Catalysts
- Federal rescheduling of marijuana from Schedule I to Schedule III of the Controlled Substances Act is an inevitability from a scientific and sociopolitical perspective within five years. Rescheduling will eliminate the application of the punitive s. 280E of the Internal Revenue Code which prohibits multi-state operators like Verano from deducting business expenses in the calculation of federal taxes. Rescheduling will further enable greater inflows of capital to the medical and recreational cannabis industries and encourage financial institutions to offer services to operators within such industries, lowering debt servicing costs. This development will buoy seasoned operators like Verano, with established cultivation means and distribution channels into profitability. In the author’s view rescheduling is not a question of “if” but “when” and when rescheduling happens, Verano - with its annual revenues of $800MM - $1B - will warrant a market capitalization of at least $2B which forms the basis of the fair value price.Vested Leadership
- George Archos, the founder and current CEO, is also the largest individual shareholder with 27MM shares. Mr. Archos would appear to be in this business to build a long-term, veritable success. He has maintained his shareholding - confident of the inevitability of marijuana becoming medically and commercially available to most Americans - over periods in which shares were more liquid and trading at multiples of the current price. Potential investors should now consider getting rich with George while the company - though not currently profitable - generates some $800MM in revenues and enjoys growing free cash flow, is valued at $420MM. The company has the resources and leadership necessary to outlive the current silliness in American politics vis-a-vis a plant that the world already knows mellows, intoxicates and offers a viable alternative to opioids in the management of pain.
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Disclaimer
The user Cwburton has a position in NEOE:VRNO. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
