Bruce Linton on His Go-Forward Strategies in the Cannabis Space

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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.

Bruce Linton joins Midas Letter to discuss his strategy going forward within the cannabis space. Mr Linton believes that psychedelics have been poorly governed worldwide not allowing their therapeutic potentially to be fully explored. As psychedelic-assisted medication is looked into more, Mr Linton now owns roughly 10 percent of Mind Medicine. Mr Linton also outlines a number of other subcategories within the cannabis space he is involved with such as animal specific CBD products and multi-state operators. His recent investment in SLANG Worldwide and the company’s vision for its CPG-based cannabis business model is also all discussed.

Transcript

James West: Bruce Linton joins me now, of BruceLinton.com, among others. Bruce, welcome back. 

Bruce Linton: Yeah, well, it doesn’t even seem to be an option, James. I just come; I just show up.

James West: [laughter] That’s right. So you’ve got all these logos all over your body, and I’ve seen a few press releases with those logos incorporated. And so it sounds like you’ve made some moves, post-Canopy. Tell me about your strategy going forward. You’re not going whole hog on any of these things, per se.

Bruce Linton: No.

James West: You’re an advisor and an executive chairman?

Bruce Linton: Yeah. And I do have more of these shirts; like, I can move the badge around, because your viewers are probably thinking, man, Bruce probably smells bad, because he’s had that shirt since, like, Tuesday.

So what I try to do, and you know, you and I chat a lot, so I’m always trying to figure out, why do I have anything to offer James in a conversation? Where do I get my information from; what do I know about? And part of what’s happened is, in the past, I could actually meet with, like, the Minister of Health for something, or the head of the bureaucracy. It could be in Germany, or it could be in England, or it could be in Canada. I could meet with provincial leaders, and I could meet with state leaders.

And as soon as I was off the field, I immediately knew that I had to either come back in within three months, or never come back. Because you’re of no value; your texture disappears. So I wanted to be able to have a conversation about dogs, big animals, mammals, all of them. I wanted to be able to have a conversation about Prohibition around psychedelics. Yeah, because listen: the reason I started in the cannabis space is, my observation was that Prohibition was a terrific barrier behind which there was probably all kinds of potential intellectual property. And if you get going big enough and create value through IP and execution.

So I looked at psychedelics as simply things that have been poorly governed, and I don’t think that the therapeutic potentially has been properly explored. I’m talking about broad spectrum psychedelics, that there are pockets that can do certain things in Australia for trials that you can’t do in, say, Canada or the US.

James West: Sure.

Bruce Linton: And so this one, which is poorly run – it’s Mind Medicine. It’s a private company, but they’ve been really working at it, putting, you know, some really good reseaches together for a couple years, a few years. So I bought, I think now I own about 8 or 10 percent of it, and I’m going to sit as the Chair. And it allows me to actually get into that conversation, which I think will be – it’s not for parties. This is going to be like, suppose someone has self-harming, depressive state thoughts, or someone has a condition which, maybe it’s a little bit where sometimes if people have a certain condition when they have feelings actually become sort of thoughts and facts, and so they use microdosing of LSD.

But the problem with microdosing LSD is that it’s not regulated, they don’t have mechanisms of delivery, and it’s not good. And so there’s other things which are very good for weaning people from opioids, and if you play with the molecules, maybe you can reduce the hallucinogenic fact, and so Mind Medicine has got a trial ready to go to the FDA for that. So I like that one.

And then maybe we should use the shirt as a prop.

James West: [laughter] A white board.

Bruce Linton: So, you know, with the better dog food and dog care area is, they have a whole bunch of direct to consumer pieces that they’ve put together through acquisitions, which means they have a platform for incoming end customers. What they really want to do is, and they have ambition which I aligned with is, great: we’re going to work on dogs. We’re going to think about old dogs, we’re going to think about anxious dogs, we’re going to do a lot of that stuff.

But I also like, once we do that, I want to do it in a way that the trials are designed so that it could actually work with mammals, period, that have four legs. So, like, maybe there’s a way that certain conditions that you might want to think about for swine, and start disrupting spaces that go bigger than just the domesticated dog.

James West: Sure. That’s actually interesting; there was a group that are developing a CBD feed additive for the pork industry, because 15 percent of pigs in the process of being grown from piglets to slaughter die from nervous attacks.

Bruce Linton: And then, not just that – there’s a whole affliction. So when a pig is stressed, it may not eat, and if it does eat, it doesn’t gain mass. So effectively what you’re doing is having it hang around rather than go to the end point at the target time and as fast as possible, with the least amount of food. So I think there’s a big part there.

