It’s time to revisit Ascend Wellness after a tumultuous 10 months since it was written up on VIC on June 16, 2022. A lot has happened. The price is now $0.84 and trading like a call option.
Sentiment on the industry has soured tremendously after softer sales across the board in 2022 (after a COVID-boosted bumper year in 2021) and weakening prices in limited license markets as well as in more competitive markets like California. The cannabis industry in California, the largest in the world, has been decimated. As a result, supply has exited, and pricing seems to be stabilizing and trending up.
In addition, investors got jerked around yet again by politicians in Washington as hopes of the SAFE banking act (which would have allowed cannabis banking and allowed institutional investors to own plant-touching cannabis stocks) passing during the lame duck session in December 2022 first got pumped and then subsequently got dashed. Frustrated investors dumped their shares across the entire industry in a bout of tax loss selling and disgust in an end-of-the-year carnage.
To top it off, AAWH’s Founder & CEO Abner Kurtin was charged with battery in Miami while traveling with his female domestic partner. After an investigation by the Miami police, the charges were dropped in September 2022, but the damage was done and Abner was stripped of his CEO title. He still remains Executive Chairman, a significant shareholder in the company, and very involved in the business. The company is currently actively searching for a replacement CEO while the position is currently being held by Co-CEOs Frank Perullo (previously President) and Daniel Neville (previously CFO). Abner is a sharp, rational capital allocator with an investment pedigree from famed Boston hedge fund Baupost. We feel that his continued involvement in the business is a positive for the company.
The sell off has continued throughout 2023 on relatively low volume. The stock is pretty illiquid with limited institutional and ETF ownership. Institutional investors only account for about 4% of the publicly traded MSO stock ownership. This is a tiny fraction compared to other mainstream CPG companies. It won’t take a big change in sentiment to move the stock higher.
Summary Description of the Company
The company operates in attractive limited license states in the NE and Midwestern states that are mostly contiguous. Below are some slides from the most recent company presentation that shows the operating footprint and the potential built-in growth for 2023 and 2024 as they expand their retail footprint.