$MSOS - Multi Bagger Opportunity in US Cannabis

Before you skip to the comment section to tell me how heavy your Tilray and sundial bags are, im talking about US cannabis operators. I want to make this clear as the majority of you don’t understand this: Tilray, Canopy, Aurora & Sundial DO NOT sell or touch cannabis in the United States. There are several companies that DO sell Cannabis in the US (MSOs) and big surprise to most of you, they make money hand over fist. Here’s a quick comparison of the top 5 MSO’s vs Top 5 Canadian LP’s ​ MSO vs LP Financials This will be a long post & there is no getting rich quick with these companies, but the long term opportunity using LEAPS is huge. If you’re more interested in gambling your money on 0DTE SPY Puts then this post isn’t for you. There are several factors at play here that are creating this opportunity for us: eventual up-listing, Naked shorters and strong business fundamentals. I want to point out that legalization in the US is not the catalyst I’m waiting for, the fact that it is federally illegal actually benefits these companies as they are getting a massive head start. When I mention MSO’s in this post I am referring to the top 5 listed above, same for the LP’s. Why You’ve never Heard of these Companies Time and time again I see comments in posts about US legalization talking about Tilray and Aurora and all the Canadian LP’s, with next to no mention of the US MSO’s. Because cannabis is federally illegal in the US these MSO’s can’t list on the major US exchanges, this is the same reason why the Canadian companies a re listed on the NYSE but don’t touch cannabis in the US, as they would have to de-list. Currently MSO’s all trade on the CSE and OTC, most retail investors don’t trade on those exchanges and major institutions currently aren’t allowed to touch these companies since they are operating a “Federally illegal business”. The result is that very few people know about these companies, including most of you and there is next to no hype in the industry. Naked Shorts I know a majority of you started jerking it the second you read “naked shorts” so I’ll get it out of the way right now so I don’t edge you for this entire post. The shorting that is taking place IS NOT the main reason for this opportunity and I’m not betting on an eventual “short squeeze”. It is certainly an added bonus and a big factor for the attractive share prices we are seeing today. Because these companies are listed on the minor exchanges with little regulation and next to no institutional investors, the opportunity for squeezing retail shareholders has been very lucrative for shorters. Short Volume on Top 5 MSOs Business Fundamentals Unlike the Canadian LP’s, the fundamentals for MSO’s get stronger every quarter. Revenues and EBITDA numbers continually grow at a healthy rate every quarter. Trulieve, Green Thumb and Verano all reported profits last quarter, with Cresco and Curaleaf on the cusp of profitability. MSO’s average Gross Profit Margin is 47%, with the lowest coming in at 38%. In comparison the LP’s average is -26% with only Canopy(20%) and Tilray(18%) having positive Profit Margins. There are a few reasons for these companies having much better operating metrics than their Canadian counterparts, the first being the ability to borrow from banks. American companies don’t have access to any funding from banks, they cant even open a bank account because they are “federally illegal businesses”. As a result they have had to actually build lean businesses, focusing on profitability and expanding when fiscally possible. The LP’s have had virtually unlimited access to funding from banks, their focus has been on rapid expansion in a country with a small market and a lot of competition, the inability to build a successful business model while borrowing an insane amount of money has shown over the last few quarters for the LPs. The second reason the MSO’s have much better fundamentals is quite simple, they’re operating in one of the biggest markets in the world. Canada has a population of 37.5M, there are currently 3 States that haven’t recorded a single cannabis sale that have either legalized recreational cannabis (New York) or are prioritizing bills that legalize recreational cannabis in the immediate future (Ohio and Pennsylvania). These 3 states combine for more than the entire population of Canada(43.69M), that's untapped revenue that will be realized within the short term that hasn't yet been priced in. These states aren’t even included in the 18 states that are already selling recreational weed, which are home to a combined 110M people. Not to mention the massive medical market that’s taken place in Florida, which has a population of 21.4M people. At this point I’m sure you get it, MSOs have better fundamentals, operate in a bigger market and are in one of the fastest growing industries in the world, which is why it’s incredible that Canadian LP’s trade a much higher multiples than MSOs. The MSO’s trade at an average revenue multiple of 4.5x with the highest being Green Thumb at 6x, while the LP’s trade at average revenue multiple of 10.3x. During the January bull run these same LPs traded at an average revenue multiple of 77.6x revenue with Sundial trading at an insane 671x multiple. Here’s a visual in case its just not sinking in. EBITDA Multiples There is a significant opportunity assuming one day the MSO’s ever get the valuations the Canadian LPs currently have/had. The catalyst for this is the Safe Banking Act. Safe Banking I’m sure most of you aren’t familiar with the Safe Banking Act, but it essentially allows the American based companies that operate in legal recreation states to have access to banks. As I mentioned earlier they don’t have access to proper financing from banks and cant even open bank accounts, having to keep revenues in cash. The Safe Banking Act will alleviate all those issues, but most importantly has language that will allow these companies to up-list to major exchanges such as NYSE and NASDAQ. Up-listing is the major catalyst in my opinion, as that opens the door for institutional investors, allows M&A from larger tobacco/alcohol companies and most importantly brings awareness of these companies to retail investors. The hype for these companies will be off the charts; huge revenue, profitable, American based companies operating in the largest market in the world that nobody has heard of until they list on these major exchanges. Did I mention that Safe Banking has bi-partisan support and was successfully added to the House NDAA last month. Here's a Fast Money segment on it since I know you guys love CNBC. https://twitter.com/CNBCFastMoney/status/1440796682535399425?s=20 My Bet The only way to buy options for this play is through the MSOS ETF, which holds the top 5 MSO’s that were mentioned above and makes up 50% of the ETF, with smaller American Cannabis companies and cash making up the remainder. I’m currently holding MSOS $50 JAN2023 C, $22k worth with an average price of $2.75, I will continue to add to this position. I also have stock positions in Trulieve and Cresco Labs. Stock Tickers- OTC Trulieve- $TCNNF Curaleaf- $CURLF Cresco Labs- $CRLBF Green Thumb- $GTBIF Virano- $VRNOF