James West: Right. Nobody likes a skinny pig. [laughter]

Bruce Linton: No, and if you think about dairy cattle, they need to bring in protein so they can actually make more milk. So maybe there’s a CBD hemp place there. So what I want to think about is first the dogs, focus on that, but I want to be able to then say, Have we done this research in a way that it opens up other doors? And then if we move up, Gage just opened their first really flagship store in Michigan. And so when I went down there, like, what I wanted to see, and when I was running around looking at places, I wanted to see that from the way they produce the cannabis, count, control, harvest, trim, products they make, brands they have, that they’re doing the full thing; the best that I think you can do. And when I looked at a bunch of the places around the US, these guys are top notch.

And so as Michigan goes from kind of a medical system to both, as we get to 2020, I think these guys are locked and loaded to do it right. Very good at what they do; very interesting and good capital in there. There’s not a lot of, you know, sort of, Oh, God, why did you sell that guy a stock, it’s actually clean.

I was supposed to have an MSO done, and an MSO ends up being a multi-state operator. 

James West: I thought that was the trading symbol.

Bruce Linton: Yeah, no, so the – it’s just beautiful fashion, James.

James West: [laughter]

Bruce Linton: But what that is, they’re much bigger market caps.

James West: Right.

Bruce Linton: The deals are complicated, because in all these, what I want to have is equity exposure that’s greater than the cash I put in, because I’m going to put a lot of work in. And the MSO one, therefore, maybe needed, potentially shareholder approval and/or listing exchange approval, and so that one got delayed. And so that means that I’m kind of having, you know, to work through that over the weekend, probably. And these two down here – SLANG and DNA – SLANG is, you know, it’s trading under $1.00.

James West: We’ve had Peter Miller in before.

Bruce Linton: Yeah, so Peter and Billy have something good going, but you know, they did some of the things that people do when they first list. They listened to people; you shouldn’t listen to people. Somebody tells you you gotta do guidance…you know what guidance is? This. Hey, watch me: watch what I do! Like, just, you don’t need to do that.

James West: [laughter]

Bruce Linton: So we need to, with SLANG, it’s get back to the focus of the business. Continue to execute, which they’re good at; pull the trigger on the acquisitions as they have them, and let people understand why, you know, an $0.85 stock is going to become a $1.00 stock and why a $1.00 stock, done the right way, becomes a $1.50 stock, and before you know it, they’re not thinking about why should I not sell some of this; they’d be thinking about, I wish I bought more of it. So we’ve got to work on that.

And DNA Genetics, these guys – 

James West: I know Don and Aaron.

Bruce Linton: Don and Aaron are great.

James West: Well, actually, I know Don, I should say. I’ve not met Aaron, though I was sitting across from him, recently.

Bruce Linton: So they’re, you know, these guys I met probably six years ago, and because I don’t know anything, I didn’t know, I organized a breakfast meeting in, I think it was Denver, with these guys, on probably, I think it was a Saturday. Now, if you know Don and Aaron, especially then, you do not organize breakfast meetings at like 7:30 a.m. on a Saturday, because I don’t know if they’ve been to a breakfast meeting before.

And what I’ve seen over time, though, is, these guys have gone from, you know, they love the life, great growers, good party, to, they like that stuff, but they also have learned a ton about business structure, licensing. And if you look back at their history, they were in California, they were doing their stuff, and they realized, if we don’t move to the Netherlands and move our work there, we could have some headaches. So they spent quite a lot of time in Holland doing their genetic work, so they were sort of in the mix with, you know, you couldn’t really say Sensi Greenhouse and exclude DNA from the conversation. And the stuff they’ve made, I know that it sells well, because it does in Canada; and I know that people respect it, because I think they’ve won more Cannabis Cups than anyone else.

James West: Is DNA public already?

Bruce Linton: No, so they’re a private company, and what I think that has to happen for them is, their business model needs to be explained, because it’s a lot of leveraging on a licensing model. They’ve recently done an acquisition, so they picked up, one of their customers became part of them so they can actually have sort of a ‘grow to show’, and you know, I think they’re ready to become – they’ve got a really good management team around, they’re ready to become a public company. So I wanted to invest before they’re there.

James West: All right. Yeah, I met with Charles – actually, Charles was on our show in Los Angeles. He was one of the first guys on our show. Actually, Don has been on our show with Alison Gordon from 48North interviewing him, which is hilarious.

Bruce Linton: Yeah, so that’s an interesting – what else impressed you about?

James West: Charles is very impressive, oh yeah. Charles is, Charles is the businessman in the crowd, obviously, and I’m sure you met Rez, who’s their corporate development, who’s actually the brand ambassador extraordinaire, if you ask me.

Bruce Linton: I would say he is, and Aaron is probably one of those people like, you know, you and I, if we get those flat hats, and we get it to go over our ears, I don’t think I look very good with that; Aaron looks like a million bucks. He’s like, he is the grower, he’s the breeder, he’s in the scene, and he is one of those guys that, you know, he has a lot of ideas that seem kind of out there when he says them. Then two, three years later, they make a lot of sense. Like, I mean, five years ago, it’s like, why isn’t all Gatorade filled with CBD and get rid of that other crap? Because like, it would actually be a lot better for sports recovery than stupid Gatorade.

