Latest / Higher Exchanges / Cannabis 3.0: The Battle for the Next Model with Scott Grossman

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Cannabis 3.0: The Battle for the Next Model with Scott Grossman · Higher Exchanges

• 0:28
  SPEAKER_02: What's up, guys?
• 0:30
  SPEAKER_02: We are back.
• 0:30
  SPEAKER_02: Welcome back indeed.
• 0:32
  SPEAKER_02: I am Jesse Redman, Chief Strategy and Investor Relations Officer at Leaf Brands, and I'm so fortunate to be back with the smartest cannabis investor.
• 0:40
  SPEAKER_02: I know he is the very tan Morgan Paxia.
• 0:43
  SPEAKER_02: Morgan, it's been weeks since we've had a public conversation.
• 0:46
  SPEAKER_02: How are you?
• 0:48
  SPEAKER_04: It has been.
• 0:49
  SPEAKER_04: I've been well.
• 0:50
  SPEAKER_04: Uh, but it's good to be back on.
• 0:52
  SPEAKER_04: And um, we got a jam-packed fall coming up too, which is great.
• 0:56
  SPEAKER_04: But uh glad we got Scott on here for this uh these last little bits of summer we're all trying to squeeze out.
• 1:03
  SPEAKER_02: So yeah, we had a quiet August, guys.
• 1:06
  SPEAKER_02: Quiet August in the industry.
• 1:07
  SPEAKER_02: We had a little bit of vacation, scheduling issues.
• 1:10
  SPEAKER_02: So we just hit one show in August, but fear not, we're coming back three strong in September.
• 1:15
  SPEAKER_02: So a bunch more content coming your way.
• 1:17
  SPEAKER_02: Super fired up for today's show.
• 1:19
  SPEAKER_02: I love all of them, but the ones I love the most are just the kickback conversation with friends trying to figure out what's going on in the cannabis industry.
• 1:26
  SPEAKER_02: And no one better the better than that than Scott Grossman.
• 1:31
  SPEAKER_02: Scott, welcome back.
• 1:31
  SPEAKER_02: How are you, man?
• 1:34
  SPEAKER_03: Hey, gentlemen, how are you doing?
• 1:36
  SPEAKER_03: How's everything going?
• 1:37
  SPEAKER_02: I feel like we're doing well.
• 1:39
  SPEAKER_02: How have you been?
• 1:39
  SPEAKER_02: I know you had an interesting uh summer.
• 1:41
  SPEAKER_02: I've been reading your uh Sunday sesh and hearing about Costa Rica surfing, beginner's mindset.
• 1:47
  SPEAKER_02: Sounds like you've uh you've been doing some stuff.
• 1:51
  SPEAKER_03: Yeah, it's been great.
• 1:52
  SPEAKER_03: Uh just got back into town uh after uh a long respite.
• 1:58
  SPEAKER_03: And um yeah, I don't know what can I say it was just in a wonderful summer and just super grateful and ready to get you know kicked back into Q4.
• 2:07
  SPEAKER_02: And Scott, before I forget, um you're a great follow on Axe SR SRG144.
• 2:13
  SPEAKER_02: I think I got that right.
• 2:15
  SPEAKER_02: And tell people quickly, Scott.
• 2:17
  SPEAKER_02: Oh, sorry, SRG444, and uh hit us quick with uh what the Sunday Sesh is and how you can subscribe there because that's something I always enjoy getting in my inbox.
• 2:27
  SPEAKER_03: I appreciate that.
• 2:28
  SPEAKER_03: Yeah, I started Sunday Sash really for myself.
• 2:31
  SPEAKER_03: Uh I've been, as you guys know, an investor and now operator for almost three decades now.
• 2:37
  SPEAKER_03: And Sunday Sesh was just a way for me to take everything in my brain and dump it on paper.
• 2:43
  SPEAKER_03: And I would say 80% of it is uh cannabis through the eyes of a consumer investor.
• 2:50
  SPEAKER_03: And 20% of it is just trying to understand this unbelievable amount of change that we're dealing through.
• 2:58
  SPEAKER_03: Um, and so I would say there's a little bit of everything in there.
• 3:03
  SPEAKER_03: If you're an investor, you'll understand where I'm focused.
• 3:07
  SPEAKER_03: If you're a cannabis investor and operator, I talk a number about uh what's going on in the industry, some of the horses that I um paying close attention to.
• 3:17
  SPEAKER_03: And if you're just an operator or just uh someone trying to get through, uh, I just try and figure out ways to connect with my audience uh on just techniques, practices that have helped me.
• 3:30
  SPEAKER_03: And hopefully I can pass it on to the younger generation.
• 3:33
  SPEAKER_02: Cool.
• 3:34
  SPEAKER_02: Do you find that substack.com/slash Sundaysash, or what's the place best place to track that down?
• 3:41
  SPEAKER_03: You could just search uh Sunday Sash or Scott Grossman.
• 3:44
  SPEAKER_03: Uh it's hopefully it's pretty easy, and I'm happy to put it in the show notes.
• 3:48
  SPEAKER_02: Yeah, we will do that for sure.
• 3:49
  SPEAKER_02: Thank you.
• 3:50
  SPEAKER_02: And so much to discuss, Scott.
• 3:52
  SPEAKER_02: The theme today is cannabis 3.0.
• 3:55
  SPEAKER_02: But before we get some momentum on that, Morgan, I want you to hit me with a FlowHub read.
• 4:00
  SPEAKER_02: And this one to me is very exciting.
• 4:02
  SPEAKER_02: Go for it.
• 4:03
  SPEAKER_02: All right.
• 4:04
  SPEAKER_04: So FlowHub texts to order AI gives customers a conversational way to shop through iMessage and RCS, which is rich communication services.
• 4:13
  SPEAKER_04: Uh, they can ask what's available, get product recommendations, build a cart, and complete their order the same way they already text their friends.
• 4:21
  SPEAKER_04: The experience is powered by AI and grounded in live FlowHub data.
• 4:25
  SPEAKER_04: So every recommendation reflects what you actually have in stock.
• 4:29
  SPEAKER_04: Once the customer is ready, text to order builds the cart and places the order for your team to fulfill.
• 4:35
  SPEAKER_04: Um, this is super cool.
• 4:37
  SPEAKER_04: I have to say, I got to try it before it went live, and it does exactly what I just read.
• 4:42
  SPEAKER_04: It's super cool.
• 4:43
  SPEAKER_04: And it'll even give you like a little, hey, you bought this last time, and you can just say same thing, or you want to try this?
• 4:49
  SPEAKER_04: This would go well with this cart.
• 4:51
  SPEAKER_04: AI is, you know, they're doing a great job with it.
• 4:54
  SPEAKER_04: So I check it out at FlowHub.com.
• 4:56
  SPEAKER_04: I think if you go to the tools page and you can get into it from there.
• 4:59
  SPEAKER_04: Um, very cool.
• 5:01
  SPEAKER_02: Awesome.
• 5:02
  SPEAKER_02: Thank you to FlowHub for continuing to support the show.
• 5:05
  SPEAKER_02: And Scott, last time you joined us in December, you talked about the beginning of Cannabis 3.0.
• 5:11
  SPEAKER_02: You now describe the next phase as being about architecture.
• 5:15
  SPEAKER_02: Can you give me some idea, maybe remind the audience, start with what is cannabis 3.0, and then go into what the architecture of that means.
• 5:24
  SPEAKER_03: Yeah, absolutely.
• 5:25
  SPEAKER_03: Um, so you're right.
• 5:27
  SPEAKER_03: Uh last time I was on was with Hirsch in December, and I think we were reacting in real time to the Schedule 3 news.
• 5:35
  SPEAKER_03: Um, I I think it probably makes sense to go one step before you had me on uh effectively a year ago, where I was going through 2.0.
• 5:44
  SPEAKER_03: And the crux of 2.0, which was pretty variant then, I think it's pretty consensus now, was this theme of bifurcation where the strong get stronger and the potential winners would lean on their balance sheets and operations instead of hoping for future regulation.
• 6:04
  SPEAKER_03: Um, I mentioned in December that I felt then that we were on the crux of this new phase, which is 3.0, and I officially called it on the Sunday Seth uh in April.
• 6:17
  SPEAKER_03: And, you know, it's very important not to lose track of my prior themes, which is kind of like how I do in terms of the rolling narrative.
• 6:26
  SPEAKER_03: And if you remember when we talked in certainly in July and then again in December, I talked about this theme of where cannabis stages will stack, meaning 3.0 is building on 2.0.
• 6:39
  SPEAKER_03: Um, you know, whereas 2.0 is based on bifurcation and 1.0 is based on the state-led green wave.
• 6:47
  SPEAKER_03: I felt very strong and I feel very strongly that 3.0 is going to be all about architecture.
• 6:54
  SPEAKER_03: And I don't want to overcomplicate it, but architecture to me is really how are these teams proactively building their company for the future?
• 7:05
  SPEAKER_03: And it's important to based on what I mentioned about stacking, uh, you're never starting from scratch.
• 7:12
  SPEAKER_03: Meaning, you know, you know, 3.0 is is going to be constrained by by what you did in 2.0, right?
• 7:21
  SPEAKER_03: What is it today your balance sheet?
• 7:23
  SPEAKER_03: What is your corporate strategy?
• 7:24
  SPEAKER_03: What does the team look like?
• 7:26
  SPEAKER_03: Where did you choose to make bets during a time where capital became extremely, extremely scarce?
• 7:33
  SPEAKER_03: And so the analogy that I like to give people is, you know, think about owning a house after a hurricane, right?
• 7:41
  SPEAKER_03: You don't get to start with a blank sheet of paper as much as we like to, right?
• 7:46
  SPEAKER_03: You inherit the foundation, you inherit the frame and the damage and the mistakes and the lessons that are learned.
• 7:53
  SPEAKER_03: And so I think cannabis companies are in the exact same companies, in this exact same position, whereas the potential bifurcated winners that have gotten through this storm are building off of what survived.
• 8:06
  SPEAKER_03: Um, and because of that, I think in 3.0, and we're already starting to see it, is that you're going to see very firm specific strategies and architectures start to emerge.
• 8:18
  SPEAKER_03: Different starting points, different constraints, different strategies, and therefore different architectures.
• 8:27
  SPEAKER_02: And so unpack what architecture means for me in more detail, Scott.
• 8:32
  SPEAKER_02: Maybe give me a couple, a couple of different examples.
• 8:36
  SPEAKER_03: Sure.
• 8:37
  SPEAKER_03: At the heart of architecture comes down to capital allocation.
• 8:42
  SPEAKER_03: Um, I know Jesse and Morgan, you're more on the private side, but one of my biggest pet peeves of being a public investor is listening to a CEO talk about capital allocation.
• 8:55
  SPEAKER_03: You typically hear things about your hurdle rate and a balanced approach.
• 9:00
  SPEAKER_03: And that always made my skin crawl.
• 9:03
  SPEAKER_03: And because I have a very different and variant perspective on capital allocation.
• 9:07
  SPEAKER_03: And I think it comes down to three things, which uh helps support what the architecture is.
• 9:13
  SPEAKER_03: Number one is intellectual capital in terms of capital allocation.
• 9:17
  SPEAKER_03: Intellectual capital is what is the playbook?
• 9:20
  SPEAKER_03: What is the strategy?
• 9:22
  SPEAKER_03: What is the team?
• 9:23
  SPEAKER_03: What are the operations needed to actually pull off a variant uh perspective that that is durable?
• 9:32
  SPEAKER_03: The second part of capital allocation to me is the financial capital.
• 9:36
  SPEAKER_03: It's not only MA and buybacks, but it's also where are you putting your capital to work?
• 9:42
  SPEAKER_03: What investments have you made?
• 9:44
  SPEAKER_03: Is it CapEx?
• 9:45
  SPEAKER_03: Is it advertising?
• 9:46
  SPEAKER_03: Is it buying customers?
• 9:48
  SPEAKER_03: Um, all of these kind of fit into that financial capital allocation.
• 9:53
  SPEAKER_03: And then the most important thing is human capital.
• 9:56
  SPEAKER_03: At the end of the day, you need to attract, train, retain, incentivize a world-class team to actually pull off those prior parts of capital allocation.
• 10:09
  SPEAKER_03: The best companies, and since we're talking about cannabis, the best companies have to seamlessly juggle all three at the same time.
• 10:18
  SPEAKER_03: And what I found over my career is that where companies get into trouble is that they're loose or very poor at one or multiple parts of that critical function of an executive.
• 10:32
  SPEAKER_03: In terms of what we're seeing in cannabis, I think we're probably going to get to examples.
• 10:38
  SPEAKER_03: But since the start of the year, uh, I think we've undoubtedly seen various approaches in order to that give you an inkling of what each architecture is.
• 10:51
  SPEAKER_03: Let me give you a few examples.
• 10:53
  SPEAKER_03: True leave, uh carving off harvest, helene into medical, stressing Georgia and Texas, that allowed them to uplist onto the New York Stock Exchange the first one.
• 11:05
  SPEAKER_03: Um, they clearly were in the room with the administration when they were drafting the new Schedule 3.
• 11:12
  SPEAKER_03: They clearly were in the room when they were drafting uh what hemp 2.0 will look like, in my judgment.
