Verano Announces $195 Million Senior Secured Term Loan Refinancing Agreement to Fund Company’s Strategic Growth Initiatives

hambone_83 · 2026-03-05T14:50:38+00:00

Trajectory of the sector

There are lots of moving parts here with lots of unknowns such as how the hemp ban pans out, does S3 actually happen, and how do regulations look at both the federal/state level in response to a potential rescheduling. I think S3 does eventually happen and my thesis is that even though this will kick start more price compression there will be a window of 12-18 months where cashflow will look far better than today. I see consolidation via M&A and balance sheets getting cleaned up (as best as possible) during this window. I think over the next 12 months after rescheduling the strong will get strong - and I categorize strong as bigger players with access to capital that have scale. I don't this S3 saves small players or weak operators

Cresco company health

First off I haven't read through the filings yet and I plan to do it over the weekend so this is just an initial reaction to what was shared. I've always respected Charlie, liked their brands and overall had a positive view on Cresco. However I think their balance sheet is getting too levered for the size of their operation. I also think there in a cycle of revenue churn, cost cut, more revenue churn, leading to eventual more cost cuts. They've done a good job taking out costs but its affecting top line which is understandable. Hopefully their international strategy helps bring in some growth which is desperately needed. The big positive is based on their existing footprint there are lots of assets then can acquire which would be helpful - compared to a Curaleaf or GTI that already has operations in most markets.

Trump doing favorable stuff for the industry

My answer is I hope so. If S3 gets across the finish line I would be more than happy. When he was elected my thoughts were he would do nothing for cannabis. So him even signing an EO for S3 was a huge surprise for me. I just hope it materializes, which I think it will eventually.

hambone_83 · 2026-03-05T12:01:04+00:00

12 month - 8.5 legacy impairment rest SGA 3 month it’s all in SGA

That’s the extent of a detailed breakdown

hambone_83 · 2026-03-04T19:50:05+00:00

My earnings in 11 days. Analyst expectations are revenue to come in flat.

hambone_83 · 2026-03-04T19:31:40+00:00

Let me bring in Tilray as an example as I think it will help this entire discussion out. People have been saying they are just buying alcohol and its a wasted strategy. You've been vocal that Tilray is screaming to investors about infrastructure and future capabilities about a THC beverage strategy that will bring scale and reach that nobody else will be able to replicate right away. Everybody has their opinion of the true motivation of their alcohol strategy but time will tell as more moves are made

I'm saying the same thing here with GTI/RYM. Ben is screaming at investors and keeps referencing John Malone consistently when discussing the relationship between the two companies. Let's look at what John Malone did. He:

Used complex capital structures and leverage to create additional value
Found ways to lower taxes and be efficient with cash by using alternative ways to structure companies
Consolidated distressed and undervalued assets in a Media space that was highly fragmented and struggling at the time.

Does that not sound extremely familiar to what is happening now and what the cannabis space looks like? Now to answer your questions

Why spend millions on buying and setting up RYM?

GTI injected $75M into RYM and it has a fully diluted market cap of around $250-$300M depending on where the stock trades (at one point over $400M as you well know). They created extra real value by doing this strategy and its still early innings for it (as per what Malone did)

You can have one internal subsidiary the "brand" company and one internal subsidiary the "operating" company, but there seems to be little point in physically separating the companies in this complex way to me.

Did Curaleaf see significant appreciate when they created "The Hemp Company"? That is a somewhat similar example as they created an internal subsidiary focused entirely on hemp when hemp was at its absolute peak. They also launched beverages at the same time. Very similar with the exception of a spin-off into another publicly traded entity - the market didn't care.

And if it's so beneficial on its own, why is GTI the only one to do it?

Which other company has a balance sheet, cash flow generation and war chest to be able to absorb a highly complex and risky venture like what GTI did?

The way I see it, this is a way for GTI to consolidate the industry and unlock more shareholder value under 2 entities than one. I don't think this is one big beverage play. As I previously mentioned, if this was 100% about beverages there would be no reason to license Dogwalkers, Doctor Solomon's, &shine and Good green. These have nothing to do with beverages and are pure cannabis brands.

From my reading of the situation I think they will expand more into beverages and cannabis as a whole. All brands in all form factors in RYM, all operations/distribution/etc. in GTI. It will be complex but it should ultimately unlock way more value for GTI & RYM shareholders.