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Oct 19, 2021

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$MSOS - Multi Bagger Opportunity in US Cannabis

bullish

Before you skip to the comment section to tell me how heavy your Tilray and sundial bags are, im talking about US cannabis operators. I want to make this clear as the majority of you don’t understand this: Tilray, Canopy, Aurora & Sundial DO NOT sell or touch cannabis in the United States. There are several companies that DO sell Cannabis in the US (MSOs) and big surprise to most of you, they make money hand over fist.

Here’s a quick comparison of the top 5 MSO’s vs Top 5 Canadian LP’s

MSO vs LP Financials

This will be a long post & there is no getting rich quick with these companies, but the long term opportunity using LEAPS is huge. If you’re more interested in gambling your money on 0DTE SPY Puts then this post isn’t for you.

There are several factors at play here that are creating this opportunity for us: eventual up-listing, Naked shorters and strong business fundamentals. I want to point out that legalization in the US is not the catalyst I’m waiting for, the fact that it is federally illegal actually benefits these companies as they are getting a massive head start. When I mention MSO’s in this post I am referring to the top 5 listed above, same for the LP’s.

Why You’ve never Heard of these Companies

Time and time again I see comments in posts about US legalization talking about Tilray and Aurora and all the Canadian LP’s, with next to no mention of the US MSO’s. Because cannabis is federally illegal in the US these MSO’s can’t list on the major US exchanges, this is the same reason why the Canadian companies a re listed on the NYSE but don’t touch cannabis in the US, as they would have to de-list. Currently MSO’s all trade on the CSE and OTC, most retail investors don’t trade on those exchanges and major institutions currently aren’t allowed to touch these companies since they are operating a “Federally illegal business”. The result is that very few people know about these companies, including most of you and there is next to no hype in the industry.

Naked Shorts

I know a majority of you started jerking it the second you read “naked shorts” so I’ll get it out of the way right now so I don’t edge you for this entire post. The shorting that is taking place IS NOT the main reason for this opportunity and I’m not betting on an eventual “short squeeze”. It is certainly an added bonus and a big factor for the attractive share prices we are seeing today. Because these companies are listed on the minor exchanges with little regulation and next to no institutional investors, the opportunity for squeezing retail shareholders has been very lucrative for shorters.

