what’s fair or not.

@cupofcoffeecap Yes, your second point is fair. It’s unclear what the realizations are. I’d say between $2k-$2.5k (their A flower price).

@cupofcoffeecap To be clear, $GRUSF trades at 25x EBITDA today and at >11x EBITDA INCLUDING full build out of NJ, full sell-through of NJ at a $2k wholesale price per pound. None of those things are true today. Dividing their NJ revenue by pounds produced shows a ~$1,800/pound realization.

@cupofcoffeecap Haha, I like your responses. At best its "partially made up slop".

@fatehsmann So, how did he arrive at the fact that Michigan decline despite significant higher production and lower COGS was due to pre roll pricing? It also doesn’t negate the fact that on a blended basis pre roll is a tiny portion of the business so price would have to decline >50% QoQ

@PoliticoStocker That is the average price of flower sold both in Michigan and Oregon- not just Michigan.

Who is this guy? He constantly DMs me and then makes up stuff trying to mock me. Please get your facts straight or maybe just keep it quiet when you're faced with the task of being honest about a highly illiquid holding that is your entire fund, I don't expect anything unbiased.

@JDerevyanny Based on production data, NJ realizations are ~$1,800 per pound. At least 40% lower than what your buddy at the other fund was parading to the public as "simple math".

@JDerevyanny On the call, they mentioed how NJ was going slower than expected. So, I don't even see how my statement is controversial. NJ realizations can be backed into with prod data, would be better if we had sales data, which we don't, despite your insincere attempt at mocking me.

The fundamental issue is three fold: 1. With $9M in cash, they cannot afford to build out these states without an addiitonal fundraise, so need to keep pitching the future to raise current $'s. $GRUSF

To help you further, it is page 15 of the MD&A filed on Sedar.

Just open the filings of your holding once in a while: 1. Pre-rolls is <15% of their business so its wtd avg cannot mathematically impact MI as you describe and 2. Hilariously, they disclose pre-roll pounds sold and revenue so you can calculate ASP, which INCREASED QoQ by + 3.2%

I would argue that the "flywheel" was entirely made up slop to help fundraise and it seems the goalposts keep being moved to "new states" when the company cannot realistically fund those on the timelines stated.

The flywheel was super exaggerated and the stock is back to trading at a nosebleed valuation.

Last point $GRUSF. Bulls never talk of valuation or impending dilution. Co. trades at >11x EBITDA if i assume full build out & sell through of NJ & 70% allocation to GRUSF (~$9M EBITDA) and annualize base-business EBITDA ($2M with corp o/h). Also has no 280E benefit from resched.

3. COGS numbers seem massaged. Costs are being reallocated to corporate to show better state numbers. Here's a clue: despite QoQ flat pricing in Michigan. +15% higher production and -14% stated "costs". EBITDA in the state declined -14.5% and revenue -9%. How is that possible?

2. NJ, arguably least competitive state in the US, has had an extremely slow ramp, poor sell-through (they don't disclose sale data only production) and much worse than expected realizations. Expect worse in other states. Also, pls adjust for them owning only 70% at best of NJ.