Capital 10X has previous highlighted Vireo Health as an undervalued and underfollowed company with a unique science-first focus. We believe Bruce Linton saw something similar with his decision to back Vireo Health.
We spoke with Bruce Linton and Vireo CEO Kyle Kingsley this afternoon to get a better understanding of the value Linton can bring to the Vireo team.
Science-First Provides Unique Opportunity
As Linton put it, coming back into a company with a medical focus reminds him of the origin days of Tweed, before it became Canopy Growth.
While the Vireo Health team already has a roster of executives and employees with a strong health sciences background, we believe Linton brings valuable capital markets experience to the table.
He stated that his goal is to bring “more eyeballs and a capital markets push to knock down the cost of capital” for Vireo. He will also be able to bring more deal flow to the company.
We believe it is the science-expertise of Vireo that has attracted Linton and his access to capital. It’s a clear differentiator from other MSOs and it provides a solid value-proposition for consumers (and investors) that other MSOs can’t match at this time.
One example of the value derived from their science-focus is their data-driven approach to product monitoring. For the last four years, Vireo has been working with a 3rd party company for post-market surveillance for all products in New York and Minnesota.
Kingsley confirmed they have not received a single report of any adverse effects from any of their products over that time. He commented that this is part of the reason he feels their vape products can be sold responsibly.
What the Future Holds
While Vireo has started as a medical-first company with solid IP, it’s clear they will be looking to develop at least one recreational brand under Linton’s guidance. At that point, they may even create a parent company such as “Vireo Growth” to structure their cannabis operations.
Linton also stated that he likes Vireo’s solid financial runway — multiple quarters at their current burn rate. They have consistently taken the less exciting “lean approach” to the cannabis market and it’s certainly paying off during these tough times.
Ultimately, this runway will provide the company enough time for Linton to make the right introductions for any additional capital needed (family offices, etc.).
While Linton seemed happy with the 11 states that Vireo is currently operating, it’s unclear what exactly an expansion would look like.
As he described it, and Capital 10X agrees, there were many overvalued companies, some of which may be undervalued at this point. Either way, when capital comes back, it will be highly selective.
The valuations will return only for robust companies on the right markets. Linton placed his bet on Vireo. We believe it’s a smart choice, and tough to find another name in the U.S. space where he can add this much upside.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.