• 11:19
  SPEAKER_03: Um, that's one example.
• 11:21
  SPEAKER_03: Another example is what Boris at Cureleaf is doing, leaning into international.
• 11:26
  SPEAKER_03: 15% of his revenue now is outside of the United States.
• 11:31
  SPEAKER_03: We just saw him go for you know the first hostile takeover in nearly a decade, um, going for Aurora.
• 11:38
  SPEAKER_03: Uh another example of architecture would be Green Thumb.
• 11:42
  SPEAKER_03: Uh, they clearly are leaning into domestic, they're clearly leaning into brands and customer loyalty.
• 11:49
  SPEAKER_03: And we saw them uh go with rhythm now that it's consolidated.
• 11:55
  SPEAKER_03: They have a valuable uh currency and a Texas hedge for what hemp 2.0 looks like.
• 12:02
  SPEAKER_03: And so what's interesting about today versus where we were call it six months ago, and certainly where we were two years ago, it felt very much then that everyone was kind of rushing to fix exactly the same strategy, which was this land grab based on limited licenses.
• 12:21
  SPEAKER_03: And now I think we're starting to see various um strategies start to emerge that when you put next to each other look very, very different.
• 12:31
  SPEAKER_02: Can I add another one to that, Scott?
• 12:32
  SPEAKER_02: You can tell me if I'm tracking your thoughts here.
• 12:36
  SPEAKER_02: I think there's a super interesting, this is a self-serving comment, but it's also just a very honest comment, guys, that there's a whole other category of things going on in California.
• 12:45
  SPEAKER_02: You know, our CEO Micah always says California is a bloody knife fight where you know guys are stabbed out, you know, bleeding on the ground, this guy's, this guy dies, this guy makes it.
• 12:54
  SPEAKER_02: I would argue a couple of years ago, Leaf was stabbed and bleeding on the ground because we were sourcing material from other farms, running mid-20s gross margins.
• 13:02
  SPEAKER_02: Now Scott Architecture built Salisbury Canyon Ranch, one of the largest cultivation sites in America.
• 13:08
  SPEAKER_02: Now we're back to a healthy cannabis company that can push 50% gross margins and spin out cash.
• 13:13
  SPEAKER_02: Leaf is not the only example of that in California of the survivors.
• 13:16
  SPEAKER_02: Later in the conversation, we're going to get the glasshouse, also super powerful brand brands in California.
• 13:21
  SPEAKER_02: I bring this up in the construct of California's been so hard for so long, but there's an architecture there where if you are a survivor and you are the glasshouse, the leaf, the strong California brands, there's an opportunity for cannabis, I don't know what.0, 4.0, 5.0, where all of a sudden everything you've done painfully on this side that caused you almost to die and bleed on the ground becomes super rewarding in that new architecture.
• 13:44
  SPEAKER_02: Is that an additional framework that you would fall into this 3.0 type thinking?
• 13:50
  SPEAKER_03: 100%.
• 13:52
  SPEAKER_03: And apologies for leaving you off.
• 13:54
  SPEAKER_03: But that that is a perfect example.
• 13:56
  SPEAKER_03: You know, we didn't mention Virio.
• 13:58
  SPEAKER_03: You know, we they've now are on their 12th, 12th acquisition in 18 months.
• 14:04
  SPEAKER_03: Uh there are number after number, and I think as we get into 3.0, the company story, and therefore, hopefully the company execution will start to reflect these various strategies that I think is going to be critical as the industry continues to specialize.
• 14:27
  SPEAKER_02: And another another, oh sorry, Barkin, go ahead, Blindy.
• 14:30
  SPEAKER_04: Yeah, well, how like looking at the transition from 2.0 to 3.0, have you like you know give like a grading system of how they did it through that environment and how they are to your point about the bifurcation is is happening.
• 14:47
  SPEAKER_04: Um, but is there like do you have you done like a scoring system?
• 14:50
  SPEAKER_04: Because I think about it from one of your points about capital location and human capital.
• 14:57
  SPEAKER_04: And are you suggesting that some of these companies might need leadership changes because this it's largely the same people that are doing the same thing?
• 15:05
  SPEAKER_04: Right?
• 15:05
  SPEAKER_04: Same roles, obviously, some roles have changed a little bit, but still largely the same leadership in most of these public companies that you know we talked about.
• 15:16
  SPEAKER_03: Yeah, I mean, I think it's some art, some science in terms of grading.
• 15:20
  SPEAKER_03: I think I've been very transparent on which companies I feel uh have done the best job either getting through the storm or now being the position, like Jesse just mentioned, to actually capitalize on some of this regulatory change.
• 15:37
  SPEAKER_03: Um, you know, if I could take a little bit of a sidestep, which I think will make sense and hopefully answer your question, you know, emerging markets, especially like cannabis, and it could be AI, it could be digitalization of content back 15 years ago, uh, it could be fracking in 2015.
• 15:56
  SPEAKER_03: Um, all these emerging industries uh come down to trying to solve for uncertainty, right?
• 16:04
  SPEAKER_03: There are a number of outcomes and a number of probabilities that could occur inside of cannabis.
• 16:12
  SPEAKER_03: And the hardest part, and I think where investors get tripped up is I think schedule three is gonna pass, or I think the hemp band is gonna uh is gonna go away or or or stay here.
• 16:24
  SPEAKER_03: And and in my judgment, um, I don't necessarily think that it makes a ton of sense to try and peg exactly when change is gonna happen, but rather be in a company that's led by great leadership, that has the staying power and the duration.
• 16:44
  SPEAKER_03: We talked about duration a lot over the years, us three together, um, that has a chance to actually come out the other side.
• 16:51
  SPEAKER_03: And so it's very hard for me to tell you what a glass house or what a leaf brands or what a rhythm is going to look like six or two years down the road.
• 17:01
  SPEAKER_03: But at least you know that they're trying to put the uncertainty to the side piece by piece.
• 17:09
  SPEAKER_03: And as an investor and an operator, I think that's critically important in in this phase of cannabis.
• 17:16
  SPEAKER_03: I don't know if that answers your question directly, but um that's kind of how I think about it.
• 17:21
  SPEAKER_04: Yeah, no, it does.
• 17:22
  SPEAKER_04: And you know, I I think you know it's interesting because when you talk about like the horses, um, tied into exactly what you're talking about, is just the the value of the jockeys, right?
• 17:32
  SPEAKER_04: And the jockeys are not just leadership, it's also the boards of these companies and you know the jobs that they have to really help make sure that these things are you know being done.
• 17:42
  SPEAKER_04: And um, so I was just that yeah, I was just generally curious because I I and I think there still is, and I'm sure when you're saying like the it's not like these are set phases, right?
• 17:52
  SPEAKER_04: Because like 2.0, we are still very much in 2.0, but we are emerging with 3.0 is another layer of 2.0, right?
• 18:00
  SPEAKER_04: Where it's like it's not one stage and then the next.
• 18:02
  SPEAKER_04: It's like they build on each other.
• 18:06
  SPEAKER_03: Absolutely.
• 18:06
  SPEAKER_03: Capital stage is stacked.
• 18:08
  SPEAKER_03: Um, you know, in terms of the team, listen, I I I think I think the ones that we would classify as the quote bifurcated winners, to your point, uh, I forget if it was Morgan or Jesse who pointed out, the teams are largely untouched.
• 18:23
  SPEAKER_03: Now, I think going deeper, in my judgment, there's been a ton of turnover.
• 18:30
  SPEAKER_03: And um I would just make a comment that if you're if you got into cannabis, you know, what Morgan, I'm looking at you, Jesse, you too.
• 18:39
  SPEAKER_03: You've been you guys have been around almost you know a decade plus.
• 18:43
  SPEAKER_03: Morgan, more, right?
• 18:44
  SPEAKER_03: I think you launched the fund in 2014, if I, if I'm if I'm not, if I'm not mistaken.
• 18:50
  SPEAKER_03: All I would say is like, I think we we are now at the point where the the money grab has has been put aside.
• 18:58
  SPEAKER_03: And so the ones who are left in the industry have a deep expertise combined with a deep passion to seeing this industry survive and prosper.
• 19:07
  SPEAKER_03: And what I can take from that, uh again, based on my experience, is if if you don't have the talent or if you don't have the passion, I think you're gonna get run over because it's not rewarding enough.
• 19:22
  SPEAKER_03: And there's someone who's gonna work harder because he or she just absolutely loves it and absolutely has the skills to and so to go back to your question about the the team, I think that what you're seeing is you're not seeing a ton of uh turnover at the top, but at the mid and and the lower tiers, you're seeing a ton of turnover.
• 19:43
  SPEAKER_03: Um, and and part of our job as investors is trying to understand why that is.
• 19:48
  SPEAKER_03: Um, and that's where I spend a ton of time on personally.
• 19:52
  SPEAKER_02: Do you know the name DE Shaw, Scott?
• 19:57
  SPEAKER_03: Absolutely.
• 19:58
  SPEAKER_03: Absolutely.
• 19:58
  SPEAKER_03: When I was at Magnetar, they were there, of course.
• 20:03
  SPEAKER_02: Yeah, yeah, yeah.
• 20:04
  SPEAKER_02: Magnetar, I love those guys too.
• 20:06
  SPEAKER_02: So DE Shaw, for people who don't know, one of the top quant firms in the world.
• 20:10
  SPEAKER_02: Uh interestingly, right?
• 20:12
  SPEAKER_02: Jeff Bezos came out of there, which is kind of a fascinating, uh fascinating story.
• 20:16
  SPEAKER_02: He left DE Shaw to start Amazon in the 90s.
• 20:19
  SPEAKER_02: Back in my hedge fund days, we had money with DE Shaw.
• 20:21
  SPEAKER_02: So I'd meet with them on a regular basis, and they weren't very open about their models.
• 20:25
  SPEAKER_02: So it's kind of like cannabis, especially GTI, where they didn't share a heck of a lot about what they did, but they kind of like GTI, they put up the numbers to justify it, so they didn't have to share all their secrets.
• 20:34
  SPEAKER_02: So I was sitting there meeting with the team, and I said, Well, how am I supposed to understand what you guys are up to if I can't analyze some of the quantitative characteristics of the models?
• 20:42
  SPEAKER_02: And they looked at me and said, Jesse, I could hand you open source on the models, but at the end of the day, trust me, this is a people bet.
• 20:48
  SPEAKER_02: Even though these are quantitative strategies, they're gonna get updated, they're gonna change, they're gonna evolve.
• 20:53
  SPEAKER_02: You want to focus on the people that built them and the team around them rather than what's in each Excel spreadsheet.
• 20:59
  SPEAKER_02: And I kind of thought that, but then I'm like, man, now I really think that.
• 21:03
  SPEAKER_02: And I've carried that with me in life, that ultimately life is a people bet on things.
• 21:07
  SPEAKER_02: Like, think about your marriage, right?
• 21:08
  SPEAKER_02: Think about your friendships, think about who you choose to do the podcast with.
• 21:11
  SPEAKER_02: You know, there's all sorts of decisions that we make.
• 21:13
  SPEAKER_02: And guys, it's a freaking people bet.
• 21:15
  SPEAKER_02: And cannabis, to a large extent, is a people bet.
• 21:17
  SPEAKER_02: Like, nobody, I don't think, has the architecture today where someone can't ruin it.
• 21:22
  SPEAKER_02: And what I mean by that is somebody could have a great footprint today, plenty of opportunities to mess that up.
• 21:27
  SPEAKER_02: We've seen that over the last five years.
• 21:28
  SPEAKER_02: Look at, and I want to be mean.
• 21:30
  SPEAKER_02: Yeah, I mean, cannabis sure had an interesting business at one point, right?
• 21:34
  SPEAKER_02: Um, and there's others out there as well.
• 21:36
  SPEAKER_02: And so I just want to emphasize, and Morgan Scott, I want to move on to the next action because I could talk for two hours here, but I do want to like sometimes on this podcast, like try to say something that's like fundamentally something I believe in my core that can help people.
• 21:48
  SPEAKER_02: And I think at the end of this day, this business is a people bet.
• 21:52
  SPEAKER_02: If you look at Leaf's assets, do you find the rant interesting, interstate export, any of that stuff interesting?
• 21:57
  SPEAKER_02: I encourage you to get to know Micah really well.
• 22:00
  SPEAKER_02: Because Mike is the visionary that came up with that.
• 22:01
  SPEAKER_02: He's the guy guiding it forward.
• 22:03
  SPEAKER_02: Same thing, Jason Terrace and Boris Keerleaf, you know, Kyle and Graham at Glasshouse, go down the list, but I'll just take a bit of feedback and move on.
• 22:09
  SPEAKER_02: But guys, it's a people bet.
• 22:14
  SPEAKER_03: Yeah, Morgan, I'll take a stab at this.
• 22:16
  SPEAKER_03: I'll just full humility, every single bad investment that I've made has come down to execution of people.
• 22:26
  SPEAKER_03: Um obviously, you know, I think of like, you know, luck is the residue of design.
• 22:31
  SPEAKER_03: Um, but at the end of the day, you want to back founder, in my judgment, founder-led companies that are incentivized and aligned and are have a very high ability to adapt.
