Disclaimer: The below post is the Q2 2025 Investor Letter that I sent to investors in the Mindset Value Wellness Fund. This post is NOT a solicitation. I talk about stocks that I own and my view of the future. It is imperative that you do your own due diligence and not rely on anything written below. I’m posting this in order to show how my writing translates to actual performance. With that, I hope you enjoy and gain insights.
The Mindset Value Wellness Fund lost 11.7% during Q2 on a net basis. Year-to-date, the Fund is down 23.8% on a net basis.
Grown Rogue Can Compete with Anyone
Our losses this quarter were primarily driven by our largest position, Grown Rogue (OTC: GRUSF). We believe investors are fundamentally misunderstanding Grown Rogue’s business, and we remain very bullish on its future.
Nothing better illustrates this misunderstanding than the market’s reaction to its recent earnings.
Admittedly, the company reported a noisy fourth quarter, and its launch into New Jersey has been slower than expected. But investors completely missed the most important part of the Grown Rogue story.
Almost halfway through the company’s Q1 press release, the company shared some eye-popping KPIs (Key Performance Indicators). What stood out was not only Oregon’s Average Selling Price (ASP) but also its Cost Per Pound to Produce. Oregon indoor flower is now selling for $661 per pound, but even crazier than that low price was that Grown Rogue’s cost to produce flower—not biomass—had fallen to $414 per pound.
Importantly, “cost to produce” includes selling costs, making it a true “four-wall” expense that reflects breakeven pricing at the facility level, excluding corporate overhead. This means Grown Rogue can break even at flower pricing of $414 per pound in Oregon and $463 per pound in Michigan.
We are confident that every other publicly traded cannabis company would be bankrupt if they had to operate at these price levels. Larger Multi-State Operators (MSOs) continue to exit competitive markets like Michigan—TerrAscend announced this quarter that it is leaving Michigan after calling the state “a very difficult market.” Yet Grown Rogue produced a 36% EBITDA margin in Michigan in Q1.
The most shocking realization is not that Grown Rogue can outcompete larger MSOs, but that, with this cost structure, it would be competitive with California greenhouse flower. According to private California greenhouse operators, average prices exceeded $500 per pound in Q2 and started April above $600 per pound. The idea that an indoor craft cultivator like Grown Rogue can match massive greenhouses at scale should stop investors in their tracks.
Even more remarkable is that the company can break even (before corporate overhead) at $414 per pound, which is approaching bargain-basement “Croptober” pricing in California with higher quality craft flower. This is Grown Rogue’s true advantage: it has figured out how to operate as leanly and efficiently as possible, allowing it to compete with the lowest-cost producers while maintaining high quality.
Now, Grown Rogue is taking this model on the road, having expanded into New Jersey, a market with a limited number of cultivation licenses. Pricing there is approximately $2,500 per pound, though trending downward. Due to limited cultivation capacity, however, pricing will likely remain higher than in more competitive markets.
While New Jersey may be 10–20% more expensive to operate in than Oregon or Michigan, there is no reason to believe Grown Rogue’s long-term costs will be materially higher. We estimate its long-term breakeven point in New Jersey at $550 per pound. With 12,000 pounds of annual production, analysts can project meaningful cash flow once the New Jersey operation reaches full capacity. Illinois is likely next, with additional markets after that.
Grown Rogue has developed a proven, reproducible model that can survive even the most severe price compression, as demonstrated in Michigan. This makes the company a prime candidate to benefit from the ongoing distress in the cannabis market. Empty facilities, lender repossessions, and distressed sales present significant opportunities. Few operators have proven they can manage in such difficult conditions, but Grown Rogue is one of them.
We remain hyper-focused on unit-level economics, which reveal the durability and competitive advantages of cannabis operators. Grown Rogue stands out as one of the industry’s best. We believe that as the company expands, this strength will become more visible in its income statement, and the stock should resume its upward trajectory.
Closing the Fund to New Capital Because Uncle Arnie’s is a Rocket Ship
Uncle Arnie’s continues to radically outperform our expectations. When we first invested, the company had just closed out 2023 with $4.5 million in revenue. Today, it is running at a revenue run rate north of $22 million, despite persistent inventory shortages due to surging demand.
Uncle Arnie’s ranks #1 or #2 in every market it fully competes in and is expanding aggressively from five to fifteen states, launching new products, and building out its salesforce to dominate the hemp beverage category.
As of this letter, we are in the final stages of closing Uncle Arnie’s next fundraising round, including a new special purpose vehicle specifically to invest in the company. We will share more details in the coming weeks, but we expect a significant increase in the value of our investment in Uncle Arnie’s. It is about to become the fund’s second-largest position.
We believe Uncle Arnie’s could reach $50 million in revenue in 2026 and $100 million in 2027, based on current forecasts. This rapid growth from a private company presents a challenge: how do we accurately value the position each month?
Uncle Arnie’s is not a public company, and we have been waiting for observable events, like a fundraise to increase or even decrease the valuation of our burgeoning private portfolio. The problem is that Uncle Arnie’s has grown so fast, and the size of the position is so large that we need to try to value it properly. The gold standard is to hire an outside valuation firm and that can quickly be quite expensive.
We plan to develop a valuation formula in consultation with our hedge fund administrators to try to value this position at an appropriate valuation. But the pace of growth and thus value creation makes us uncomfortable taking in additional capital at this time, because it could cause dilution to existing investors if we don’t value Uncle Arnie’s properly. Just one thought experiment is that if we apply the same sales multiple as a valuation tool, our investment could be worth 80% more by year-end, simply because of breakneck growth. And by next year, it is possible that the Uncle Arnie’s position could be worth more than all the other investments in the fund. Valuing that properly every month could prove challenging and detrimental to existing investors.
We may eventually hire a third-party firm for valuation if we consider accepting additional capital. Until then, we have decided to close the Mindset Value Wellness Fund to new capital.
Frankly, we “blame” Theo, Alberto, and the entire Uncle Arnie’s team for their phenomenal execution. Their success has created a wonderful problem for us.
Glass House on ICE
On July 10, ICE raided two Glass House (OTC: GLASF) facilities, arresting hundreds and, tragically, resulting in the accidental death of one worker. ICE also alleged the presence of underage undocumented workers. While federal law permits teenagers to work in agriculture, California law prohibits anyone under 21 from being on-site at a cannabis cultivation facility.
Having toured Glass House many times, I’ve never seen anyone who appeared underage. This situation has left me shocked and with more questions than answers. Unfortunately, the media—on both sides of the political spectrum—has turned Glass House into a political punching bag, further clouding the facts.
A month earlier, Glass House offered preferred equity holders (including us) the option to convert into a lower-interest convertible or redeem for cash. Given our need for liquidity (to increase our position in Uncle Arnie’s and rebalance our portfolio), we chose cash.
We have not reinvested in the common stock and have further reduced our Glass House exposure across funds. Why? Because our job is to assess risk, and right now, we cannot accurately quantify the regulatory risk. Cannabis investing is already complex; this uncertainty pushes us to remain on the sidelines—for now.
Private Investing Housekeeping
· One of our smaller private cannabis debt investments stopped paying interest and is exploring a sale or wind-down. We marked it down 50%, though we hope to recover the full amount. This position represents ~1% of the portfolio.
· A small cannabis beverage investment raised dilutive capital and lost a founder. We marked it down 30%. This position represents less than 0.8% of the portfolio.
· We have not yet marked up or down our other private investments, including Uncle Arnie’s, as there have been no observable third-party transactions. This may change upon the completion of Uncle Arnie’s funding round (expected in July or August). We anticipate that the increase in valuation will more than offset the markdowns above.
Summary
We are bullish on the second half of the year. We expect Grown Rogue to gain momentum in New Jersey and to potentially take advantage of broader industry distress. We also see Uncle Arnie’s value soaring as its triple-digit growth continues.
Cannabis reform remains a potential catalyst. From credible sources, we hear there is progress on rescheduling with the Trump administration. But even if reform continues to take longer than expected, our portfolio companies continue to grow and expand their competitive advantages. We are excited about what the rest of this year will bring.
As always, please reach out if you have any questions or comments.
Sincerely,
Aaron M. Edelheit