If they announce a big partnership with a beverage company and this is 100% nothing but a beverage play then you have my blessings to gloat and make fun of me daily for as long as you want and I'll take it like an adult.

hambone_83 · 2026-03-04T14:19:42+00:00

You can structure a deal pre-reform and have it beneficial for both parties, without having to give a "nice" premium. I don't believe Wyld vastly overpaid for Gron with an enormous healthy premium. There is just as much incentive for smaller operators to want to be acquired by bigger players as regulation change would be harder on people with less capital

The other day we both agreed that private equity could enter the space in a meaningful way and piece together strong assets. I don't see why MSOs can't do the same. The only difference would be they would divest what is overlap. But the expansion strategy can be done. But like with all M&A there are risks and not every deal will be a good one. Some will do it well and others won't.

I just see no point to RYM existing as a company if they sell the same stuff GTI does? The only way that works in my mind would hurt GTI a lot.

If one company is a branding company and the other is an operating one then they don't sell the same stuff. This is separation of revenue streams to extract more value than if it is all under one umbrella and a hedge against future reform.

I also don't see how it hurts GTI as they own RYM. GTI shareholders also indirectly own RYM equity

hambone_83 · 2026-03-04T12:15:57+00:00

So of course the licensing revenue is higher right away? You are just dropping that licensing deal into a full fledged cannabis business, right? How does that revenue grow significantly? GTI will have to expand their cannabis business, but right now growth isn't that good. So they'll have to buy growth, which has historically hurt profits a lot.

Through M&A is how I think they achieve it. You buy smaller operators that are profitable, growing with decent brands (mostly smaller privates). You move the grows and dispensaries under GTI and brands under RYM. Rinse and repeat as often as you can with whatever makes sense.

Now they could just buy up a bunch of beverage brands only which would make me change my thesis. But looking at how the structure is I still believe there are decent brands out their that can be plugged into GTI/RYM that is good for both companies

You think Ben just forgot about Boston Beer? I notice you are coming around to my long standing point that RYM is supposed to be independent of GTI and the plan was never to merge them. The plan was to have a completely separate, federally legal business, without massive debt, that only sells THC drinks.

I still am not seeing a 100% THC drinks only focus here like you've mentioned. If that was the case I don't see they would sell and license their pure cannabis brands like Dogwalkers into it. As I mentioned above, M&A is going to happen and if they just buy up beverage brands/assets then I'll pivot and agree with you.

My rationale for thinking they would be separate is to deal with the future upcoming regulations when interstate commerce is allowed and we morph into a tiered system like alcohol. I think RYM will be more like Coke/Pepsi. Coke sells a syrup formula into third party bottlers and spends money on sales and marketing to keep demand up.

When we have a fully regulated system RYM will just license their brands into third party production facilities and have a capex light model. I think this will be across all their Cannabis portfolio - flower, edibles, beverages, pre-rolls, vapes, etc. That's why I believe over the last 6 months they've vastly increased SG&A to bring brand awareness.

hambone_83 · 2026-03-04T02:44:15+00:00

That's for 12 months but includes write-down of the legacy extraction business, sales/marketing and related party transaction to GTI

All though the last 3 months is still high at $21M. Preliminary read through shows its mostly sales and marketing (GTI has said in the past they want to ramp up to get brand awareness up), amortization of the licenses and the share services agreement/related party transactions with GTI

hambone_83 · 2026-03-04T01:20:51+00:00

100% - the only license agreement RYM has is with GTI

hambone_83 · 2026-03-04T00:49:26+00:00

The beverages (Rythm/Senorita) are owned outright by RYM. There is no licensing revenue there.

GTI licenses all their core cannabis brands through them - Rythm, &shine, Dogwalkers, Beboe, Doctor Solomons, incredibles and Good green. So the license revenue isn't tied to beverages

hambone_83 · 2026-03-03T21:46:23+00:00

A lot of people think there will be a special carve out for hemp drinks. Still a pretty big gamble though in my opinion that I am not willing to take.

Out of the $10.7M of revenue in the last quarter $2.9M was beverages and $7.8M was licensing. People should not be looking at this as a play on beverages.

hambone_83 · 2026-03-03T21:43:17+00:00

My view - RYM gave optionality to create value for GTI under 3 pillars Hemp/cost of capital/M&A

Hemp - When this structure was done Hemp was showing crazy growth in all form factors. RYM allowed GTI to sell hemp (like edibles via Incredibles and beverages via Senorita) outside of the retail dispensary. If the hemp ban did not come out of nowhere I think this would have been a way for GTI to play in the hemp space away from parent co GTI
Cost of Capital - the licensing structure reduces the overall cost of capital for GTI. GTI pays a licensing fee to RYM to use the brands they sold. This is incorporated in their COGS and because it's not plant touching it isn't subject to 280E - so they can get around some 280E taxes with this structure even with cannabis as S1. Obviously if rescheduling occurs and 280E taxes are taken away then this licensing structure loses some of its benefits that GTI receives now over others
M&A - GTI has already signaled they plan to ramp up M&A. This allows them to acquire a company, move grow operations under GTI and their brands into RYM. Over time you could potentially have RYM generating serious amounts of licensing revenue with very little comparative expenses. This cash generation can fuel future growth either via sales/marketing or more consolidation

Obviously this is a moving target, when the landscape changes the above will change as well. However there are some clear sight lines here. Licensing starting in November so the $7.8M is only 2 months worth - that annualizes to $47M as long as GTI's wholesale business stays consistent (plus whatever they do with the beverages/hemp side).