• 22:43
  SPEAKER_03: It's not so much intelligence, it's not so much how you interact with people, it's your ability to kind of react to what's going on on the field.
• 22:53
  SPEAKER_03: And um, you know, from my judgment, I think that's everything.
• 22:57
  unknown: Yeah.
• 22:57
  SPEAKER_04: I I I mean, I agree it's people are paramount.
• 23:01
  SPEAKER_04: I mean, to your point, uh every loss we've had has been around people and just whether they were just not right for the job or had misaligned intentions that were discovered after the fact.
• 23:13
  SPEAKER_04: Unfortunately, that's pretty common in this industry.
• 23:16
  SPEAKER_04: Um, you know, and and the idea around founder led is that's great if but there are very few founders that are that fit that knit.
• 23:25
  SPEAKER_04: And those are those are great, and those are special.
• 23:27
  SPEAKER_04: Um, you certainly can bring in professionally managed teams that can do very well because a lot of this stuff is blocking and tackling, strong operations, strong financial controls, and you know, but not losing maybe that original kind of energy, that branch, that approach, and fostering that, but you know, being a better shepherd.
• 23:49
  SPEAKER_04: Um, so because we've certainly had to do that quite a bit in this space is bring in professionally managed teams.
• 23:54
  SPEAKER_04: And Scott, to your point is like especially in that mid layer, there can be those folks can be just absolute critical to the to the company's success.
• 24:07
  SPEAKER_04: Um, and it's they don't get the notoriety, they don't get to come on podcasts.
• 24:12
  SPEAKER_04: They're the people on the field every day moving the ball down the field, you know, and and it's just um, you know, and those people are very hard to find.
• 24:21
  SPEAKER_04: You know, it's I still think we are in a major deficit in our industry for people.
• 24:26
  SPEAKER_04: Um, it's it's you know, and I don't know what's going to change when that's going to change.
• 24:30
  SPEAKER_04: Um, obviously capital flows, higher stock prices, more MA, more liquidity, you know, that'll bring more um talent to the space.
• 24:38
  SPEAKER_04: But you know, that's something that, you know, to your point on the 2.0, 3.0 is like, you know, when do we start to get more professionalization?
• 24:45
  SPEAKER_04: Um, and just as a sidebar, like I was doing some a bunch of research on one of these legacy states, and it's like it's the same people, you know, they're just kind of flopping between organizations, and so it's just kind of status quo.
• 24:59
  SPEAKER_04: And it's like that you kind of need like a wholesale reset of talent to really change how some of these markets, uh, these legacy state markets function and for the better, because otherwise it's just the same folks.
• 25:14
  SPEAKER_04: So um, but anyway, but but this actually is a great segue because uh you know, we are starting to see some differentiation as we're talking about, and and I think it's really interesting because I still do track all these public companies, and but they're starting to look so different.
• 25:28
  SPEAKER_04: So it's like how you know, we have an ETF that has most of these companies in it, but um but to call them one, it's not really like you know, just coming straight out, like MSOS, like to your point, like Cure Leaf is not a multi-state operator anymore.
• 25:43
  SPEAKER_04: They're a multi-state, they're an international company, yet they're one of the largest positions in it.
• 25:47
  SPEAKER_04: Um, and then you got the differentiation with truly what they're doing, focusing on their medical business.
• 25:53
  SPEAKER_04: You've got uh GTI, you know, as you were mentioning, just there's a lot of differentiation happening, which is really interesting, but it also makes it really hard from uh when you're trying to look at it from like a an analyst perspective, like these it's not apples to apples at all.
• 26:08
  SPEAKER_04: Growth rates look different, margins look different.
• 26:11
  SPEAKER_04: But sorry, go ahead, go jump in on this, Scott.
• 26:14
  SPEAKER_03: No, no, I think I think I think you're hitting on a a really critical point that hopefully gets that's across.
• 26:21
  SPEAKER_03: Um, you know, last time or numerous times I was on, we were talking about the MSOS and how uh you know there was only the size of a thimble for investors to come in and out.
• 26:34
  SPEAKER_03: And we also just mentioned about this differing approaches to architecture.
• 26:40
  SPEAKER_03: And what's most interesting to me is I made a call in the beginning of the year that I thought 2026 would be uh a very um uh not I bifurcated is the wrong word, um, disperse.
• 26:54
  SPEAKER_03: I think we're I thought we were gonna have a ton of dispersion.
• 26:58
  SPEAKER_03: And so just looking at the MSOS, it's basically flat over the last 52 weeks and year to date.
• 27:05
  SPEAKER_03: But look at the dispersion.
• 27:06
  SPEAKER_03: You know, True Leave is up 32% year to date, up 30% in the last year, Cure Leave is up 25% year to date, and it's flat over the last year, um, Glasshouse up 12%, but then there are folks like Cresco down 40%, down 48% in the last year.
• 27:24
  SPEAKER_03: Um uh Ascend is down 40%.
• 27:28
  SPEAKER_03: Um so if you if you would have told me two years ago that the MSOS was flat, I I think we would probably all say uh, you know, plus or minus the GTIs to Trule's to Cure Leafs, would probably be in a band, but we're starting to see major dispersion.
• 27:46
  SPEAKER_03: Um the second point I would make is the ETF largely hasn't really changed.
• 27:51
  SPEAKER_03: The composition of the ETF really hasn't changed.
• 27:55
  SPEAKER_03: But yet we've seen up listing from TrueLeaf, we've seen up listing from glass, we've seen reverse splits from CureLif, we've seen a reverse split from Vireo, we saw a consolidation of rhythm uh uh inside GTI.
• 28:09
  SPEAKER_03: Um, and so that begs the question.
• 28:12
  SPEAKER_03: I don't have the answer, but it certainly makes me uh uh ask quite like who is buying these names?
• 28:19
  SPEAKER_03: I think what we can say with reasonable conviction is that the days of entering and exiting through the MSOS are largely over.
• 28:28
  SPEAKER_03: And I think that's a really great thing.
• 28:30
  SPEAKER_03: I don't wish any ill will on the MSOS.
• 28:32
  SPEAKER_03: I think there's a a purpose to that product.
• 28:35
  SPEAKER_03: I think it's a way for investors to get exposure to the best run companies in the world.
• 28:41
  SPEAKER_03: However, if you are a uh a real money manager and you have a differentiated opinion, the market is starting to reward that dispersion in architecture and reflect it in stock prices.
• 28:57
  SPEAKER_03: And I think that's exactly what you want to see certainly in 2026.
• 29:04
  SPEAKER_04: Yeah, and I and I do wonder some of the because there's so much assets in that product, is it a hedge hedging tool mostly for some of these shops that are taking underlings and they are using that as more of a tool versus an investment product?
• 29:18
  SPEAKER_04: And how does that you know interact with the the underlings?
• 29:22
  SPEAKER_04: And you know, we'll have to see when like GTI, I don't know what their process is for a listing.
• 29:28
  SPEAKER_04: Um, we know Ascend is working on a similar strategy of to what um true leave did, and we'll have to see like well how these things, to your point, is like I and these are just you know mostly on the stock side because like outside of glasshouse, I think glasshouse is the only one with an ATM active, right?
• 29:43
  SPEAKER_04: So, you know, to your point from back to kind of bringing this into capital allocation and thinking about how these companies are going about these differing strategies.
• 29:52
  SPEAKER_04: Um, one thing I've been waiting to see is how some of these companies are going to start resolving some of the 2.0 stuff, which is their balance sheet.
• 30:01
  SPEAKER_04: Um, you know, most are not great shape, right?
• 30:04
  SPEAKER_04: To your point, I think it's a great analogy of saying that's like going through a hurricane and you know they still have water damage, they've, you know, the roof is still falling off.
• 30:13
  SPEAKER_04: Like there's real capital to come in to shore up the, you know, maybe the foundation might still be okay, but there's a there's a lot of money that needs to come in to really repair these balance sheets and um set them up for you know more success in this 3.0.
• 30:29
  SPEAKER_04: Um but you know, how do you think these companies or or am I you know, am I being too too much of a bear after being in this industry for so long to be critical on these these balance sheets?
• 30:43
  SPEAKER_03: No, I I mean I think inside cannabis, I think that's the right question.
• 30:49
  SPEAKER_03: I think if you kind of take a step back and look at probably the you know consumer or healthcare or alcohol.
• 30:57
  SPEAKER_03: I mean, these they're levered, right?
• 31:00
  SPEAKER_03: And the UTP is a whole conversation which we've kicked around in the past.
• 31:04
  SPEAKER_03: Uh we clearly have to do that.
• 31:06
  SPEAKER_02: And we should kick around again because yeah, to ignore the UT UTP thing is insane.
• 31:10
  SPEAKER_02: You've got two billion dollars of UTPs across the top five companies.
• 31:13
  SPEAKER_02: Uh, was it truly 598 or 698?
• 31:16
  SPEAKER_02: And Scott, I very much apologize for interrupting you, but I think like the UTP thing is absolutely has to be addressed because what's the resolution?
• 31:24
  SPEAKER_02: Like there's all this industry buzz about going back to 2023.
• 31:28
  SPEAKER_02: And if that happens, that's a completely different picture than if we don't even get adult use in 2026 or into 27 and we carry 23, 24, 25, and 26.
• 31:38
  SPEAKER_02: You know, no, you know, they you actually have to pay that money back.
• 31:41
  SPEAKER_02: And to what degree do you have to pay that money back?
• 31:44
  SPEAKER_02: And so like I think that, yeah, you've got to add that to the debt, first of all.
• 31:48
  SPEAKER_02: And I think you've got to assume the worst case.
• 31:52
  SPEAKER_02: I mean, you can't assume the best case, because if you assume the best case, the worst case happens, your whole model, you might as well go throw, throw the thing in the trash.
• 31:58
  SPEAKER_02: So I think like as that part of the conversation, Morgan, about balance sheets, yes, but balance sheets and especially this notion of UTP, or the balance sheet, if it's 12% debt that's due in 2030, you can model what that looks like.
• 32:10
  SPEAKER_02: On the UP UTP, you can have four or five, six hundred million dollars that you don't know that number is going to go in half, go down 90%, or stay the exact same.
• 32:19
  SPEAKER_02: And you don't even and you start modeling out interest rates and cash flows on that.
• 32:23
  SPEAKER_02: Some of these businesses are completely drowned if that happens.
• 32:25
  SPEAKER_02: And if you get the relief, some of them are completely on fire.
• 32:28
  SPEAKER_02: And so I just want to build that into the conversation because I think that like we always talk about clarity on schedule three.
• 32:33
  SPEAKER_02: Fantastic.
• 32:34
  SPEAKER_02: Give me clarity on the the UTPs that'd be even you know more interested.
• 32:39
  SPEAKER_03: Yeah.
• 32:40
  SPEAKER_03: So as a public investor, I I think the most important part of what we learned, you know, really since December.
• 32:48
  SPEAKER_03: Again, assuming it gets through and there's no stay and and and we don't go off the rails, is it the UTP balance should not be growing.
• 32:57
  SPEAKER_03: Um, and obviously being a public investor, I think the incremental or the second derivative is always more important than actually what's happening.
• 33:04
  SPEAKER_03: And so I think that's what people are reacting to.
• 33:07
  SPEAKER_03: I also want to mention, again, we talked about this in July.
• 33:11
  SPEAKER_03: Uh, you know, remember, TrueLeave uh when they refinanced their debt, they they effectively cut their debt in half, right?
• 33:18
  SPEAKER_03: They could have, my guess is they probably could have refinanced the entire um, you know, note that was coming due, but they chose to actually downsize.
• 33:27
  SPEAKER_03: Um, and so if I look at the top three names, GTI, uh, I think it's a question of how much they're gonna get back.
• 33:33
  SPEAKER_03: And I don't think they have a UTP major issue.
• 33:37
  SPEAKER_03: Uh, I think CureLeaf clearly potentially has an issue, but I think ACE, you know, the Aurora deal deal is in some way, shape, or form uh addressing that because it's it's a deleveraging type of transaction.
• 33:52
  SPEAKER_03: And with TrueLeave, I mean, they have an unbelievably catch-rich balance sheet.
• 33:57
  SPEAKER_03: Um, and yeah, the UTP should scare you if you're a true leave investor.
• 34:01
  SPEAKER_03: Um, but I don't, I think the point is that it's probably not growing.
• 34:06
  SPEAKER_03: And so while we should no doubt put that as debt, um, I don't think it's gonna be more onerous than you know, than the worst case scenario.
• 34:17
  SPEAKER_03: I think it's a tail event.
• 34:18
  SPEAKER_03: Again, we're trying to solve uncertainty, not really price risk.
• 34:24
  SPEAKER_03: Uh, and if you want to go into what I mean by that in detail, I'm happy to do that.
• 34:28
  SPEAKER_03: But we we just don't know.
• 34:30
  SPEAKER_03: And so I think it has to be in the realm of possibility.
• 34:34
  SPEAKER_03: Um, but part of the reason why these names are here and trading at the multiples that they are, is because that scenario is clearly a possibility.
• 34:43
  SPEAKER_03: Um, and so as we continue to resolve some of this uh and get more certainty, um, I think that will start to be reflected in the equity values of these companies, which in my judgment are still very cheap.
