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VIDEO: Curaleaf Holdings, Inc (CNSX:CURA) Completes Largest Equity Raise in US Cannabis History

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Curaleaf Holdings, Inc (CNSX:CURA) CEO Joseph Lusardi is ecstatic about the company’s record-setting, $400 million USD equity raise and recent listing on the CSE. Curaleaf operates in the United States, is a fully vertical medical cannabis operator, and sells 90 percent of what the company cultivates and produces in its dispensaries. The company will be operating in 12 states by the end of 2018 and is licensed to open 69 dispensaries nation-wide. Curaleaf’s largest footprint is in Florida, where it already has a strong delivery presence and 13 dispensaries, with plans to open 22 more stores in the coming months. Lusardi supports the STATES Act because it would open up banking and debt markets to US cannabis companies.

 

Transcript

Fraser Toms:  Hey, welcome to Midas Letter Live. In this segment we have the CEO of Curaleaf Holdings Inc., trading on the CSE under the symbol CURA: That’s Joe Lusardi. Joe, how are you doing today?

Joe Lusardi:  Great, thanks for having me.

Fraser Toms:  Yeah, no problem. I mean, your company right now seems to be the talk of the town, with the biggest ever reverse takeover in CSE history. Why don’t you just give us a general overview as to your company and the assets that you have gong on now?

Joe Lusardi:  Yeah, sure. So Curaleaf is a US vertical cannabis operator, and we are vertical, so 90 percent of what we cultivate and manufacture, we sell in our own dispensaries. Our footprint extends on the East coast from Maine down to Florida; we also have some operations in Arizona, Nevada and Oregon, and we’re trying to create a national band of cannabis. We want to be the most significant retailer of cannabis in the country underneath the Curaleaf brand.

And as you put out, we are really pleased to say we’ve done the largest equity raise in US cannabis history; we’ve taken capital from over 100 institutions across the globe and we’re excited to put that money to work to create a tremendous amount of shareholder value.

Fraser Toms:  Great. So, one thing I was wondering is if you could comment on the share structure a little bit. So, how many shares out, and what’s the float looking like, if you know?

Joe Lusardi:  Sure. So we have 458 million shares outstanding, and Christine, what’s the flow? (inaudible) 589 on a fully diluted basis. And we raised 400 million at a $4 billion pre-money valuation.

Fraser Toms:  Okay, so, in terms of management –

Joe Lusardi:  US.

Fraser Toms:  US, okay. In terms of management ownership on a percentage basis, can you comment on that?

Joe Lusardi:  Yeah, sure! Happy to do that. So our executive chairman, Boris Jordan, owns just about just under 40 percent of the business, and then we have a couple other shareholders that own close to about 80 percent of the business in total. Management has 10 percent of the company, and then there’s about 10 percent that was owned by some early angel investors in the company, which was previously called Palliatech. And so that’s really the cap table, and then we just floated 10 percent on the street at 400 million, so that’s how it all breaks down.

Fraser Toms:  Okay, so that sounds good. I just wanted to get you to comment on your brands for a minute, here. You’ve got some hemp interests as well as Curaleaf, which is the mainstream cannabis brand. Why not just give our viewers an overview of what the branding situation looks like for Curaleaf?

Joe Lusardi:  Yah, so I mean, Curaleaf today is 98 percent medical cannabis, and so we’re very much a, you know THC company, if you will, or THC/CBD grown under state compliant medical marijuana laws. But we have just recently also launched Curaleaf Hemp; that’s our new CBD line, and that product is manufactured using isolate grown in Kentucky and Arizona, and that’s a nationwide CBD product that we’re going to be launching here imminently this week.

But the vast majority of our business today is in the medical marijuana space, under state-regulated programs.

Fraser Toms:  Okay. I also see here UKU Craft Cannabis? Is that – ?

Joe Lusardi:  So UKU is our wholesale brand, and so we just launched that out in Oregon. It’s a bit more of an edgy brand; it will likely be used in a wholesale context and also as we go into adult use markets, and so that’s a little bit of a different brand that we’ll roll out. It’s a craft cannabis brand.

Fraser Toms:  Right, okay. So I can see looking forward that you guys have a lot of planned expansion in terms of dispensaries. So what does that look like in terms of what you’re growing? So maybe give us an idea of how much cannabis you’re growing, and then from a retail perspective, is there partnerships that are existing, you know, for you guys to kind of fill out those stores?