James West: Absolutely.

Bruce Linton: And that sounds common-sense now; five years ago, when you’re saying Gatorade should be in the business where they should get run over, he was kind of out there.

James West: Right, no doubt. So then overall, you’ve become more of an investor, an advisor, than an operational manager.

Bruce Linton: Yeah, I’m not going to be – I can’t, I can’t be hired to be a CEO. The issue is, I’m – unless I’m fully – it’s my thing, my way, and I got to go and do it, right now what I want to do is be in the conversation with the regulators. I want to be in the strategy discussion, I want to be part of that part. But I don’t want to do anybody’s annual review. Like, you know, I’m terrible at those. Even by the time – so, like, really the reason Canopy worked pretty well was, Zekulin – Mark – he ran down everything in. And I ran out: Board, money, media, a lot of meetings with regulators.

James West: Right.

Bruce Linton: If I go in, I’m going to bring somebody like Zekulin, and he’s still got a job, and then he has a non-compete. Because, like, I think annual reviews, for example: if you work for me, you don’t need an annual review. If you’re still there at the end of the year, I like you, you’re good. You’re doing a great job; keep working. If you’re not doing a good job, I fired you, and you’re not here at the end of the year. I find that’s pretty clear.

James West: Right. That’s a pretty obvious outcome for an annual review.

Bruce Linton: And if I see you and I think, hmmf, I don’t want to give you any more options, that means that we’re not on the same page. So we’ll talk about why I don’t want to give you more options, and what it would take to become more valued that I actually…because options are really a way to, like, say, I want a future with you here.

James West: Okay.

Bruce Linton: And if I don’t feel that, then we should talk about it, because there’s some issue.

James West: Are you concerned at all of over-extending yourself across too many brands to the point where your effect on the, you know, the visual effect, the valuation effect, or the Bruce Linton effect, becomes diminished because you’re perceived to be over-extended? 

Bruce Linton: Yeah, it’s a good question. There’s going to be some people who think that. My worry was more that I get blindsided because I get really narrowly focused, and I only do something that aims at geriatric dogs. I put all my time and money there. Because in Canopy, what worked was having a global perspective across everything from, like, you know, what we were doing with the Beckley Foundation in the UK, which had a long history in psychedelics and things, to what we were doing with animal care, because we had a whole bunch of stuff going on there, to what we were doing with extraction, production, brand development, brand building, brand placement, in 16 countries and 10 places in Canada.

And so what I liked is knowing how Germany was influencing what was becoming the best plan that you could come up with for Spain, Greece, or Portugal. And I need to be able to see on the US what was starting to happen is, we looked a lot, got to know Acreage, got that deal done; I wanted to be able to know that we would, at some point in time, have a platform there, but I wanted to know, what were the conversations with the governors? Who was pushing, what was the real agenda? 

Now I can go to that again. And so I think this combination simply means that I’m not going to be out of the conversation on enough of the breadth to actually be really informed. And so, you know, I think a lot of people think, well, you should just do one thing and do it really deeply. Like, I started Canopy, and I was still running, for five years at the beginning, Martello. So I had two full-time jobs there, and then for the last two and a half, three years, I was in the back trying to make Ruckify, which is a thing that’s just coming along.

And so, like, I guess I’ve never been perfect at just doing one thing, and this is, I feel like it’s a much lesser load by far than I had when I was trying to build and create Canopy.

James West: Cool. All right, where’s the next great frontier in the cannabis space globally that has been under-exploited, in your opinion?

Bruce Linton: So I just slip it upside down and say, Who is your customer? So if you’re doing geriatric care and you’re making the aged environment way less full of pharmaceuticals, less drug-on-drug interaction, and creating an environment, it’s going to become a differentiator for those environments that support that and do that. And the companies that make those products are going to be massively disruptive to anybody who’s a pharmaceutical company who goes after that cohort.

I don’t think we’ve explored – I still think that CBD can become free, because if people grow the right kind of hemp and do the right things, they can actually monetize the other aspects of the plant. And so maybe that’s where, if you had free CBD and you went to that company that you mentioned with the swine product, they could actually offer to put their supplement in for free and take the upside shared yield gain of the 15 percent not being stressed and dying.

And so, like, I think that the model is going to change over and say, like, how am I doing a great job by niche? And so those are two, like, I love animal care, I love this. I think it’s going to be a little longer road, but the therapeutic possibilities of other psychedelics, I think, is totally misunderstood. And as big states – people forget, like, Michigan is a big deal. It’s a big state, they have already a high consumption rate. When states flip over to go from a single kind of medical to really everything, it’s kind of like, here, half of Canada just did this today. You know, it’s a big deal.