• 34:56
  SPEAKER_04: What happens with when companies that are doing this, like Julie's done it, Glasshouse has done it, Ascend is working on it, where they siphon off or partition off.
• 35:06
  SPEAKER_04: Well, in Glasshouse, they just they kind of restructure it with with Virio, but but for these others where they kind of contain via it's via equity method, right?
• 35:17
  SPEAKER_04: The adult use business.
• 35:19
  SPEAKER_04: But what happens to the balance sheet when they do that?
• 35:22
  SPEAKER_04: Um, and is and the UTP associated?
• 35:25
  SPEAKER_04: Do you know?
• 35:25
  SPEAKER_04: Because like I saw some of these UTP balances went down and went down meaningfully, and I was like, if it just doesn't go away, where did it go?
• 35:34
  SPEAKER_04: And so do you know how that's being addressed?
• 35:38
  SPEAKER_03: I think every company is is taking a different approach.
• 35:41
  SPEAKER_03: I think the cleanest example is probably TrueLeave when they they carved off you know the harvest and and the wreck assets.
• 35:49
  SPEAKER_03: Um the short answer is I don't know.
• 35:51
  SPEAKER_03: I think the punchline is I think the the carving off uh was was was done to solve a different problem.
• 36:00
  SPEAKER_03: Yeah, I think last time we talked about solutions-oriented equity, right?
• 36:04
  SPEAKER_03: They truly going back to that example, you know, they carved off harvest for what$15 million.
• 36:10
  SPEAKER_03: So when I talk about solutions-oriented capital, that's exactly what I mean, right?
• 36:14
  SPEAKER_03: So she was able to carve off an asset for$15 million and created hundreds of millions of dollars, hundreds of billions of dollars of uh of uh of equity value by by virtue of uplifting.
• 36:29
  SPEAKER_03: Um and so I don't necessarily think the UTP UTP uh is solved.
• 36:36
  SPEAKER_03: I also don't think that that the these carving off of the of the rec assets is is probably permanent.
• 36:43
  SPEAKER_03: But I think if you're trying to adapt to what's uh you know what the game is today, um that's kind of how I think about it.
• 36:50
  SPEAKER_03: I think it's a it's a path, not the destination.
• 36:54
  SPEAKER_04: Yeah.
• 36:55
  SPEAKER_04: So one last for me, and and I and I really want to get into this curly Aurora thing, but you know, just to kind of wrap up this section, I think is really interesting is you know, it seems like companies are starting to try to differentiate with they're trying to different their straight differentiate their strategy.
• 37:14
  SPEAKER_04: How do you look at it from who's actually differentiating it versus who's talking about differentiating?
• 37:21
  SPEAKER_03: Yeah, I think follow the capital.
• 37:23
  SPEAKER_03: That's really it.
• 37:24
  SPEAKER_03: You know, tell me what you believe, that's fine.
• 37:27
  SPEAKER_03: I think companies are are doing a better job telling the story.
• 37:31
  SPEAKER_03: Jesse, I think you've done a marvelous job on Leaf, going to the farm, showing people the assets, being very crystal clear on what the near strategy is or is not, raising capital, not to pick on you, but um I think it's it's it's worth mentioning.
• 37:46
  SPEAKER_03: I think Glasshouse is doing a really good job of trying to paint a picture of not necessarily interstate, but potentially inner country.
• 37:54
  SPEAKER_03: That was their first sale outside of California, which I think is really important.
• 37:58
  SPEAKER_03: I'm sure we'll get to it at the end.
• 37:59
  SPEAKER_03: But at the end of the day, Morgan, it's it's it's it's show me where you've spent the money, you know, what you're actually doing.
• 38:06
  SPEAKER_03: And so going back to capital allocation, at the end of the day, it's got to come through in the numbers.
• 38:11
  SPEAKER_03: So if you say, hey, it's a creative or there are$40 million of synergies, well, you got to show me it.
• 38:17
  SPEAKER_03: Um that that's that's that's kind of like a little bit of a cop-out answer, but that's the only thing that you as a public investor can rely upon, which is okay, the story's great, give me a milestone.
• 38:33
  SPEAKER_03: I'm gonna have to keep you accountable.
• 38:35
  SPEAKER_03: If the goal posts keep moving, then something's gone adrift, right?
• 38:40
  SPEAKER_03: Not saying that problems or new problems won't arise, but you got to have an explanation as to why.
• 38:45
  SPEAKER_03: Um, and that's the only way to keep your management teams accountable.
• 38:49
  SPEAKER_04: Yeah.
• 38:50
  unknown: Yeah.
• 38:50
  SPEAKER_04: And second that with what Jesse's been doing, it's it's a very differentiated strategy, and they've done a great job of making it known.
• 38:57
  SPEAKER_04: Um, where I think a lot of these other teams are, I don't know if they're just tired or what, but you just you know, you don't hear a peep from most about what's actually going on out there.
• 39:06
  SPEAKER_04: Um and you know, whether whether they have not actually figured out what their actual path is with what they have, or I don't know.
• 39:16
  SPEAKER_04: But um, but yeah, so I would agree with that.
• 39:19
  SPEAKER_02: So yeah, I think it goes to there's two parts to it, Scott, that you kind of hit on, which you have you have to show people the story and you know, credit to Graham of the early days of glasshouse, like he was out there kind of like me, you know, in the farm, showing people stuff, showing the expansion, but then you have to deliver on it, right?
• 39:35
  SPEAKER_02: You've got to light up that new greenhouse, you've got to get that new field planted, harvested, and make the concentrates.
• 39:40
  SPEAKER_02: And so, yeah, I think you have to tell the story, but then you've also got to very much like validate, okay, what that guy said actually happened.
• 39:46
  SPEAKER_02: And so I think there's like two pieces to be very much uh on the R IR IR side of it.
• 39:51
  SPEAKER_02: Um, but yeah, man, jumping into Cure Leaf, fascinating stuff here and fits in really well with the uh architecture conversation because as I spend more time at Leaf, you know, we're working on an export strategy, we're kicking off um our GMP certification process for our lab uh next week, which is exciting, something I've been spending a lot of time learning about the different GMP certifications, implications of going to different countries, target market analysis, um kind of find trying to understand, you know, what does the rest of the world look like?
• 40:23
  SPEAKER_02: Um, you know, I didn't think that 24 different adult use dates were confusing enough, so I thought I'd look at a dozen different countries and really get my head spinning.
• 40:31
  SPEAKER_02: And it does get your head spinning because the value of this international supply chain, I think it's getting increasingly important as these markets open.
• 40:42
  SPEAKER_02: And there's different keys out there that open up different doors.
• 40:46
  SPEAKER_02: And that's through these facilities, GMP certifications.
• 40:50
  SPEAKER_02: And then depending on what you're which what business you're in, if you're in flour concentrates, you know, your vape brand, your edibles brand, your you know, a pre-roll brand, whatever, certain markets may be like, hell yeah, like Germany loves flour.
• 41:04
  SPEAKER_02: But, you know, for example, edibles, you know, you know, your chocolate edibles are not a thing in Germany.
• 41:10
  SPEAKER_02: And so a bit of a long-winded intro, but I say it all in the notion of like this concept of architecture is getting more important.
• 41:16
  SPEAKER_02: And I think that's super relevant, Scott, to why Kira Leaf is so interested in what's going on at Aurora.
• 41:24
  SPEAKER_03: Yeah, I think it's uh it's a one of the most interesting events in our space.
• 41:30
  SPEAKER_03: And again, I I I said it earlier, it's the first hostile situation uh in in almost a decade.
• 41:38
  SPEAKER_03: Um, you know, with with with Aurora, um I but I'm I'll I'll I'll do a shameless plug.
• 41:45
  SPEAKER_03: I just actually did a Sunday sesh on on this very topic, and most of it's free.
• 41:51
  SPEAKER_03: So please, please check it out.
• 41:52
  SPEAKER_03: I won't have the ability, I won't have the time to actually go through it.
• 41:56
  SPEAKER_03: But it makes a lot of sense.
• 41:57
  SPEAKER_03: You know, I mentioned at the outset that international is now 15% of CuraLeaf's uh business.
• 42:03
  SPEAKER_03: It's growing much faster in the mid-teens relative to the the core US operation.
• 42:08
  SPEAKER_03: Uh, importantly, it's a large it's the largest MSO with the only foothold in Europe in multiple countries with assets on the ground.
• 42:19
  SPEAKER_03: And I think what we can take from this is that he just needs more verticality, but also compliant cannabis to actually run through his European operations.
• 42:32
  SPEAKER_03: And um, you know, for a variety of reasons, I think it makes a lot of sense in terms of like the financial implications, purely for no surprise.
• 42:44
  SPEAKER_03: His trading at call it 12 times relative to the space at call it four to six times for a very similar footprint.
• 42:52
  SPEAKER_03: And he's trying to buy an asset that has$40 million of synergies.
• 42:57
  SPEAKER_03: So on a pro forma basis, he's paying anywhere from call it two to four times.
• 43:03
  SPEAKER_03: Um, he's getting access to 50,000 tons of GMP certified weed in Canada that's actually moving to Europe today.
• 43:12
  SPEAKER_03: He's buying an asset that's down 65% in the last two years, despite a real turning of the shift up at Aurora since 2023.
• 43:23
  SPEAKER_03: That's not getting credit in the public markets.
• 43:25
  SPEAKER_03: And potentially as importantly, you know, Aurora has a substantial cash balance.
• 43:32
  SPEAKER_03: And so PureLeaf is effectively delevering by virtue of the of the terms that were offered while getting access to growth and getting assets and having the supply to continue to push pure relief well over 20% of international mix, which is a critical, critical inflection point for that business.
• 43:54
  SPEAKER_04: Do you yeah?
• 43:55
  SPEAKER_04: And I was I've been uh that's a great Sunday stretch, by the way, for anyone that wants to check it out.
• 43:59
  SPEAKER_04: I love the balance.
• 44:00
  SPEAKER_04: Sheet look you did, the synergy analysis, like that.
• 44:02
  SPEAKER_04: It was a really nice, clean way of looking at it.
• 44:05
  SPEAKER_04: Because I when I first saw this too, I thought, you know, if I were to rank order the intention behind it, I put balance sheet as number one.
• 44:13
  SPEAKER_04: I was like, but seeing that it was structured as stock and cash, I was kind of it made me think about it for a little bit longer.
• 44:21
  SPEAKER_04: I was like, was this because it was just kind of like, let's see, can we get this deal done at this price potentially in this way we've structured it?
• 44:29
  SPEAKER_04: Or if this invites some others to the table, you know, and it becomes a competitive situation.
• 44:34
  SPEAKER_04: Like if I, you know, so you don't want to go all the way to your top bid, right?
• 44:38
  SPEAKER_04: You want to kind of come in there and see how it goes.
• 44:41
  SPEAKER_04: So it was like, you know, just for the sake of a podcast, you know, speculative conversation.
• 44:47
  SPEAKER_04: Why not bid 20% higher and just do all stock when you have such a huge spread in valuation?
• 44:54
  SPEAKER_04: And to your point, for the cash benefit.
• 44:59
  SPEAKER_03: Yeah.
• 44:59
  SPEAKER_03: So just to kind of recap what uh Cure Leaf has offered, um, you know, effectively, you know, 0.34 Cure Leaf shares plus 75 cents of cash per share.
• 45:13
  SPEAKER_03: So to your point, the mix is heavily stock.
• 45:16
  SPEAKER_03: Um, I think, you know, uh I I don't know how familiar you guys are with bear hugs.
• 45:21
  SPEAKER_03: Bear hugs is effectively before things get ugly and hostile.
• 45:25
  SPEAKER_03: I I think Boris really wanted to do a partnership deal.
• 45:31
  SPEAKER_03: Um I think he sees an uh Aurora investor base that's tired, uh, a C-suite that's been there for uh a number of years.
• 45:40
  SPEAKER_03: The CEO's been there for five plus years and doing really good work, but not getting rewarded.
• 45:46
  SPEAKER_03: Um and so my my assumption is that he was giving them an olive branch to participate in the upside of the combined company by giving them currency.
• 45:58
  SPEAKER_03: Now it's expensive currency.
• 46:00
  SPEAKER_03: Um, but I think that was probably the initial approach.
• 46:04
  SPEAKER_03: Uh we don't have a definitive deal.
• 46:07
  SPEAKER_03: Um my judgment, there are a number of issues with the offer terms to Aurora, which is why I think you're seeing some of this hostility, and we can go into why that is.
• 46:17
  SPEAKER_03: Um, but I my my my assumption is that by offering stock and utilizing the cash on the balance sheet, it's both deleveraging and highly accretive and strategically important.
• 46:29
  SPEAKER_03: And I think it was a really good starting point.
• 46:31
  SPEAKER_03: And when he was rebuffed, uh, I think he's taking it to shareholders to say, hey, we want this asset, we're not gonna overpay, but you Aurora shareholders should take a very hard look at what we're offering you because our could because your board is not engaging.
• 46:48
  SPEAKER_02: Morgan, um, I think you have the most context here.
• 46:51
  SPEAKER_02: Historically, what's been the problem with Aurora's business?