Joe Lusardi:  Yeah, so we’re vertical. We have 600,000 square feet of operations for cultivation and manufacturing currently in operation, so we have a very significant operational capability. Because we operate on the East Coast, and in most states that we operate in, for example, in Florida, New Jersey, New York, the vast majority of what we sell in our stores will be our own products, not somebody else’s. There really aren’t wholesale markets in those states, and so we’re very much vertical, and we carry the Curaleaf products in the Curaleaf dispensaries.

And we have licenses to open up 69 dispensaries throughout the end of 2019 across all of our states, and so we are very rapidly opening up dispensaries across the country. We’ll open up another dispensary here this week in Florida, and we’re trying to open almost one a week between now and the end of the year. So we’re really putting down a very aggressive dispensary network to create access to cannabis.

Fraser Toms:  Okay, so in terms of a state by state basis, where’s your biggest presence? And then also, I’d like to find out if that correlates to sales? So in other words –

Joe Lusardi:  I’m with you. So Florida is our biggest footprint at the moment, so we have 13 stores open in Florida, and we’ll continue to open up stores in Florida till the end of the year. And Florida, as you know, is one of the fastest-growing, or if not the fastest-growing, cannabis market in the United States. So, Florida is adding 3,000 to 5,000 patients a week, some weeks.

And so we’re very excited about that opportunity. Our Florida license allows us to open up 35 stores in that market, and so we’re very aggressively putting down a retail footprint across the state. We do also offer next-day, state-wide delivery in Florida already, so we have a presence throughout the State of the Florida, but we’ll continue to fill in the map with dispensaries through 2019 till we get to 35.

Fraser Toms:  Okay, and then so looking ahead at some of the catalysts – strategically, you know, where do you have your eye on in terms of expansion, and where do you see the biggest opportunity?

Joe Lusardi:  Well, we’ve been very focused on highly populated states, and we like the limited-license, highly regulated framework that exists on the East Coast. We think that it creates a balance between the supply and the demand of cannabis, and creates more favourable economic opportunities. And so we’ll continue to look at limited-license markets. We’ve got a very full M&A pipeline, and you know, we’re keeping an eye on markets like Ohio, Illinois, and very populous states that have, you know, nascent cannabis markets where we think we can go in and execute our business plan and create shareholder value. So, you know, we’ll continue to put down money into accretive acquisitions that allow us to create value for our shareholders.

Fraser Toms:  So understanding that you’re US-focused, what do you think the best case scenario would be politically, and what would that do for your company? So in other words, if, you know, moving into the US elections, if cannabis becomes a focus and it’s something that looks like it could be legalized federally, just give us an idea how that would change your business?

Joe Lusardi:  Well, we supports the STATES Act, the Gardner Warren bill, and you know, we’ve been very vocal in that we need to get a resolution between the conflict between federal and state law. And so we think the States Act is a very logical step in the right direction: it gives the states the ability to create their own marijuana policy, and so that’s what we support, and we think that if it hat happens, that will open up banking in a more meaningful way. It will likely open up the debt markets in the US right now, which really don’t exist in any meaningful way. So we think that’s a good step in the right direction for the industry in the United States.

Fraser Toms:  Okay, and if that were to not happen, moving forward as a business, you know, how much would that get in the way of your progress, or do you think you’d be able to accomplish your goals anyway?

Joe Lusardi:  Well, we’re going to continue to operate under state laws, and so we’ll go into market state by state and go into operations where that’s fully compliant with state laws, and so I don’t think it will impede us from growing on our business plan, but certainly would make it easier for us to do. I think, as I say, the States Act passes, one of the biggest impacts will be to open up the debt markets to these operators, which don’t really exist today. You know, debt is very expensive. So you know, I think if we can get our financing costs down, that will allow us to, you know, grow even faster an create even more shareholder value.

Fraser Toms:  Great. And just last question for you, you guys are entering the public scene with the IPO valuation of 4 billion, if I’m not mistaken? So yeah, for investors out there that are looking at this company, you know, what’s the value proposition for them looking forward so that they can feel confident in an investment in Curaleaf?

Joe Lusardi:  Yeah, you know, I think if you look at the Curaleaf, and we’ll publish some earnings here in about 30 days, but we’re growing this company at a 300 percent clip on the top line year after year, and so this is a high-growth company. We’re extremely focused on creating not only revenue but earnings; you know, we think that that’s an important factor in evaluating a business. So we intend to create a lot of top line growth and drop a lot of money to the bottom line, and we think that will create a lot of shareholder value.

Fraser Toms:  Sounds good. Well, I think we’ll leave it there, Joe. Thanks so much for joining us today.

Joe Lusardi:  Yeah, thanks for having me. Appreciate it.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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