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High Times Holdings – the owner of High Times Magazine – is planning to go public.
Since 1974, High Times has published a monthly magazine focused on cannabis and the marijuana counterculture.
With legal cannabis sweeping across the United States, you’d expect that High Times might have a thriving business. But that’s not exactly the case.
In the first nine months of 2017, the company reported revenues of $12.4 million. That represented no growth over the same period in 2016. Meanwhile, the company reported a net loss of $16 million during the recent nine-month period.
High Times plans to raise up to $50 million from investors at a price of $11 per share. The offering values the company at $275 million on a “pre-money” basis.
It’s impossible to value High Times on a price-to-earnings basis, since the company is losing millions every year. Therefore, valuing the stock on a price-to-sales basis makes more sense.
Assuming that High Times generated $16 million in revenues last year, the company is valued at about 17-times sales.
Let’s compare that with one of the biggest magazine publishers: Meredith Corp. (NYSE: MDP). The company publishes a wide variety of magazines including Better Homes & Gardens, Midwest Living, Eating Well and Rachael Ray’s Every Day.
Meredith is currently valued at $3 billion, versus its revenues of $1.75 billion. That means the company is valued at 1.7-times sales. Plus, Meredith generates nearly $150 million in annual profits.
It’s tough to argue that High Times – with huge financial losses and zero growth – is valued at 10X more than a profitable magazine publisher like Meredith.
In early 2017, a private equity group led by Adam Levin purchased High Times from the family estate of the magazine’s founder. The price paid? Just $70 million.
Levin – now the company’s CEO – plans to quickly flip his $70 million investment by taking the company public.
Investors should avoid the hype with this one. There are far better investments in the cannabis sector – including companies in Canada and California that are growing extremely quickly.
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Pot Stocks Briefing
Maricann Buys Swiss Cannabis Company
Maricann (OTC BB: MRRCF) plans to expand to Switzerland with a new acquisition of Haxxon. Haxxon has a 60,000 square foot facility near Zurich, where the company produces 2,210 kg of dried cannabis per year.
Maricann plans to use the dried cannabis for finished products, including vape cartridges and pre-rolled cigarettes.
CanniMed To Be Acquired for $1.1 billion
Aurora Cannabis (OTC BB: ACBFF) has agreed to acquire CanniMed Therapeutics (TSX: CMED) in a transaction valued at $1.1 billion.
The purchase price represents a 181% premium to CanniMed’s share price prior to the announcement.
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Weekly Performance (Monday – Thursday):
North American Index: +5.1%
Horizon Medical Marijuana ETF: -2.3%
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