• 46:55
  SPEAKER_04: Uh I mean, before Germany, they were just basically all they didn't really have much of a business.
• 47:02
  SPEAKER_04: I mean, it was not it was never like a leading product, a category, or at least I didn't think so.
• 47:08
  SPEAKER_04: I mean the best thing that they did over the last five years, and you know, I mean this generally as a generally as a you know, kudos to them was they used their currency to clean up their balance sheet.
• 47:20
  SPEAKER_04: And they did without burning a ton of cash as they were doing it, and then they got this nice tailwind of Germany giving them a place to clear product.
• 47:29
  SPEAKER_04: But you know, I don't I don't ever hear people talking about they have you know fantastic flour, they're like leading, or they're you know, it just seems like they were they had a license and they were producing and were smart enough to capture that uh you know, the German market and be able to clear their supply.
• 47:49
  SPEAKER_04: But um, you know, so to me, I when I think about the situation, it's you know, Pure Leaf wants to probably bring in a lot of its uh capabilities and say, like, you you have these assets, but we need these need to be run better.
• 48:04
  SPEAKER_04: And I think Scott, you wrote about this as like the you know, because some people were trying to say, like, oh, they look at the quarters, they're looking great.
• 48:11
  SPEAKER_04: And it's like they were looking okay, they were looking a little bit better, but they are starting to soften again.
• 48:17
  SPEAKER_04: And and to me, that's saying, okay, competition's picking up.
• 48:21
  SPEAKER_04: How do they really stand when there's compet when there's actual competition?
• 48:27
  SPEAKER_03: Yeah, I agree.
• 48:28
  SPEAKER_03: I agree.
• 48:29
  SPEAKER_03: You know, 2020 or last year, fiscal year was was really strong, really strong.
• 48:34
  SPEAKER_03: You know, I think uh Eva Dom going for memory year grew called 30%.
• 48:38
  SPEAKER_03: But Q4 was weak, and the implication for this year is that they'll be down.
• 48:44
  SPEAKER_03: And so I think that goes to the opportunistic nature of this bid.
• 48:50
  SPEAKER_03: If you remember when Aurora uh reported Q4 earnings and then Q1, you know, really the Q4 is when stock really started a struggle.
• 48:59
  SPEAKER_03: It was down 20% in the weeks following that Q4 report as investors digested the glide path into 2027.
• 49:08
  SPEAKER_03: Um, to your point, Morgan, I I I I think I think you're right.
• 49:12
  SPEAKER_03: I I I've dealt with Aurora over the years.
• 49:15
  SPEAKER_03: Um, you know, I've written about Canada.
• 49:18
  SPEAKER_03: I I told investors, you know, I've been pretty adamant that Canada is roughly, and I'm curious how you think about this, Morgan, but I I always thought Canada was called two to three years ahead of the United States in terms of rationalization and specialization.
• 49:33
  SPEAKER_03: That market has massively contracted in terms of the number of players.
• 49:38
  SPEAKER_03: I think the key takeaway for me was that you know Canada had these glasshouse style grows that a huge, enormous uh country, clearly, but the size the market was effectively the size of California.
• 49:54
  SPEAKER_03: And so there was nowhere to put all this regulated cannabis, and and Europe, whether people foresaw that or not, it was it was their saving grace at the same time as the market consolidated organogram, you know, consolidated number of assets.
• 50:11
  SPEAKER_03: Um and so there are very few left standing.
• 50:15
  SPEAKER_03: Um, going back to what you mentioned in the beginning, Jesse, like this GMP certification um is critically important, particularly in Europe.
• 50:24
  SPEAKER_03: And I don't necessarily see that going away anytime soon.
• 50:28
  SPEAKER_03: In fact, if you listen to what Boris is saying, and you listen to what Kyle and Graham are saying, uh, and I'm curious what you think, Jesse, is like the the regulations are getting harder, not easier.
• 50:43
  SPEAKER_03: And so if you can get access to these scarce assets, I think it's very critically important to remember that Aurora spent you know over a billion dollars of CapEx and multiple billions at MA using stock, but all of that is some cost.
• 51:00
  SPEAKER_03: And so for CureLeaf or a glasshouse or uh or someone else to recreate that footprint, it's not only the time and the capital and the red tape.
• 51:12
  SPEAKER_03: Um it's just it might not be doable.
• 51:16
  SPEAKER_03: So I think this is uh I do think this is a win-win for shareholders at the right price.
• 51:23
  SPEAKER_02: Yeah, my read, Scott, is I think it could be doable.
• 51:25
  SPEAKER_02: I think it's getting um, you know, Germany in particular, like it's just it's it's so massively complicated, you know, even breaking down the different GMPs, even if you get into the EU GMP, who comes over, does your audit, what country they're from, what part of the country we're they're from, you know, all affects um you know where you're gonna end up sending your product.
• 51:42
  SPEAKER_02: So it's really a complicated GMP web out there.
• 51:46
  SPEAKER_02: My read is it's largely solvable, but solvable at what cost and over what time frame is a different question.
• 51:52
  SPEAKER_02: EU GMP is typically the most challenging to get, often can take one year plus, sometimes two or three years, and depending on your facility and what upgrades it needs, you're talking hundreds of thousands, typically well into the millions to meet that standard.
• 52:06
  SPEAKER_02: And then another unintended consequence, guys.
• 52:08
  SPEAKER_02: I don't know if you contemplated on GMP, is that it can increase your production cost as well, depending on what you're doing.
• 52:14
  SPEAKER_02: And so there's a bunch of nuances around these GMP conversations.
• 52:18
  SPEAKER_02: In Aurora's case, um, they have the EU GMP, which is the access largely to Germany for most folks.
• 52:24
  SPEAKER_02: And you guys remember, was it April of 24, I believe, was when uh Canada or Germany opened to Canadian imports, and you saw what that did to you know flour prices.
• 52:34
  SPEAKER_02: And I think, Scott, that's been a big buoy to these Canadian operators.
• 52:37
  SPEAKER_02: If that export option didn't show up, um, you know, I think many more of them would have drowned, which begs the question about like if export opens up in the US, what happens to prices in places like California?
• 52:47
  SPEAKER_02: That's a different conversation to have on a different day.
• 52:50
  SPEAKER_02: But I think an important corollary that someone like you, Scott, would probably be looking at as well.
• 52:55
  SPEAKER_02: Um, I think on the GMP side, it's it's buildable architecture, a matter of time and cost.
• 53:00
  SPEAKER_02: They have the EU GMP access.
• 53:02
  SPEAKER_02: They also have one called TGA GMP, TGA GMP is a standard that gets you um accessed primarily to Australia, but there's also some reciprocity in there to the UK.
• 53:15
  SPEAKER_02: So they're definitely interested in building out the rails.
• 53:19
  SPEAKER_02: You know, think like you need a pathway to get to these countries or keys to the railroad to get into them.
• 53:27
  SPEAKER_02: And I think that's super valuable.
• 53:28
  SPEAKER_02: And obviously, cost-wise, that has a tremendous amount of value both in time and dollars.
• 53:33
  SPEAKER_02: But let's contemplate a second part to this equation.
• 53:36
  SPEAKER_02: And I want to credit uh DPAC Anand, who's a fantastic uh consultant that I've been talking to a bunch about international things.
• 53:44
  SPEAKER_02: And DPAC has this term, what is your right to win?
• 53:47
  SPEAKER_02: And it just hit me so hard because he's saying in these conversations, okay, so if you get access to the market just because you get the keys to the EU GMP, just because you have the keys to get into Germany now, what is your right to win in that market?
• 54:01
  SPEAKER_02: Are you do you have better flour?
• 54:03
  SPEAKER_02: Do you have cooler strains?
• 54:05
  SPEAKER_02: Do you have a lower price?
• 54:06
  SPEAKER_02: What makes it so that once you get in there and you spend the millions to open that door, that you're actually going to win?
• 54:12
  SPEAKER_02: And I think just I'm not arguing that I don't know enough guys about Aurora or about how this business would work to really understand if they have that right to win or not.
• 54:23
  SPEAKER_02: But I think it's a critical question that all of us should be asking ourselves.
• 54:26
  SPEAKER_02: And as you see more of these press releases coming out with GMPs and GACPs, don't just fall for like they got the certification, now the millions of dollars come in.
• 54:36
  SPEAKER_02: Say, awesome, they got the certification, the door opened.
• 54:40
  SPEAKER_02: Now allow me to look at that marketplace and analyze because they got entrance to that door, can they actually compete and win?
• 54:46
  SPEAKER_02: And I think there's a lot of corollaries here in this Cure Leaf and Aurora conversation.
• 54:50
  SPEAKER_02: You want the assets to get the access, but then also investors think about it back in, figure out what is their right to win in that market.
• 55:00
  SPEAKER_03: 100%.
• 55:01
  SPEAKER_03: 100%.
• 55:02
  SPEAKER_03: And no, obviously nuanced, but it's not too dissimilar from getting a license back in 2014, right?
• 55:11
  SPEAKER_03: Like, okay, you you have a license to open up a dispensary and you have to be vertical in Illinois or New Jersey.
• 55:18
  SPEAKER_03: And, you know, I think we can look back in hindsight and say it wasn't worth much, it was hard to do.
• 55:26
  SPEAKER_03: It required a lot of work, it required a lot of capital.
• 55:30
  SPEAKER_03: But the the ones who actually did something meaningful with that license built something differentiated.
• 55:36
  SPEAKER_03: Um and I think that's a similar analogy.
• 55:39
  SPEAKER_03: I don't think it's completely apples to apples, but I think there's a there's a lesson there for sure.
• 55:44
  SPEAKER_04: Yeah, there's definitely run these licenses.
• 55:46
  SPEAKER_04: It's there's there's definitely a premium around first mover, right?
• 55:50
  SPEAKER_04: Because especially, you know, as we if we have time getting into capital allocation, what you actually do with that license to make it productive and valuable and you know, building great products and great brand value.
• 56:03
  SPEAKER_04: But uh I don't know if you guys have seen what prices are for brand new licenses in Florida.
• 56:12
  SPEAKER_04: Because you know they did that second issuance or whatever, that last batch.
• 56:16
  SPEAKER_04: Most of them, I think almost or all of them, none of them were built.
• 56:22
  SPEAKER_04: But they are now being actively sold.
• 56:26
  SPEAKER_04: And we all remember, I'm sure, when Florida was first opening, a license there costs if someone sold a license for a hundred million dollars.
• 56:36
  SPEAKER_04: Any guess of what today a license goes for?
• 56:41
  SPEAKER_04: So no debt, no assets, just brand new, just paper.
• 56:45
  SPEAKER_04: The paper, the ability to go.
• 56:49
  SPEAKER_03: I was gonna say ten.
• 56:50
  SPEAKER_04: I was gonna say I was gonna say ten, yeah.
• 56:53
  SPEAKER_04: Uh saw one come across for four.
• 56:56
  SPEAKER_04: Opening bin.
• 56:59
  SPEAKER_04: So, and I just and I also say that in the context of like Georgia's really hot right now.
• 57:04
  SPEAKER_04: And those few licensees that are there are now getting what feels like old times kind of valuations all over again.
• 57:13
  SPEAKER_04: So, but it's because at that first move, because you have the ability to just build out a lot of stores and get a lot of market share.
• 57:20
  SPEAKER_04: So there's still like it so I just I wonder how to, and you know, I know we're talking about international, but I because I just don't know enough.
• 57:27
  SPEAKER_04: But like, how do you assign international like these values to the GMP?
• 57:31
  SPEAKER_04: The to your point, Jesse, the the rails, like to be able to get in and be operating and establishing a footprint before more competition comes in.
• 57:40
  SPEAKER_04: And how do you really you know understand what that value is?
• 57:44
  SPEAKER_04: What do you think, Scott?
• 57:48
  SPEAKER_04: I don't have a great answer.
• 57:50
  SPEAKER_00: Yeah, yeah.
• 57:51
  SPEAKER_04: I mean you we can kind of compute a little bit around what how curio leaf is looking at Aurora, right?
• 57:57
  SPEAKER_03: Yeah, I was just gonna say, like, I the way I think Cure Leaf is looking at it is uh I I think first and foremost, I think they believe that they will operate it better, right?
• 58:08
  SPEAKER_03: Boris has talked about the yield difference between their grow and when Aurora is kicking out.
• 58:13
  SPEAKER_03: Boris has talked about genetics.
• 58:16
  SPEAKER_03: Um and so as as I think about the multiple that they're paying combined with the synergies and the cash balance, you can run the numbers, but based on on what they they basically put out, they basically have to run it efficiently for two to three three years, and they're break-even.
• 58:39
  SPEAKER_03: So I think from their perspective is oh, and by the way, I missed one critical point, which is uh this concept of verticality, right?
• 58:47
  SPEAKER_03: They're they're already in Curio Levy is already in Europe and they're already buying a lot of the biomass from the aurores of the like.
• 58:56
  SPEAKER_03: And so just like we think about uh vertical markets in the United States, there's going to be additional margin opportunity by combining, you know, we all we always talk about broco, distribute co and and and and you know, retail co or brand co.
• 59:13
  SPEAKER_03: I think there's a part of that too.
