iAnthus Capital Holdings (CSE: IAN; OTCQX: ITHUF) continues to powerfully outperform the majority of cannabis stocks in 2019 as it expands its footprint across the U.S.
It is riding the crest of a wave after closing an $865 million all-stock purchase deal to acquire MPX Bioceutical this week. The firm described it as a “$1.6 billion business combination” and chief executive Hadley Ford declared that 2019 will be a transformational year for iAnthus.
It now has operations in Arizona, Maryland, Nevada, California, Massachusetts, and New Jersey, complementing existing retail and production assets in New York, Florida, Massachusetts, Vermont, Colorado, and New Mexico. It believes this gives it “super-regional footprints” in the east and west of the U.S., reaching more than 120 million potential customers.
iAnthus on the Expansion Trail
The news caused iAnthus shares to increase 8.2% to $5.80 on Wednesday and the price stood at $5.57 by the close of trading on Thursday. That is a sharp increase on the low of $3.76 we saw on Dec. 21, and iAnthus has been on an upward march throughout 2019. On Friday the share price was trading between $5.60 and $5.72.
Cannabis stocks have typically performed well since the start of the year, but iAnthus is ahead of the curve, having piled on more than 20% for investors over the past month. It is well positioned to thrive in the burgeoning U.S. market for a number of reasons. When you are choosing U.S. marijuana stocks you are advised to look for those where the majority of votes are in the hands of common shareholders, and iAnthus fits the bill. It also does reasonably well when it comes to sales per diluted share and it now boasts a footprint that few peers can rival.
It has already built up brand recognition by being an early mover in several states and it serves as both a producer and a retailer. After completing the deal with MPX it now has operations in 11 states, with 15 cultivation and production facilities and 63 dispensary licenses. It now has 450 staff and it is bidding to position itself as one of America’s leading providers of cannabis for both recreational and medicinal purposes.
It now boasts a platform business in Arizona that is generating annualized revenue of around $50 million. MPX had secured one of just six licenses for vertically integrated operations in New Jersey, which was a real coup as there were 146 applicants for those six licenses. It also gained the licenses for four of the 61 dispensaries to be built across Nevada. iAnthus sweeps all that up into its growing empire.
Savvy Operators Join the iAnthus Board
Holders of MPX shares received 0.1673 common shares of iAnthus for each MPX share held, representing a premium of 30.6% based on the closing price of iAnthus and MPX shares on Oct. 17, 2018, when the proposed deal was first announced.
iAnthus will now benefit from increased expertise in the boardroom. It has expanded its board of directors to seven members, with three senior executives from MPX – Robert Petch, Elizabeth Stavola, and Robert Galvin – joining existing members Ford, Randy Maslow, Julius Kalcevich, and Paul Rosen. Those MPX executives have proven themselves to be savvy at leading teams to win competitive licenses in sought after jurisdictions, so there is potential for organic growth at the firm. Further acquisitions could also be on the horizon, as iAnthus is likely to be more appealing to potential vendors.
iAnthus has a strong retail estate in favourable markets, and a formidable management team. Its strategy of seizing market share on both coasts looks interesting, as it is going after the economically prosperous regions. It can be a major player in New York, Massachusetts, and Florida, and its footprint on the west coast has now grown. However, it is worth noting that iAnthus stocks have been subject to volatility, while the cannabis market in general is relatively untested.
The firm is also beholden to some considerable financing activities it will have to repay, so it could come under pressure if revenue is not as strong as forecast, particularly as its liquidity is not as strong as some of its rivals. Its market cap of $415.25 million makes it small by global standards, and its size could leave it prone to volatility, but Ford is bullish and many investors have been won over by his vision and enthusiasm.
In the interest of full disclosure, Capital 10X employees’ own shares in iAnthus. More information on the profiled company can be found by reviewing the public filings of iAnthus Capital Holdings Inc. on SEDAR at www.sedar.com. Writers at Capital10X.com are not certified financial analysts or licensed in the securities industry in any manner and the content of this report may not be complete, accurate or current. iAnthus is a consulting client of Capital 10X and though the information contained herein is believed to be the subjective opinion of the author, this business relationship could create a conflict of interest.
iAnthus Capital Holdings was a market awareness client of Capital 10X.
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