High Times Achieves Vertical Integration with Cannabis Production Ahead of Stock Listing – IPO Edge
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High Times Achieves Vertical Integration with Cannabis Production Ahead of Stock Listing
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High Times Achieves Vertical Integration with Cannabis Production Ahead of Stock Listing

By John Jannarone, IPO Edge

High Times is now vertically integrated.

Formally known as Hightimes Holding Corp., the owner of the eponymous magazine and operator of Cannabis Cup events, announced it has a signed letter of intent to acquire California-based cannabis holding company Humboldt Heritage Inc. along with its subsidiaries Humboldt Sun Growers Guild and Grateful Eight LLC. The acquisition equips High Times with cannabis growing, processing and product manufacturing capabilities direct from the most coveted cannabis community in the world, Humboldt County.

The announcement follows recent news that High Times will open two flagship retail stores – in Los Angeles and Las Vegas – offering cannabis under dispensary licenses. With both production and retail operations,  High Times becomes one of California’s largest vertically-integrated operators, offering exclusive access to 18  Northern California-based brands including ​True Humboldt ​and leading cannagar producer ​Cuba Libre.​

“High Times’s mission is to connect consumers to cannabis – not only the best access and experience, but the best products available to our consumers across the country, and eventually the world,” said Hightimes Holding Corp. Executive Chairman Adam Levin. “This addition adds 200+ of the best cannabis-producing farms in the world, and the rest of the capabilities we’ll need to develop and grow into the future into the High Times family! I envision the farmers of the Humboldt Sun Growers Guild will become a featured part of our cannabis cup events.”

Top-line synergies should boost High Times after its decision to offer cannabis products. For instance, the new locations will provide a cross-marketing opportunity, both with the High Times and Cannabis Cup brands. The stores will sell logo memorabilia, licensed products, and a variety of cannabis products, including local strains that have won Cannabis Cup awards.

“This allows our cultivators’ and their artisan brands unprecedented exposure to consumers as High Times reaches millions of people all over the world. The farmers in Humboldt Country have been leading parallel missions to High Times over the past 45 years,” said  Humboldt Heritage Inc. CEO Barry Nachshon. “Knowing that we will be part of the High Times family, as well as a key manufacturing and supply chain partner as the company enters the retail and delivery markets in California is very exciting for our team.”

Until recently, High Times had focused mainly on being a media company. Like many other companies in the industry, High Times avoided “touching the plant” to ensure it could comply with all regulators and obey listing rules on certain stock exchanges. Companies that do handle cannabis directly tend to list on Canadian exchanges or trade over the counter in the U.S., indicating that may be where High Times shares trade first. The company hasn’t yet announced a formal listing date or exchange for the shares.

The decision to enter the dispensary business comes as many small operators have struggled to keep up with larger players such as MedMed Enterprises Inc., Harvest Health & Recreation, Inc., Medicine Man Technologies, Inc., and Terra Tech Corp. By purchasing or partnering with mom-and-pop dispensaries, High Times can elevate businesses to a higher competitive plane using its brand power and industry expertise.

The company also recently acquired DOPE Media for $11.2 million. DOPE has regional publications along with Dope Cup events that complement Cannabis Cup events. Hightimes also bought Buyers Industry Guide, owner of the BIG Show industry conferences. The B2B tradeshows gather twice annually in Miami and Los Angeles with over 10,000 industry guests annually.

High Times’s revenue rose 21% in the six months through June 2019, driven largely by a jump in publishing and advertising revenue.

The company has sold shares to over 26,000 investors in an offering of up to $50 million which remains open until March 31. Some of the shares sold have generated cash that won’t appear on the company’s balance sheet until the stock begins to trade.

In addition to the share offering, High Times converted $28.6 million of debt to equity. That transaction dramatically reduced the company’s leverage and gave it scope to acquire some complimentary businesses.

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