• 59:15
  SPEAKER_03: And so I think the cash on cash payback uh for pure leads is is is pretty attractive.
• 59:22
  SPEAKER_03: And so um, while they don't have a crystal ball on how much competition is coming online, who in the United States can get a GMP, how much of you know new um licenses are coming up, I think they have reasonable conviction that regardless of what gets thrown at them, they'll be in a much better position and help leapfrog them um for that when the competition does come, they're in a much better position to absorb some of that competitive head, which that's just my take.
• 59:56
  SPEAKER_04: Yeah.
• 59:57
  SPEAKER_04: Can we just double-click on that with the uh two to three year payback?
• 1:00:00
  SPEAKER_03: Do you know how that did you calculate that, or was that it's just a kind of thumb in the, you know, I do have a model and a human in front of me.
• 1:00:09
  SPEAKER_03: Um but if they're doing, call it, you know, they did 40, um, this is Canadian, but you know, with the synergies, they're probably at 50 million dollars of Ibata.
• 1:00:20
  SPEAKER_03: And so I don't see any dish meaningful additional capex.
• 1:00:25
  SPEAKER_03: And so um, you know, just based on what they're paying for the business combined with the cash, in terms of what they're actually putting out, um, you know, I I think that I think the math kind of spits out for, I mean, if you're paying a three times multiple for the business, you you've got to effectively um, you know, you can run in place for a number of years and and hopefully get some of that back.
• 1:00:48
  SPEAKER_04: Right.
• 1:00:49
  SPEAKER_04: You know, I just didn't know if it was off the headline multiple or if you were taking in the synergies and um into that as well.
• 1:00:55
  SPEAKER_04: Uh with the synergies, with the synergies.
• 1:00:57
  SPEAKER_04: Yeah, okay.
• 1:00:58
  SPEAKER_04: Because that's a low.
• 1:01:00
  SPEAKER_04: Okay.
• 1:01:01
  SPEAKER_04: Yeah.
• 1:01:02
  SPEAKER_04: Right.
• 1:01:03
  SPEAKER_03: I I think the synergy, if you go through the numbers on the$40 million synergies first, you know, just based on on my past and all of our paths, you're never going to put out the the real synergies, uh, particularly when you're in a hospital situation.
• 1:01:17
  SPEAKER_03: So my my sense is that 40 million is rather conservative.
• 1:01:21
  SPEAKER_03: Okay.
• 1:01:22
  SPEAKER_03: Uh my and and going through that 40, if you start doing the numbers on the actual yield differences between what Kierley thinks they can get with Aurora's assets, um, you know, the synergies start getting pretty wonky pretty fast.
• 1:01:37
  SPEAKER_03: Um that's just kind of my my assessment of the situation.
• 1:01:43
  SPEAKER_02: Well, guys, this has been a great conversation on that topic.
• 1:01:46
  SPEAKER_02: Morgan, do you want to run through capital allocation a little bit and we'll see if we have time for any more after that?
• 1:01:52
  SPEAKER_02: Sure.
• 1:01:53
  SPEAKER_04: Um, well, I mean, we were kind of just touch touching on a little bit here with this Cura, but I, you know, uh, I guess, you know, when we're looking at the landscape today, we are starting to see some more capital allocation, whether it's tuck-in small store acquisitions, whether to your point it's not actual dollars, if it's human capital or intellectual capital.
• 1:02:15
  SPEAKER_04: Um, but there's some MA starting to happen.
• 1:02:18
  SPEAKER_04: I mean, obviously, Virio is completely just going bananas and having a field day with MA and getting a lot of stuff done.
• 1:02:25
  SPEAKER_04: Um, but it still looks a lot, you know, it's we're we're still kind of emerging into more of this activity, right?
• 1:02:33
  SPEAKER_04: And so I guess, you know, just starting off um and thinking about some of we do still have some of the similar players, but where are companies still destroying capital?
• 1:02:45
  SPEAKER_04: Let's start with that one.
• 1:02:48
  SPEAKER_03: Oh, I don't know if I want to you know throw anyone under a bus.
• 1:02:54
  SPEAKER_03: Um so I don't know if I have a great answer for you on that, Morgan.
• 1:02:58
  SPEAKER_03: I probably want to stay away.
• 1:03:00
  SPEAKER_03: I I think the I'll answer that by saying uh the horses that are not in my stable, I have questions on.
• 1:03:10
  SPEAKER_03: Put it that way.
• 1:03:11
  SPEAKER_03: And so um that could be because I just don't know or I haven't done enough work.
• 1:03:17
  SPEAKER_03: Um, but the those those are the situations that I've I purposely avoided just because I don't necessarily think I have a great grasp of where they're differentiated and what their path is, and even if they had a strategy, if they had the wherewithal, the talent, the capital, and the right playbook to actually pull it off.
• 1:03:38
  SPEAKER_03: I I know that's not exactly what you want to hear, but that's that's how I would answer that question.
• 1:03:43
  SPEAKER_04: Yeah, well, and you know, and I think about from the early days when we were trying, a lot of these companies were building and being acquisitive, and there was so much white space.
• 1:03:54
  SPEAKER_04: There was not a lot of data.
• 1:03:55
  SPEAKER_04: There was not a lot of, we just didn't know how things were gonna go.
• 1:03:58
  SPEAKER_04: And so, and valuations were a lot higher back then, not just in cannabis, but you know, in a lot of StAS, right?
• 1:04:04
  SPEAKER_04: I mean, StAS was trading at these huge multiples, so we still had like SaaS to these crazy deals in our space too.
• 1:04:09
  SPEAKER_04: But now we have a lot of data, and we have a lot of a lot more maturation of a market.
• 1:04:16
  SPEAKER_04: It's still emerging globally, but and there's still plenty more to be done here.
• 1:04:20
  SPEAKER_04: But we have a lot more data and understanding.
• 1:04:23
  SPEAKER_04: But I guess, you know, so then I guess the question would be how should we be evaluating how MA looks today and and how would we better grade how companies are doing it to say that yeah, that's a good that's a good deal.
• 1:04:37
  SPEAKER_04: That makes sense.
• 1:04:38
  SPEAKER_03: Is it is it the pay gap is like yeah, I I think that's that's that's uh that's a fair question.
• 1:04:47
  SPEAKER_03: I I I probably let me give you a real-time assessment.
• 1:04:51
  SPEAKER_03: I think Vireo is probably the number one situation to evaluate MA right now.
• 1:04:58
  SPEAKER_03: I mean, they're clearly gobbling up a ton of companies across um across the country.
• 1:05:04
  SPEAKER_03: Like I mentioned, I think they're they're up to 12 now in the last 18 months.
• 1:05:08
  SPEAKER_03: I think the difference with Virio, just as a headliner, is you know, number one, the the financial sponsor behind Virio in many ways is solving a problem that we've talked about over the last couple of years together, which was um you know, effectively equitizing the debt.
• 1:05:26
  SPEAKER_03: And so what Virio seems to be doing is they're buying the companies mostly with currency and rolling the debt into uh into the into the pro forma nucle.
• 1:05:41
  SPEAKER_03: And so they're buying assets at much, much lower multiples than when we saw in the first wave of MA in cannabis.
• 1:05:48
  SPEAKER_03: You know, go back to the true leaf harvest.
• 1:05:50
  SPEAKER_03: It's a great example.
• 1:05:51
  SPEAKER_03: And the multiples that Virio is paying is is is wildly lower.
• 1:05:57
  SPEAKER_03: In terms of how I would evaluate that.
• 1:06:00
  SPEAKER_03: Situation, in my judgment, um, it's going to be integration.
• 1:06:04
  SPEAKER_03: I think the precedent here, and we have a lot of precedent outside of cannabis on roll-ups.
• 1:06:10
  SPEAKER_03: I think that's pretty well understood by a number of investors in and outside of cannabis.
• 1:06:15
  SPEAKER_03: But I think the precedent is air, right?
• 1:06:18
  SPEAKER_03: I mean, they had a great team, um, but they they paid peak multiple on peak EBITDA.
• 1:06:27
  SPEAKER_03: And if you go back, and I think everyone probably has their own opinion, but I'll share mine.
• 1:06:34
  SPEAKER_03: Um, it just didn't seem like those assets were very well integrated.
• 1:06:38
  SPEAKER_03: And so it was a little bit more of a decentralized type of model, at least from the outside looking in.
• 1:06:45
  SPEAKER_03: And I it seems that's what Virio is trying to do as well.
• 1:06:48
  SPEAKER_03: Sammy's been on a number of podcasts talking about what they're doing, you know, Sammy at C21, as you guys know.
• 1:06:55
  SPEAKER_03: Um, and so they are taking that decentralized approach, but the difference is they're just paying a fraction of the multiple and they're not putting any leverage on this business.
• 1:07:04
  SPEAKER_03: In terms of knowing if it's gonna work, I think at the end of the day, whatever they're buying has to look better tomorrow than today.
• 1:07:14
  SPEAKER_03: And that's that's gonna be the yardstick for me, is like ultimately, I think Sammy talks about you know revenue per share accretion.
• 1:07:22
  SPEAKER_03: You know, with full respect to Sammy, he's a good friend.
• 1:07:25
  SPEAKER_03: Uh, I don't look at it that way.
• 1:07:26
  SPEAKER_03: I think for me, it would be free cash flow per share because of the point on on trying to figure out what gearing there is on the equity.
• 1:07:36
  SPEAKER_03: Um, but I think that's that's kind of how I would evaluate it.
• 1:07:40
  SPEAKER_03: Um I'll stop there, but that that's hopefully a real-time example of how an investor like myself is going to evaluate.
• 1:07:48
  SPEAKER_03: I don't have a position in Berio.
• 1:07:49
  SPEAKER_03: I've looked at it.
• 1:07:50
  SPEAKER_03: Uh, I'm pretty deep in diligence.
• 1:07:53
  SPEAKER_03: Um, they're clearly over a billion dollars pro forma.
• 1:07:56
  SPEAKER_03: They're gonna be the largest dispensary owner network in the United States, but it gives me heartburn knowing that this was kind of what Air was trying to do just five years later.
• 1:08:08
  SPEAKER_03: And so now that I have those two examples, I could compare them and say, okay, what's different, what's not?
• 1:08:16
  SPEAKER_03: What did they say they're gonna do?
• 1:08:17
  SPEAKER_03: Did they deliver, did they not?
• 1:08:19
  SPEAKER_03: And ultimately, what's that worth?
• 1:08:21
  SPEAKER_04: Yeah.
• 1:08:23
  SPEAKER_04: Truly impressive what they're doing, the rate they're doing it.
• 1:08:25
  SPEAKER_04: And to your point, is like, as we were talking about earlier, is the talent level on all this integration.
• 1:08:34
  SPEAKER_04: And you know, because it's coming fast and furious, and they have they are not slowing down.
• 1:08:40
  SPEAKER_04: I mean, it was I think we were talking who we were talking with someone earlier this year, trying to remember which guest it was, and they thought that uh uh the virio was gonna slow down.
• 1:08:50
  SPEAKER_04: I was like, I don't think so.
• 1:08:53
  SPEAKER_04: And boy, they they've gotten a lot of stuff done, and and it'll be interesting to see to your point, is you know, because Sammy's been talking a lot about you know same store sales and revenue per share accretion and all this stuff.
• 1:09:04
  SPEAKER_04: And I like the idea of free cash flow because you know, they're supposedly buying these assets that are already built, and so there's not a lot of capex needs, right?
• 1:09:12
  SPEAKER_04: So that free cash flow is probably pretty good.
• 1:09:15
  SPEAKER_04: I mean, there's gonna be some rebranding and probably refreshing of things to get it in line, but they also at the same time, I you know, I will I say all this, but they also have this model where they want the companies they're buying to stay who they are.
• 1:09:30
  SPEAKER_04: So maybe maybe you know, free free cash flow is the right thing because they won't have all this cost of overhauling things and they're gonna just try to be more normalizing on the back end and and let the existing footprints run as they were.
• 1:09:42
  SPEAKER_04: So um it's very interesting, just in the context of it compared to Aurora and and yeah, yeah.
• 1:09:53
  SPEAKER_03: I I I I completely agree.
• 1:09:55
  SPEAKER_03: We we talked about the scarcity of capital in this industry for years.
• 1:09:59
  SPEAKER_03: Um, and we also talked about the fact that you know deals weren't getting done because the bid asked, it wasn't accretive and all that.
• 1:10:06
  SPEAKER_03: I I don't want to go back in time.
• 1:10:09
  SPEAKER_03: But Virio is demonstrating a clear competitive advantage, right?
• 1:10:14
  SPEAKER_03: Like it is so hard to do deal a one deal, let alone 12.
• 1:10:18
  SPEAKER_03: Uh, the speed, the complexity, the legal, the operations, the licensing, the transfers, like this is not easy stuff.
• 1:10:26
  SPEAKER_03: Um, and so that to me suggests that that is their edge.
• 1:10:31
  SPEAKER_03: Now they happen to be in a lot of these capital structures already.
• 1:10:34
  SPEAKER_03: And so that bid-ask question kind of goes away because they're the bid and the ask in some respects.
