Interview with Hadley Ford CEO of iAnthus Capital Holdings

Capital 10X sat down with Hadley Ford, CEO of iAnthus Capital Holdings to discuss his strategy for growing iAnthus‘ multi-state-operations.


Capital 10x: All right so we got the one the only. Any time I see this guy everywhere anywhere is that positive energy beacon and we need this right now. Markets are shredding cannabis stocks. Is this the nuclear winter?

Hadley Ford: No. Things go up, things go down. The volatility of our stock is 170 over the last six months so if you can’t stand this type of ride you know you shouldn’t be in this.

Capital 10x: It’s been wild because what’s happened it really is just macro has taken over everything.

Hadley Ford: Yes, people forget there’s big correlation between our stocks and the Canadian stocks. There’s correlation between cannabis stocks and the general market and you’re just going to see that happen. The market gets a cold and we get the flu.

Capital 10x: In fund management, I always used to say you catch valuation up in the downturns. They’re like how does that work.

Hadley Ford: Exactly right, you just you buy a little bit every month and you let the vol work in your favour.

Capital 10x: Totally right. You know and so I think one opportunity if there is a positive story to be told for the industry is the discrepancy between the valuation of the U.S. MSOs, high quality ones, versus Canadian what I call big brand generic and I think there’s an opportunity here where investors will see for sale signs everywhere. I think something presents itself. Maybe you could talk us through.

Hadley Ford: The stocks in the U.S. are on sale right now. The whole sector is just wildly undervalued. If you look forward ten years from now you’re going to have a trillion dollars of market cap having been created in the U.S. markets.

The top players and you can pick out who those are today we’re going to garner 80% of that so it’s $800 billion dollars of value ten years now you can use any discount rate you want and bring it back to today divide it by the ten leading guys and we’re all undervalued.

Capital 10x: So I recommend if anyone can get the iAnthus deck is very well done. There’s that one page I think just if whatever MSO you’re invested in I think that’s probably the most concise one deck that shows you how this sector evolves in ten years.

Hadley Ford: It’s a very simple idea.

Capital 10x: And those aren’t heroic. So that’s the 10-year vision. Obviously, we’ve had the Farm bill, great. What more can we see on the U.S. because we need catalysts right and that I think is critical to unlock the value. Could you talk us through, you’re closer to this on the ground what are we seeing, what opportunities?

Hadley Ford: From a catalyst perspective. Every piece is another pebble on the scale. Some are gonna be little rocks and some are gonna be big boulders and the strange thing is a lot of these legislative things are going to occur don’t really change our operating behaviour whatsoever but they change the perception and that’s very key because once the perception changes you have other suppliers come in, suppliers of capital, suppliers and different services.

That changes the dynamic of the industry so something like the States act and I think if that gets passed and you know knock on wood that it will, that just shows a willingness of politicians to work together. It’s one more indication of the direction we all know that we’re going.

Capital 10x: That is truly you know it is perception.

Hadley Ford: It won’t change what I do, we’re going to get up every day and grow cannabis and sell it to our customers, but that perception piece it’ll change the cost of all of our inputs dramatically.

Capital 10x: Phenomenal. Now taking it down to iAnthus. Give me your high level. What are the key drivers that you’re looking at the business, the strategic, initiative. I think that’s important it’s the first chance we’ve had to sit down so I think that’d be great for our viewers as well but I think iAnthus has a very compelling business model that I think can be told very quickly and succinctly.

Hadley Ford: Within the cannabis world you really have a choice. We’ve got licenses in eleven states and we can choose what we do with those licenses: we can be a farmer, we can be a retailer, or we can be a seller of branded goods. If you get the multiples of any of those, the seller of branded goods is going to trade at five times. Those other guys are about one times.

So if we’re going to do anything from a business model perspective is to create sticky products that our customers are going to love. They’re going to ask for by name. So if I come home with generic ibuprofen I’m sent back out into the rain and sleet to go get Advil. That’s what you want the end of the day.

So all this infrastructure, everything we have to do, the growing, the processing, the manufacturing, the labeling, the retail environment, that’s all in support of one thing, which is to delight a customer who says I can’t live without an iAnthus product.

Capital 10x: That’s very key right. You’re chasing the 5x not the one-time multiple. So that branding, the B branding I’d love to hear how you got it. I like it.

It’s an empty vessel right, but the thought was that it all has to start with a bricks-and-mortar model which is bizarre right because here we are in 2019 and because of the federal legality and the state regs we have to have a business model that harkens from 1936. If I was here and said I have a great new idea for a sneaker and the real killer app is I’m gonna build stores to sell them with you be like I have this is like a growth-oriented show you can’t deny it anymore, but within cannabis you can’t advertise nationally, you don’t have contract manufacturers, you can’t use social media.

The only way you can build that relationship with a customer around a product is in a retail environment right so a necessary evil is you have to have these retail stores and if you’re going to have them you should have one name that means something so people said that’s where I’m going to go to learn about cannabis, I’m going to be invited in, I’m going to not have any pressure, I’m going to learn about this new thing that’s maybe I’m coming back to it, maybe I’m an experienced user or maybe I’m a new user, but you need to have that type of retail environment.

Capital 10x: You know it’s a very good compare contrast because like sometimes I think at a high level cannabis either becomes that nutrition store there’s like a million things on the shelves.