Short Volume on Top 5 MSOs

Business Fundamentals

Unlike the Canadian LP’s, the fundamentals for MSO’s get stronger every quarter. Revenues and EBITDA numbers continually grow at a healthy rate every quarter. Trulieve, Green Thumb and Verano all reported profits last quarter, with Cresco and Curaleaf on the cusp of profitability. MSO’s average Gross Profit Margin is 47%, with the lowest coming in at 38%. In comparison the LP’s average is -26% with only Canopy(20%) and Tilray(18%) having positive Profit Margins. There are a few reasons for these companies having much better operating metrics than their Canadian counterparts, the first being the ability to borrow from banks. American companies don’t have access to any funding from banks, they cant even open a bank account because they are “federally illegal businesses”. As a result they have had to actually build lean businesses, focusing on profitability and expanding when fiscally possible. The LP’s have had virtually unlimited access to funding from banks, their focus has been on rapid expansion in a country with a small market and a lot of competition, the inability to build a successful business model while borrowing an insane amount of money has shown over the last few quarters for the LPs.

The second reason the MSO’s have much better fundamentals is quite simple, they’re operating in one of the biggest markets in the world. Canada has a population of 37.5M, there are currently 3 States that haven’t recorded a single cannabis sale that have either legalized recreational cannabis (New York) or are prioritizing bills that legalize recreational cannabis in the immediate future (Ohio and Pennsylvania). These 3 states combine for more than the entire population of Canada(43.69M), that's untapped revenue that will be realized within the short term that hasn't yet been priced in. These states aren’t even included in the 18 states that are already selling recreational weed, which are home to a combined 110M people. Not to mention the massive medical market that’s taken place in Florida, which has a population of 21.4M people.

At this point I’m sure you get it, MSOs have better fundamentals, operate in a bigger market and are in one of the fastest growing industries in the world, which is why it’s incredible that Canadian LP’s trade a much higher multiples than MSOs. The MSO’s trade at an average revenue multiple of 4.5x with the highest being Green Thumb at 6x, while the LP’s trade at average revenue multiple of 10.3x. During the January bull run these same LPs traded at an average revenue multiple of 77.6x revenue with Sundial trading at an insane 671x multiple. Here’s a visual in case its just not sinking in.

EBITDA Multiples

There is a significant opportunity assuming one day the MSO’s ever get the valuations the Canadian LPs currently have/had. The catalyst for this is the Safe Banking Act.

Safe Banking

I’m sure most of you aren’t familiar with the Safe Banking Act, but it essentially allows the American based companies that operate in legal recreation states to have access to banks. As I mentioned earlier they don’t have access to proper financing from banks and cant even open bank accounts, having to keep revenues in cash. The Safe Banking Act will alleviate all those issues, but most importantly has language that will allow these companies to up-list to major exchanges such as NYSE and NASDAQ. Up-listing is the major catalyst in my opinion, as that opens the door for institutional investors, allows M&A from larger tobacco/alcohol companies and most importantly brings awareness of these companies to retail investors. The hype for these companies will be off the charts; huge revenue, profitable, American based companies operating in the largest market in the world that nobody has heard of until they list on these major exchanges.

Did I mention that Safe Banking has bi-partisan support and was successfully added to the House NDAA last month. Here's a Fast Money segment on it since I know you guys love CNBC.

https://twitter.com/CNBCFastMoney/status/1440796682535399425?s=20

My Bet

The only way to buy options for this play is through the MSOS ETF, which holds the top 5 MSO’s that were mentioned above and makes up 50% of the ETF, with smaller American Cannabis companies and cash making up the remainder. I’m currently holding MSOS $50 JAN2023 C, $22k worth with an average price of $2.75, I will continue to add to this position. I also have stock positions in Trulieve and Cresco Labs.

Stock Tickers- OTC

Trulieve- $TCNNF

Curaleaf- $CURLF

Cresco Labs- $CRLBF

Green Thumb- $GTBIF

Virano- $VRNOF

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35.00

Target Price

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Confidence

2-6 Months

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