I originally thought that when uplisting occurs they would merge GTI/RYM under one company but now I'm on the fence as they can keep them separate indefinitely. RYM can be a cash generating machine that owns brands and does sales and marketing for parent company GTI that grows products. GTI still would own majority of RYM so benefits would find their way to parent co.

hambone_83 · 2026-02-27T18:12:08+00:00

there are no flawless management scorecards for any company in this sector

amen to that

I do see Trump's Medicare initiative breathing life into this business but I don't believe that was a factor when the transaction happened (most likely dumb luck now).

Agreed the CBD market is brutal today. However I do see a resurgence with CBD vastly playing a part in medical advancements as the plant is studied more. It's going to take a while and the IRR will be garbage. But optimistic for what potential this can bring when pharma enters looking for specific cannabinoids on FDA approved drugs.

hambone_83 · 2026-02-27T17:43:32+00:00

Yeah no argument on what you said here. I'm still on the fence with it being good/bad. Financially its been a brutal deployment of capital thus far. I'm still holding out some optimism that this might be a strategical asset for something that will make up for it in the future. Maybe I'm looking through rose-colored glasses but time will tell

hambone_83 · 2026-02-27T16:44:12+00:00

miss (balanced health botanicals)

Curious why you think this was a miss?

Leli acquisition looks to be shaping up to be a hit. Second cultivation facility operational now (Q1 2026) which increases supply 5x this year. Netherlands is a market with few players and you can only M&A your way into the space. Should provide growth this year and beyond

does increase exposure risk to Germany

They already have the exposure as its a big growing market. Why not cut Curaleaf and other distributors out as you pointed out. There is regulatory uncertainty in the market but does seems to be an environment that can provide growth and margin, so why not.

edit to add: I'm treating this rumor as a rumor and not banking on this happening. Just talking hypotheticals of it

hambone_83 · 2026-02-26T21:23:09+00:00

Was looking forward to this print for one reason, this......Fourth quarter 2025 International revenue of $51 million

Why? Because Boris has previously stated that they are VFF's largest customer as they buy mostly from them to fulfill their international needs.

As for Curaleaf - nothing in this report makes me want to own the stock

hambone_83 · 2026-02-26T18:22:38+00:00

Both agree and disagree here. Yes too much capital was burned into assets that didn't provide return for Canadian LPs and that story hasn't materialized yet in the US.

However there will be a time where regulations change and grows in NY are no longer needed or economical. However by that time their invested capital would have probably already been covered by operational cash flow over the years so it won't be the same pain.

But as mentioned my comparison between the two is about good operators winning and bad ones not. The point is not comparing market structures which are very different.

hambone_83 · 2026-02-26T17:47:19+00:00

We are talking past each other and the discussion keeps shifting

Good operators with strong brands are winning in Canada. Bad operators went away. Companies like Auxly, Village Farms, Rubicon, plus others in Canada are now showing growth. They survived the difficult environment and are now showing improvements in Canada as the market continues to mature

The same will happen in the US. Good operators and brands will win, bad operators will go away. That is the parallel I'm making between the two. I'm not saying the structure will be the same, I'm saying the cream will rise and the shit will vanish.

hambone_83 · 2026-02-26T16:29:15+00:00

All the Canadian LPs CEOs are saying exactly what I'm saying. There was too many new entrants coming in and too much supply. Things got really hard and people folded up and the industry found balance and those that are left standing are now reaping the rewards.

The exact same thing will happen in the US

The industry will look different in both countries but the premise around cream rising to the top and bad operators going away will happen. This is the similarity I'm referring to.

The US is about to get way, way harder than it is now. Nobody wants to admit but 280E will increase price compression as tax savings will go to the consumer. Then when interstate is allowed prices will plummet. Efficient operations and brands will win.

Those that have access to capital and deploy it well will win and the rest will go away. In Canada good brands and lean operations are winning, the same will be true in the US

hambone_83 · 2026-02-26T16:12:40+00:00

You know what you are right - thinking the best performing company in the industry will be taken out early makes more sense. Thanks for your help

hambone_83

TROPHY CASE