The Chairman of Cannabis
On the call when the CRC announced TerrAscend was awarded a New Jersey Cannabis license:
On that call, it was interesting. They had already gone through the other six operators that they approved. And the process was, I believe, that the chairman would state the name of the operator and say, buy, have a motion to approve. Then somebody would come on, which other commissioner, and would say a motion to approve and then they would vote. And then they got to TerrAscend.
We felt really good about getting approved, even if it was a smaller number than the seven that ended up getting there. The chairwoman said, ‘do I have a motion to approve?’, and nobody said anything. It felt to me like everything froze. I went through all these emotions. I thought, ‘did my line just die?’ I wanted somebody to jump in and say something, but then it meant that, at some point, if they said something, then it meant that it wasn’t just my phone that died, which I was almost hoping for that.
All of that happened in ten seconds or so. Then the chairwoman repeated it. And somebody came on and said, ‘I make a motion.’
On why NJ is a key state for TerrAscend:
New Jersey will be a huge driver of our business one year from now. Hopefully, we have three stores that are rating in Jersey at over $40 million in re. And, we should have a strong wholesale business selling to the other operators in the state as well.
We will have finished our expansion in New Jersey in terms of our cultivation expansion, where we’re going to double our footprint. So that’ll be in Jersey, and Maryland rec will have started or be about to start. We’ll have completed that facility and be fully ready to be one of the top players there in that market, and Pennsylvania will be ready for rec as well.
We have three huge drivers coming up. Gage will be much larger than it is now. There are some amazing deals out there for small to buy small mom-and-pop dispensaries for low single-digit EBITDA multiples. So, we’ll go from seventeen dispensaries right now to closer to thirty or so.
On strategy differences from TerrAscend and other large MSOS:
We wanted to go deep into that. We don’t have a big footprint. And New Jersey, where we aim to be one of the top one or two players, has so much more of an impact on our numbers and we’re so much more leveraged to Jersey than all of the other operators.
I have definitely, even after the approval, been focusing a ton of my time and attention there. When being in this business, you have to keep a lot of balls in the air and certainly Maryland. We are building a large-scale facility down there that should be operational at least in the late summer of this year and hopefully rec will be on the ballot in Maryland. It looks like it will be. So that could be a state that turns a rec, say, sometime next year.
In Pennsylvania, where we have our largest power facility, there is a lot of talk that it will be going rec next year as well, that’ll be done legislatively — because I think they can’t do it with ballot.
*** The following transcript is AI generated and some words have been removed for spacing. Please listen to the epsiode for full context.
*** The following transcript is AI generated and some words have been removed for spacing. Please listen to the epsiode for full context.
Harnessing The Green Wave
On when they first started investing in cannabis:
Back when we first started investing in cannabis, there were other firms that started to pop up and they would invest in cannabis, but they wouldn’t do “plant-touching operators”. We would actually invest in plant-touching operators because we couldn’t ignore the business potential of these companies.
Now we all know because we hear the earnings calls and see the reports that come out of these operators. And when you’re looking at gross margins, some of these companies are in the 60% and you’re looking at EBITDA margins above 30%. These are very interesting business profiles, and they are experiencing massive growth year over year.
So, it’s interesting how these limitations actually create opportunities when you pay attention.
On how Poseidon brings a value-added approach to the companies they invest in:
We don’t just typically write checks.
Although sometimes you just have to know where your attention is best received. Sometimes when you do invest in a company, they’re not as interested in having an active investor at the table. If they’re running their business as well, we tend to just say, ‘you’re good to go.’ But a lot of times we are actively involved, and it’s something we set as an expectation at the outset of the investment for our founders — that we’re here.
We’re partners. At the beginning of the pandemic, we had an all-hands meeting for the entire portfolio and brought on insurance people, lawyers, accountants, just everything. Everybody had resources at hand for what appeared to be a Black Swan event, as Sequoia Capital called it.
On why Posiedon invested in Juul:
They were doing the razor blade model, which is that they were going to be able to work with partners.
They weren’t going to take on the capital-intensive aspect of cultivating processing and infusing the pods themselves. They were going to work with some of these well-known brands like “Jetty extracts” in order to do it. The razor blade model is great because it’s a light touch, then you have a pretty strong impact and a great brand experience.
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