So I think being really strong in a single state is going to probably be interesting, because the MSOs are kind of like this, and they might start wanting to buy those really strong in the single state ones.

James West: Right. Do you think the proliferation of outdoor hemp and cannabis in Canada is going to be a game-changer for the economics of concentrates going forward, because of the massive supply of outdoor-grown feedstock that’s coming?

Bruce Linton: I think so, and I think if you’re in that business there will be compression. But I don’t know how much effect it has, really, on back to who’s your customer. So you know, I’ve been a big advocate of beverages. I think that the format will, now that we see how this, you know, headwinds of vaping and stuff, I keep coming back to the fact that something that goes glug-glug-glug and goes through you, is a lot different than inhale. So in a good beverage, if it has 2 or 2.5, 3 milligrams in a single serving, if that becomes, like, $0.03 of input or is $0.10 of input, it almost has zero effect on the actual sale margin of that product.

James West: We had a party with a group of prototype beverages, homemade, of course, and it was funny because I think the dosage was about 2 to 3 milligrams per 12-ounce serving, and by 10:00, the party was almost silent. [laughter] Because everybody had two or three and was, you know sufficiently high that it became a very different kind of party. It’ll be interesting to see how the beverages play out.

Bruce Linton: And which ones you want to make. Like, that quiet experience, those might be good beverages to serve if people are going at an art gallery.

James West: Or a yoga class. [laughter]

Bruce Linton: Yoga…it might not be the best choice if you’re going to a comedy club. Well, did the audience all die? No, they’re just in their own head.

James West: Or you’re going to give a speech.

Bruce Linton: But so I think really when you see compression on price per milligram, I’m not sure it has a material effect, positive or negative, on finished goods. 

James West: Okay, and we’re seeing a continuation of the devaluation of the cannabis sector globally in the publicly traded realm. Do you think that’s a by-product of the vape sort of crisis that is sort of causing cannabis to be perceived as being fundamentally part of that problem?

Bruce Linton: I’d say maybe. I think part of it is, there’s just no other current, like, amazing news. So suppose all of a sudden the US House and Senate start getting a little active on the topic; you could see that sparking things up. You could see, when people start rolling out and trying what the packing is like and the images of the 2.0 products, that will help. There’s at least a few cannabis companies that are doing Phase II and some Phase III trials that I bet they’ll start reading at the end of this year, beginning of next year. And if they can start reading data that says, In fact, this does this in this dosage, delivered this way, those are market moving things.

You know, right now, all we can talk about is, apparently you shouldn’t vape Vitamin E, and apparently, CannTrust can find new ways to get in more challenges. For those people watching, if the stock is still $1.00 and you’re holding it, why?

James West: I can’t imagine why it still goes up. 

Bruce Linton: How – [laughter] Maybe someone will buy the property and grow more illegal cannabis, but, like, why are you buying and holding the stock? I don’t get it. I got a call yesterday from a journalist and they said, you know, what do you think is going to happen with those assets? And I said, hey, I know what should have happened a long time ago; they should have been bought by somebody and the assets could have been used. Now we’re in a domain like, once you have your licenses, like, they’re gone right? I think they’ve just, they said this is no longer a licensed site.

And I say, if the site’s not licensed, you can’t do anything –

James West: Well, licenses are non-transferrable, anyways.

Bruce Linton: Right, but, you think – like, you’re the regulator, and, to a regulator, this is like the scene of a triple homicide, basically.

James West: Yeah. 

Bruce Linton: So, do you think the regulator’s going to say, well, the triple homicide, you know, that wasn’t really traumatic for me; I’m okay with re-licensing the site. Like, it just feels like it would be very hard to get people really comfortable to re-license there right away. 

James West: Yeah.

Bruce Linton: I think. I would be, you know, people are people, and that’s kind of traumatic.

James West: Right. Well, I’m hoping it accumulates a huge discount because of that perception, and buy it for pennies on the dollar and then re-license it, change the name, and drive on. It’ll be forgotten in this atmosphere of, you know, 20-second news cycles eventually. But anyways, Bruce – 

Bruce Linton: Or, you know what could happen is, it could get so cheap, you could buy it and, like, grow the world’s most secure tomatoes, which was back to my Plan B in case I didn’t get a license in Smith’s Falls. And those, you know, who knows? Like – 

James West: High tech tomatoes.

Bruce Linton: You could have, like, you know – I just, I hope someone puts a lid on it. It’s no more.

James West: Well, lycopene, which is a major compound in tomatoes, is shown to have great qualities for antioxidants in skin, preventing you from aging. So there might be a future there.

Bruce Linton: World’s most secure tomatoes.

James West: [laughter] Bruce, let’s leave it there for now. Thanks very much for joining me as usual.

Bruce Linton: Thanks, man.

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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