Hadley Ford: It’s very nutritious, I have a little frosted buds in the morning, I put a little milk on it. Mmm tasty.

Capital 10x: So it could be that Nutrition House or it could be this experiential thing that you know it could take that next leg right and I like I left that vision of what you guys are saying but to do that it can’t be a million different brands on the shelf it’s got to be one brand.

Hadley Ford: From a retail perspective. Yes, exactly. To actually even manage the collateral around being eleven states, in eleven different retail store names would just be cost prohibitive. You need to have one retail vision. People will come to the store, be delighted with that experience, give a great customer service.

While they’re there they’ll buy something, hopefully they’ll buy a product that you’ve manufactured and then they become aware and then they learned to ask for that by name and it means something to them from a lifestyle perspective whether it’s nutraceutical or health and wellness or pain relief or whether it’s exhilaration or something for a more recreational perspective but that’s the concept you have to drive that foot traffic because there is no other way to make that relationship so now

Capital 10x: How many things can we humanly put CBD in?

Hadley Ford: Pretty much everything. I’ve got some right here. This is actually pure extracted CBD oil.

Capital 10x: He did drop some CBD oil into my cup. I didn’t know if I was going to pass out or not.

Hadley Ford: I feel so much more relaxed now. It’s an interest from a CBD perspective right because it’s just a blessing that can be given so you know right now I could have Hadley’s shaving balm. Wow, it’s different right with CBD. But once Gillette foamy sort of blesses it then I’m competing with some of the massive balance sheet, so it’s really interesting from a CBD perspective on why you want to be in that business and where that business actually might go.

Capital 10x: Yeah, and so if you had to say how you drive that, how does your CBD business differentiate from someone else’s and maybe you talk the strategy behind that.

Hadley Ford: Well the strategy around is pretty straightforward right. As I said earlier we want we’re about building that brand piece and we can’t advertise THC. I can’t have a full ad page in the New York Times, I can’t put something on New York one, but with CBD I can and I can have the same name so there can be an ability to have that marketing piece, that advertising piece to develop brand awareness that you don’t have from a THC perspective.

Now if you happen to actually build a great product that people love and desire and can’t live without, which I do think CBD for Life is one of those, you get paid to learn, you get paid to build your business, which is a nice value add.

Capital 10x: CBD for life sells a premium is that right. So those are the brands you want right?

Hadley Ford: That’s what you want something people ask for by name, command price premium, people come back, and buy it over and over again.

Capital 10x: So you’re in 11 states right now.

Hadley Ford: That’s right.

Capital 10x: Which is your favourite state?

Hadley Ford: Which is my favourite kid.

Capital 10x: Yeah exactly, which is the kid that you want to adopt that’s not yours which state?

Hadley Ford: Just thinking about in terms of growth opportunity for the next several I would say Florida’s probably the poster child for what the market can become. It’s going to look a lot like what California looked like.

You’ve got a good population base, you’ve got good patient recognition, you’ve got physicians who are supportive of it, you’ve got a legislative process that seems to be pushing forward, allowing flower, allowing edibles, so I think that state’s going to look pretty good plus you’re allowed to open 35 or 40 stores now and we have a very big grow campus there. We’ve got 35 acres so you we will have all the pieces coming together in that state.

The place that we’re not as much as I’d like to be is California. Now we’ve got a little co pac deal there so we can colour in the whole state. That’s the largest legal cannabis market on the planet and you have to have a serious presence there so that’s a big area of focus for us over the next 12 to 18 months.

Capital 10x: Great, wrapping it up in terms of just capital, how you feel about finishing off 2019, 2020. Just talk us through.

Hadley Ford: You have some change? I was going to hit you up for a little something. This isn’t free.

You always need capital, it’s one of the big big pieces that we focus on right. Another we focus on is our team. You got to develop an a-plus group of employees that can get the job done and that’s job one for us this year.

Second piece is you really have to have systems. You’re going to have these nationwide products, brands, you have to actually be able to measure so you can make them the same wherever you are.

And the third piece is that whole cost of capital piece because this if you think about it we all know seven years from now we’re not going to be manufacturing product in 50 different states. It’s just naturally have to be centralized. You may have contract manufacturers for some products, which means that as you build all these things out you may have stranded capital so you better really pay attention how capital you can put into work and what the cost of that capital is.

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 Writers at 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 is a market awareness client of Capital 10X.

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.

Thomas has over 17 years of global institutional investment management experience. At TD Asset Management he was Director of Global Resources and lead Portfolio Manager for over $1 billion of global equities (resource and sustainability funds). Thomas is a Chartered Financial Analyst and has been featured on BNN Bloomberg, CTV, Benefits & Pension Monitor and the National Post. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.

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Good interview. But other US MSO did well today . On one of tw best days if the year. Why didn’t ianthus go along ? I know were better off on NASDAQ, but its excuse. This company had been on a big downturn why.? And why wasn’t that question asked?

Scott Willis

I think iAnthus is underperforming because it is smaller than the largest MSO’s and has been public longer. Retail investors want to own the newest hottest stock and this mindset does not benefit iAnthus. The company will have its day as operations are fully built out over 2019. Coupled with a significant discount to the larger MSO’s there is the potential for attractive stock returns for those with anything longer than a few month time horizon.