• 1:10:40
  SPEAKER_03: And since they're using currency, they're effectively saying, hey, you want to, it's they're kind of doing what Boris does, which is like, do you want to be part of part of a bigger organization that has a chance to win?
• 1:10:51
  SPEAKER_03: Or do you want to just kind of wither away?
• 1:10:53
  SPEAKER_03: Um, and because they're on both sides of the capital structure and both sides of the buyer and seller, um, the friction is less.
• 1:11:01
  SPEAKER_03: That to me, going back to where we started on architecture, that to me is their playbook.
• 1:11:07
  SPEAKER_03: They've assembled a team that can pull it off, and they have the financial wherewithal to actually execute.
• 1:11:13
  SPEAKER_03: Um, that is a hopefully a fan, uh, hopefully that's a good way to illustrate how I'm thinking about 3.0.
• 1:11:21
  SPEAKER_04: Yeah, and uh, you know, I the the point about timing is so critical because to your point when Aaron's doing it, valuations are so much higher, with so much more costly, with so much more, you know, equity issuance versus today, where these things are happening at very low prices and people are also tired, they want to transition, they they want to like say, yes, this like here we go, let's be a part of a bigger organization, see if we can have more success doing it with much more scale.
• 1:11:51
  SPEAKER_04: Um, timing is totally different and in their favor.
• 1:11:54
  SPEAKER_04: And I do find it interesting though when we come across situations where people that are a tiny, tiny fraction of the size think they're like, no, we can we can compete with this, you know, and we're we're gonna turn down this bid because for whatever reason, and I'm just like, you know, I just think there's so many people where it makes a lot more sense to, you know, the current trajectory to your point, a lot of companies are in the withering trajectory, they are not on the upward slope.
• 1:12:24
  SPEAKER_04: And it and you know, as you said before too, about Canada, they already have gone through this rationalization.
• 1:12:29
  SPEAKER_04: There still are plenty out there that are trying to fight it back, but Virio is finding the companies that are like, Yep, let's go.
• 1:12:37
  SPEAKER_04: Um, and I'm kind of interested that Aurora investors are also like potentially fighting back because this is like here's an opportunity.
• 1:12:45
  SPEAKER_04: You got a nice bump from where it was.
• 1:12:48
  SPEAKER_04: I know it had, you know, it's kind of bounced around, but you know, reset the table.
• 1:12:51
  SPEAKER_04: And if you don't want to be part of the game, you can sell.
• 1:12:54
  SPEAKER_04: It's the nice thing about being a public company, you can just sell and move on.
• 1:12:57
  SPEAKER_04: But for those that don't, they can bat on and see what can happen on a larger footprint.
• 1:13:02
  SPEAKER_04: I, you know, I just it's interesting how we have made a lot of progress, but there's still our, you know, where these frictions still rely or reside in our space.
• 1:13:10
  SPEAKER_04: And uh, you know, it's how much more withering and tiring to do people need before they're gonna say, okay, let's do it.
• 1:13:16
  SPEAKER_04: But problem is the longer you wait on that withering vine, it's you know, deflation is not your friend.
• 1:13:22
  SPEAKER_03: Yeah, good point.
• 1:13:24
  SPEAKER_03: Good point.
• 1:13:26
  SPEAKER_04: Uh Jesse, uh, do we want to do a quick yeah?
• 1:13:30
  SPEAKER_02: Let's hit it, man.
• 1:13:31
  SPEAKER_02: I think it's an exciting conversation.
• 1:13:33
  SPEAKER_02: And uh a friend over at Glasshouse shot me a message, and just to clarify, they are not using their ATM.
• 1:13:39
  SPEAKER_02: If one of us misspoke and said that, I apologize.
• 1:13:41
  SPEAKER_02: I don't think we said they were using the ATM.
• 1:13:42
  SPEAKER_04: I just said they had an ATM.
• 1:13:44
  SPEAKER_04: You're right.
• 1:13:45
  SPEAKER_04: I'm sorry.
• 1:13:45
  SPEAKER_04: But I and I I would think with a nice valuation they could use it.
• 1:13:48
  SPEAKER_04: I didn't say sorry, if I didn't mean to say that they were.
• 1:13:51
  SPEAKER_02: Sorry.
• 1:13:52
  SPEAKER_02: Yeah.
• 1:13:52
  SPEAKER_03: Uh I don't think they had a need for it personally.
• 1:13:56
  SPEAKER_02: Yeah.
• 1:13:57
  unknown: Yeah.
• 1:13:57
  SPEAKER_02: And I think you'll see more of them out there, right?
• 1:13:59
  SPEAKER_02: It's and uh I don't think there's something that should always freak people out.
• 1:14:02
  SPEAKER_02: They just give people um optionality.
• 1:14:04
  SPEAKER_02: And I think if we you know get some movement here, we'll see more of them.
• 1:14:07
  SPEAKER_02: But anyway, just wanted to clarify that about glasshouse.
• 1:14:10
  SPEAKER_02: But uh Scott, you've been doing a lot of deep work here.
• 1:14:13
  SPEAKER_02: Glasshouse kind of uh fits that California architecture 3.0, winning in California today.
• 1:14:20
  SPEAKER_02: A lot of opportunities across the U.S.
• 1:14:23
  SPEAKER_02: trying to capitalize, starting to capitalize on overseas opportunities.
• 1:14:26
  SPEAKER_02: So why don't you lay it out big picture for me, Scott, where you are in Glasshouse?
• 1:14:30
  SPEAKER_02: Then we maybe we can dig in a little bit more.
• 1:14:34
  SPEAKER_03: Yeah, sure.
• 1:14:35
  SPEAKER_03: So full disclosure, I'm I'm an investor in Glasshouse.
• 1:14:38
  SPEAKER_03: Do your own work.
• 1:14:39
  SPEAKER_03: This is not financial advice.
• 1:14:40
  SPEAKER_03: But Glasshouse is one of those names that if you've been around in cannabis for as long as we have, it's like hard to ignore.
• 1:14:47
  SPEAKER_03: Uh and I've I've been watching them since the spec days.
• 1:14:50
  SPEAKER_03: Uh, never been an investor until last year.
• 1:14:53
  SPEAKER_03: I was in the warrants, if you remember.
• 1:14:55
  SPEAKER_03: We I think we talked about it in July.
• 1:14:57
  SPEAKER_03: And then as soon as they refinanced the press, uh, I migrated into the equity.
• 1:15:03
  SPEAKER_03: Um, I think you know what Glasshouse, I think the the the what they're trying to do makes a ton of sense.
• 1:15:14
  SPEAKER_03: And if you think about what we've talked about on previous episodes and some of it today, is the walls seem to be coming down, right?
• 1:15:22
  SPEAKER_03: We can talk about whether it's uh, you know, the iron curtain of of states, but and that's intercountry, you know, interstate, but also inner country.
• 1:15:31
  SPEAKER_03: And I think Glasshouse's model was predicated on finding highly scarce grandfathered assets, not too dissimilar from your set of assets, Jesse, in terms of actually trying to secure that footprint.
• 1:15:45
  SPEAKER_03: And it's the one company that I can think of, other than potentially Leaf, that has this kind of formulaic growth algorithm based on capacity additions that are already basically there.
• 1:15:59
  SPEAKER_03: And if you've ever been to the farm, it's just it's like un like there's nothing you've like you've ever seen before.
• 1:16:07
  SPEAKER_03: You know, up to call it six million square feet, uh, they're the lowest cost uh producer in the in the country, they're on in the perfect environment, grown from the sun, uh not relying on the grid.
• 1:16:22
  SPEAKER_03: And uh I think if you believe in a world where cannabis becomes ubiquitous, and you believe in a world where they could actually move that biomass outside the confined walls of California, which they've already proven, the earnings power of this business is just enormously convexed.
• 1:16:41
  SPEAKER_03: And I would argue probably the most convexed out of all the big, you know, to call it tier ones and tier twos.
• 1:16:48
  SPEAKER_03: Um, so I find it very interesting.
• 1:16:50
  SPEAKER_03: I always talk about like this horse, you know, safety spits, and stupidity.
• 1:16:55
  SPEAKER_03: Um, glasshouse is, I wouldn't call it the safest of my bets, but if you think of kind of where I believe cannabis will be in five to ten years, um, there aren't many companies that are well positioned for a world where the United States is dominant in cannabis.
• 1:17:13
  SPEAKER_03: And there aren't too many companies that can actually produce cannabis at a price point that is highly competitive to, you know, other than like outdoor grows that are used for very different um form factor.
• 1:17:28
  SPEAKER_03: And so um I think they've done uh an unbelievable job getting through this wall of worry that were rated, as you guys remember.
• 1:17:37
  SPEAKER_03: They had a capital structure issue, as you may remember.
• 1:17:40
  SPEAKER_03: Um, but since since in the last call it year, they've hit a number of milestones that they said they would hit.
• 1:17:48
  SPEAKER_03: And I think the future for the company is extremely bright.
• 1:17:52
  SPEAKER_02: Yeah, Graham is very operationally gifted.
• 1:17:55
  SPEAKER_02: Um yeah, he's one of the people that I really admire in the industry for his intellect and his ability to use technology to improve things, and you can't argue with the success that they've had there.
• 1:18:06
  SPEAKER_02: Um Scott, how do you think about three components to that story?
• 1:18:11
  SPEAKER_02: And so again, we have what I call the knife fight in California, which continues to be a challenging market, feels like it's stabilizing, flour prices peaking up a touch, but still, you know, a difficult market overall.
• 1:18:23
  SPEAKER_02: Some of the lowest prices, um, maybe second lowest prices, maybe the absolute lowest prices in the country.
• 1:18:29
  SPEAKER_02: But so much optionality, right?
• 1:18:31
  SPEAKER_02: And uh I want you to break that down into two pieces.
• 1:18:33
  SPEAKER_02: One is the interstate piece, obviously, you know, the ability to ship things across the country, potential supply chain agreements there with other operators, potentially powering brands, glasshouse brands, already a strong brand, you know, could leverage the CPG aspect there.
• 1:18:48
  SPEAKER_02: Allswell consumer brand strong in California could leverage the CPG aspect there.
• 1:18:52
  SPEAKER_02: So optionality in terms of you know what they could do in terms of strategy to go across the US.
• 1:18:57
  SPEAKER_02: And then Scott, also that move into Europe.
• 1:18:59
  SPEAKER_02: I caught most of their spaces, and it sounds like they're pursuing G G A C P certification for the one of their facilities, and that would potentially open them to partner with others to get into Europe, which is super exciting as well.
• 1:19:16
  SPEAKER_02: So talk to me about those three pieces to that architecture.
• 1:19:20
  SPEAKER_03: Yeah, I mean, I think California is no different than a grown rogue in Oregon that's moving east.
• 1:19:26
  SPEAKER_03: They they think they're they're and that I subscribe to it, is like if you can, if you could stay afloat in the hardest markets in the world, and then you can go to other markets, um, there's something to be said about that.
• 1:19:40
  SPEAKER_03: I think it's, you know, of all the of all the public cannabis operators, um their disclosure is pretty detailed.
• 1:19:49
  SPEAKER_03: And so you you can clearly track their cultivation costs over time.
• 1:19:53
  SPEAKER_03: And it's only going one way.
• 1:19:55
  SPEAKER_03: And I think as they stand up more additional uh acreage, um, that will continue to go down.
• 1:20:01
  SPEAKER_03: I think they guided, you know, call it 95 bucks a pound, which if you kind of do the math on that, that's like a 25 cent pre-roll.
• 1:20:08
  SPEAKER_03: And so um, you know, I think, you know, I think that an investor in Glasshouse today has a clear understanding of where California is today.
• 1:20:19
  SPEAKER_03: We we've always talked about the number of cultivation licenses coming down.
• 1:20:23
  SPEAKER_03: We've talked about the number of brands that are going away.
• 1:20:26
  SPEAKER_03: That market to me doesn't feel as bad as it does, as it was called three years ago.
• 1:20:32
  SPEAKER_03: I have a variant view on pricing, which we talked about in July.
• 1:20:35
  SPEAKER_03: Uh, and then again in December.
• 1:20:38
  SPEAKER_03: It feels firmer, at least heading into Croptober, relative to last year.
• 1:20:44
  SPEAKER_03: Um, the dispensary network is tighter.
• 1:20:48
  SPEAKER_03: Um, and they've already proven, you know, uh, called it five months ago, there are a number of bears on Glasshouse are saying they're never going to be able to move California, or sorry, weed out outside of California.
• 1:21:02
  SPEAKER_03: And they've already done it.
• 1:21:05
  SPEAKER_03: Now it wasn't intoxicating.
• 1:21:07
  SPEAKER_03: We don't know what the price was, um, but they're giving you a vision as to their ability to move some of that biomass outside of California.
• 1:21:21
  SPEAKER_03: And because this is such a fixed-cost nature business, um, they're they're setting up to be, you know, the Chiquita or the dole, the agricultural uh giant of the industry that I think has significant motes.
• 1:21:37
  SPEAKER_03: Um, I don't necessarily think we're we're gonna see uh a new grow.
• 1:21:42
  SPEAKER_03: Maybe Texas, I have an opinion there, let's not go there, but I don't think you're gonna see a significant amount of new capacity go up in the United States, uh, maybe ever.
