Grown Rogue Goes Retail
A Conversation with CEO Obie Strickler About the Big Push In New Jersey
Warning: The following column is about a microcap company. Microcaps by definition can be illiquid and experience wild gyrations. It is important to do your own due diligence, rely on your own research and understand that microcaps can be very volatile. Please proceed reading using your highest levels of caution. That being said…
Grown Rogue (Canada: GRIN, OTC: GRUSF) is blazing a trail showing the cannabis industry how focus, discipline and operational excellence can lead to free cash flow, growth and excellent investor returns. I first wrote about the company in December of 2022.
The company’s sole focus is on craft cannabis flower cultivation, which has led to Grown Rogue being the #1 flower in the fiercely competitive Oregon market and a top 5 indoor brand in Michigan.
Now the company is about to enter New Jersey, which has limited supply, sky high prices and mediocre quality flower.
And on top of that Grown Rogue just announced that they are getting involved in retail dispensaries as well. Could this cause the company to lose the focus that has been the key to its success?
Obie Strickler, Grown Rogue’s founder and CEO, agreed to a follow-up to last year’s interview. Despite no analysts covering the best performing cannabis stock for the last two years, I continue to believe the company should be studied and analyzed for their success, which I think is only just getting started.
Here is what I learned in our interview:
Grown Rogue is investing in retail but is not in charge operationally and thus will not lose focus of its mission.
The company gets guaranteed distribution and improved economics without sacrificing company bandwidth
This may be the first of up to 6 to 7 dispensaries in New Jersey that Grown Rogue invests in
Both the New Jersey dispensary and the cultivation facility will open in Q2, with the cultivation facility seeing the first sales in Q3.
Grown Rogue is close to entering an additional limited license state as well
I now believe that Grown Rogue should put up eye-popping growth numbers in Q3 and Q4, with Q4 possibly showing cash flow growth of more than 200% year over year.
I think the company has the potential to end the year at a $20-$25 million EBITDA run rate and get to around $40 million in EBITDA in 2025. This is up from $7-$8 million in 2023.
What makes this remarkable is that the fully diluted market cap for all options, warrants and convertible debt is approximately $70 million. And that gives the company no credit for the cash that the options and warrants would bring, so the enterprise value is probably less than $60 million.
And don’t sleep on Grown Rogue’s partnership with Goodness Growth (OTC: GDNSF). Not only is Grown Rogue helping in Maryland, but the big impact will be when Minnesota goes full adult use in 2025 and Grown Rogue shares in the upside when that happens.
The company’s mission of becoming the first national craft brand is coming into focus as they will have a presence in six states by year end and with more states on the way in the future.
I hope you enjoy this interview as much as I did.
*Please note that there are two points in this interview where we had a bit of technical difficulties. Both moments get resolved quickly and shouldn’t take away from enjoying the interview!
Here is the Spotify link to listen to audio only: