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Will there be a wave of cannabis stock buyback programs by public companies?


Among mainstream industries, public companies will sometimes repurchase shares they issued in the past, ostensibly to increase the value of the remaining shares held by investors, but it’s a move that’s been utilized sparingly in the cannabis space.

However, some industry observers think that might change. Viridian Capital Advisors questioned whether the marijuana industry could be poised for a small wave of share buyback moves, after Chicago-based Verano Holdings Corp. (OTCQX: VRNOF) this week announced it would repurchase up to $50 million in Verano stock, or 17.3 million shares.

The move by Verano “makes abundant sense,” Viridian wrote in a quick analysis, noting that the company was sitting on almost $200 million in cash at the end of March. In addition, the company’s stock price remains depressed, and it’s up only about 8% since the Drug Enforcement Administration confirmed that it’s in the process of moving cannabis to Schedule III.

Viridian suggested that other multistate operators, such as Florida-based Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) and Chicago-based Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF), also could benefit from devoting some of their respective war chests to stock buyback programs. Both of these companies, Viridian pointed out, have enterprise values superior to their earnings, along with “generally good liquidity” and “solid credit.”

While sporadic, the tactic has been used in the public cannabis sector before.

Going back to 2021, Ayr Wellness Inc. (CSE: AYR.A) (OTCQX: AYRWF) approved the repurchase of up to 5% of its shares at the time, with a 12-month limited repurchase program, also in a bid to boost the company’s stock price, The Motley Fool reported at the time.

Then last year, another Chicago-based MSO, Green Thumb Industries (CSE: GTII) (OTCQX: GTBIF), decided to set aside up to $50 million of its funds toward repurchasing 10.4 million shares, a buyback program that is still open until September this year.

Prior to Verano’s announcement this year, smoking accessory company Turning Point Brands (NYSE: TPB) also repurchased 72,545 shares of its stock for $2.1 million.

If other public cannabis companies see such a strategy having a positive effect on the stock value of their peers, it could easily become a trend among the struggling sector.

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