• 1:21:52
  SPEAKER_03: And um going to your second point, um, I think the economics, Sammy, I asked Sammy on my Sunday sesh, I think the economics for uh dispensaries throughout the country who want access to high quality, tested, safe, very affordable cannabis uh is is at an all-time high, especially when you're with electricity and and and inflation.
• 1:22:22
  SPEAKER_03: And the the economics are just make sense, right?
• 1:22:25
  SPEAKER_03: If you're if you're you're buying a wholesale cannabis at 800 to 1200 a pound and you could buy it direct, there's a huge gap that glasshouse can slot into.
• 1:22:38
  SPEAKER_03: Now, I don't think 100% of an Illinois dispensary or Georgia dispensary is going to be glasshouse cannabis, but you have to imagine that some portion on the shelf could be diverted to cheaper weed.
• 1:22:53
  SPEAKER_03: And I think that's the opportunity.
• 1:22:55
  SPEAKER_03: There's about 15,000 dispensaries in just in the United States.
• 1:22:59
  SPEAKER_03: There are a number of states that are starting now, like Texas.
• 1:23:03
  SPEAKER_03: I don't know how well you're following the data center build-out in Texas, but they just effectively put in moratorium on ERCOT, which is the regulatory agency that handles the electricity grid in Texas.
• 1:23:14
  SPEAKER_03: There's like a four-year waiting list just to get on the grid.
• 1:23:17
  SPEAKER_03: And I just don't see how a cannabis operator is going to front run a data center in Texas.
• 1:23:22
  SPEAKER_03: And so if you're sitting there, whether it's Texas or Georgia, I think there are a number of states that would love to have access to California cannabis at very cheap prices.
• 1:23:32
  SPEAKER_03: Um, that's the second bucket.
• 1:23:34
  SPEAKER_03: And the third bucket, I think, is kind of goes back to the Aurora situation.
• 1:23:38
  SPEAKER_03: Um, genetics, California Appalachian matters, uh, and cost matters, and they're competitive.
• 1:23:45
  SPEAKER_03: And so for a glasshouse investor to win, uh, you don't need 100% of your biomass getting diverted outside California.
• 1:23:54
  SPEAKER_03: But if you had a release valve where you can have some of the capacity spoken for, I think that would be wildly accretive to the business that's growing at 95 bucks, selling at 225 when the real market is anywhere from call it 800 to almost$3,000 a pound outside of California.
• 1:24:19
  SPEAKER_02: Scott, what's your opinion on the interstate opportunity and the time frame under which that happens?
• 1:24:24
  SPEAKER_02: Because when I think about the export, my crystal ball is always murky, but my crystal ball gets a little cleaner on the export because I can see the path.
• 1:24:30
  SPEAKER_02: I can see this DEA channel opening, I can see matching certifications to countries, export permit, import permit, a few more boxes checked.
• 1:24:39
  SPEAKER_02: I think that's an achievable thing for companies in 2027.
• 1:24:42
  SPEAKER_02: Interstate, my crystal ball gets murkier because the rails really aren't there.
• 1:24:47
  SPEAKER_02: You need uh either, you know, work on the dormant commerce clause to you know have something meaningful across the board happen, or we're gonna go state by state and unlock some things, which is gonna be a little bit longer path.
• 1:24:59
  SPEAKER_02: And so what are your views there, Scott?
• 1:25:01
  SPEAKER_02: Do you agree with me on the international potentially coming first?
• 1:25:03
  SPEAKER_02: And how do you view the state by state opening up?
• 1:25:06
  SPEAKER_02: Because you can't argue that for a low-cost California producer like Glasshouse, that when these markets open, it's gonna be a tremendous opportunity to sell more product at higher prices.
• 1:25:17
  SPEAKER_02: Does that normalize in a national cannabis economy?
• 1:25:21
  SPEAKER_02: Yes, but I think that takes a fairly long time to happen.
• 1:25:24
  SPEAKER_02: So tremendous opportunity, I think, uh the interstate time, interstate part, but I feel like the interstate part is harder to figure out when does the first one happen?
• 1:25:31
  SPEAKER_02: And then what's the order in which the other one's happening?
• 1:25:35
  SPEAKER_02: The other ones happen, you know, probably with uh Florida, maybe at the end, right?
• 1:25:39
  SPEAKER_02: One of the biggest states, probably at the end because of the mandatory vertical, but we'll see how it goes.
• 1:25:44
  SPEAKER_03: Yeah.
• 1:25:45
  SPEAKER_03: So I mean, I think the inner country has already happened.
• 1:25:47
  SPEAKER_03: Again, it was CBD, wasn't intoxicating, but I think you're gonna see more of that.
• 1:25:53
  SPEAKER_03: Um and it doesn't necessarily have to be one off.
• 1:25:56
  SPEAKER_03: It could be a big something, big tobacco, big alcohol, securing biomass.
• 1:26:02
  SPEAKER_03: Um, and and that would be um probably the the near term, is that I think you'll see more international diversion.
• 1:26:11
  SPEAKER_03: Uh, and and whether that's through a GMP network, um, but I I think that's what management team has been pretty clear on.
• 1:26:18
  SPEAKER_03: The interstate, I think I don't have an answer.
• 1:26:21
  SPEAKER_03: I I I don't have an answer.
• 1:26:23
  SPEAKER_03: There are a number of views, you know, um, you know, in terms of going medical.
• 1:26:28
  SPEAKER_03: Uh, there are a number of people who think that if it if it's just schedule three medical, uh we talked about in the past, like these state off-take agreements.
• 1:26:39
  SPEAKER_03: Um, I think that's probably the more likely scenario where you have California striking a deal with another state where they can actually move cannabis in a legal fashion for medical only.
• 1:26:54
  SPEAKER_03: And that's probably my the second example of how you'll see glasshouse moving cannabis outside California.
• 1:27:03
  SPEAKER_03: Um, but again, going back to this concept of uncertainty versus risk, there's one of the beautiful things about Glasshouse is that there's just so many outcomes.
• 1:27:13
  SPEAKER_03: And I can't tell you the probability, but the fact that the company has the optionality and it provides the an investor just an enormous amount of complexity.
• 1:27:23
  SPEAKER_03: Um, if you actually go through the various cases, there's a clear example where the company is making well over$20 per share in gross profit.
• 1:27:34
  SPEAKER_03: Um, and and the company's valued at you know a billion dollars, call it 100 million shares outstanding.
• 1:27:41
  SPEAKER_03: So, you know, most of the MSOs today are trading for anywhere from call it three to five times gross profit.
• 1:27:47
  SPEAKER_03: Now that's not the best metric, but in Glasshouse, for example, that is the metric because they don't have stores, they really don't have marketing, they really don't have distribution, and so it's really a gross profit type of.
• 1:28:00
  SPEAKER_03: Business.
• 1:28:00
  SPEAKER_03: And when you have the programmatic build of the square footage that's going online, and you have the precedent of them actually doing that, the echo the formula becomes so powerful that I just don't think you're paying a lot for that option.
• 1:28:18
  SPEAKER_02: No, they do a nice job on the IR side, making it digestible in terms of like here's what we're going to turn on, here's what the value of it is, here's the time frame under which it happens.
• 1:28:26
  SPEAKER_02: And they've done a nice job of meeting those milestones on the operational side.
• 1:28:30
  SPEAKER_02: Scott, let me wrap with this.
• 1:28:32
  SPEAKER_02: I think investing, and the older I get, I think life is a risk management business, and you're always thinking about what could go wrong.
• 1:28:38
  SPEAKER_02: So when you look at the glasshouse story, you shared a lot of the potential positives.
• 1:28:42
  SPEAKER_02: What keeps you up at night about it?
• 1:28:44
  SPEAKER_02: What are the things people should look at and say, you know, what are the things that could go wrong?
• 1:28:50
  SPEAKER_03: Um, I think the biggest risk outside of like fat tails, a fat tail would be getting rated again.
• 1:28:56
  SPEAKER_03: A fat tail could be a disease in one of the grows.
• 1:29:00
  SPEAKER_03: Um so putting that aside, I think the biggest risk to the glass house story is matching capacity with demand.
• 1:29:10
  SPEAKER_03: And so there is a scenario where they're turning on lights and grow rooms, but they have a sinkhole in demand where they grow too, you know, basically growing too much and not having an outlet.
• 1:29:22
  SPEAKER_03: Again, this this product expires, right?
• 1:29:25
  SPEAKER_03: So whatever you're planting in the ground has to be out the door, and they call it 90 days.
• 1:29:30
  SPEAKER_03: And so if you sequence that wrong, you're gonna have a major hiccup.
• 1:29:34
  SPEAKER_03: I think that's the biggest risk and what keeps me up at night.
• 1:29:39
  SPEAKER_03: Um the flip side is also true, by the way, which is you have demand outstripping supply.
• 1:29:45
  SPEAKER_03: And that's probably a good problem to have, and hopefully they'll lean on that side.
• 1:29:50
  SPEAKER_03: But I think that's probably the biggest risk to the story, which is how do they match capacity relative to the true underlying demand?
• 1:29:59
  SPEAKER_03: And once the demand is there, how do they do they have the ability to actually meet it because of regulation, GMP, all that stuff?
• 1:30:07
  SPEAKER_03: And I think that's gonna be their challenge this year.
• 1:30:13
  SPEAKER_02: Yeah, I think that's all all well said.
• 1:30:15
  SPEAKER_02: You want to have the capacity for where the demand to serve serve the demand you believe is going to be there, but you don't want to get a hell get ahead of yourselves with the capacity as well.
• 1:30:24
  SPEAKER_02: So it's a definitely a matching exercise.
• 1:30:29
  SPEAKER_02: Well, this has been great, guys.
• 1:30:30
  SPEAKER_02: I think this has been overall an awesome conversation.
• 1:30:32
  SPEAKER_02: But before we get out of here, I want to say, Morgan, I did love your flow hub read today.
• 1:30:37
  SPEAKER_02: I'm a guy that really likes what's inside the dispensary.
• 1:30:40
  SPEAKER_02: I don't always enjoy the process of going in the dispensary.
• 1:30:44
  SPEAKER_02: And so the idea of being able to, you know, text, get some recommendations, place an order, have it waiting for you, and go in and out.
• 1:30:52
  SPEAKER_02: That's the kind of thing that would compel me to say, I'm gonna go to that store.
• 1:30:55
  SPEAKER_02: How do you get that, guys?
• 1:30:56
  SPEAKER_02: If you want to be that store, go to flowhub.com and schedule a demo today.
• 1:31:02
  SPEAKER_02: Exciting stuff.
• 1:31:03
  SPEAKER_02: I would like to use that texting technology.
• 1:31:05
  SPEAKER_02: I'm gonna see if that's available.
• 1:31:06
  SPEAKER_02: Any stores in my area.
• 1:31:09
  SPEAKER_02: Scott, great to see you again, man.
• 1:31:11
  SPEAKER_02: Welcome back from your summer excursions and thank you for being here again.
• 1:31:16
  SPEAKER_02: Morgan, always good to see you, my friend.
• 1:31:19
  SPEAKER_02: It's been too long since we had a public conversation.
• 1:31:22
  SPEAKER_02: I think today's show was great.
• 1:31:23
  SPEAKER_02: I hope everyone else out there enjoyed it.
• 1:31:24
  SPEAKER_02: I always like kicking back and having a casual conversation with you guys.
• 1:31:28
  SPEAKER_02: On the podcast side, on the YouTube side, on the social media side, if you guys could do us a solid, if you're on YouTube, thumbs up, subscribe, drop a comment.
• 1:31:38
  SPEAKER_02: That's super helpful to the algorithm.
• 1:31:40
  SPEAKER_02: If you are on the podcast side, hit like or subscribe.
• 1:31:44
  SPEAKER_02: I don't even know what you do on those apps these days.
• 1:31:46
  SPEAKER_02: YouTube is the one that's really taking the taking off for us.
• 1:31:48
  SPEAKER_02: If you're on the social media side, I think all of us are guilty of these these days.
• 1:31:52
  SPEAKER_02: You see somebody's posts, you kind of like getting their head, but you don't actually tell them that you like it.
• 1:31:56
  SPEAKER_02: And so I'm trying to get better at that.
• 1:31:57
  SPEAKER_02: When I see something you guys like, actually hit that like button and show some love.
• 1:32:00
  SPEAKER_02: Appreciate it if you guys could do the same repost of the most helpful.
• 1:32:03
  SPEAKER_02: So thank you guys all for that.
• 1:32:06
  SPEAKER_02: I think we'd leave it here.
• 1:32:07
  SPEAKER_02: We'll be back in a couple of weeks.
• 1:32:08
  SPEAKER_02: We're gonna try to hit uh three shows here in September and make up for a soft August.
• 1:32:13
  SPEAKER_02: So thanks again, guys, for being here.
• 1:32:15
  SPEAKER_02: Thank you all for listening, and we'll see you guys again soon.
• 1:32:18
  SPEAKER_02: The views expressed in this podcast are provided for informational purposes only.
• 1:32:21
  SPEAKER_02: Nothing we said should be researched, should be considered research nor recommendation.
• 1:32:26
  SPEAKER_02: All investing involves risk, including the loss of principle.