Marijuana MSO Greenlight’s dividend an apparent first for the industry – and last for now

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Missouri-based multistate operator Greenlight Dispensary is believed to be the first big U.S. marijuana company to issue a dividend to investors – and it could be the last, at least for the foreseeable future.

The privately held company issued a dividend in April that makes up a little more than 4% of the total capital invested in Greenlight and totals seven figures, John Mueller, co-founder and chief executive officer, told MJBizDaily.

He declined to be more specific about the total value of the dividend.

While it’s a special dividend at this stage, Mueller said he hopes it will eventually be issued quarterly.

“We’re trying to standardize the cannabis industry and show that we can issue and return capital to our shareholders just like any other industry,” Mueller said.

Greenlight currently operates 27 cannabis stores in Arkansas, Illinois, Missouri, South Dakota and West Virginia.

The Kansas City-headquartered company aims to expand to 40 this year.

Greenlight, which also has more than 150,000 square feet of cultivation and manufacturing space across its five-state footprint, brought in more than $250 million in revenue and turned a profit last year, Mueller said.

The company is also debt-free, unlike so many of its competitors across the industry.

Florida-based marijuana MSO Ayr Wellness, for example, reported $400 million-$500 million in gross debt, analyst Matt Bottomley noted on the company’s full-year and fourth quarter earnings call on March 10.

Dividends from other companies unlikely to follow

Greenlight is funded largely through cash flow and operations and requires minimal capital, Mueller said.

“(That’s) different from all of our peers that are kind of our size,” he said.

“So we don’t need to worry about paying down high teens or mid-teens interest rates, and we don’t have those handcuffs on from lenders, allowing us to give back to our shareholders.”

Some companies are cash-flow positive and could issue dividends in theory, Jason Wilson, a cannabis research and banking expert at New Jersey-based exchange-traded fund issuer ETFMG, told MJBizDaily via email.

Massachusetts-based multistate cannabis operator MariMed, for example, reported positive cash flow from operations for the third year in its 2022 financial results.

Abner Kurtin, executive chair of Ascend Wellness Holdings, said during a fourth-quarter and full-year earnings call in March that the New York-based MSO is nearly generating positive cash flow from operations.

But given the high cost of capital that much of the cannabis industry is grappling with, any company with excess cash flow will likely put it toward debt retirement and growth opportunities.

“For companies that have excess cash flow combined with manageable debt loads, cost-effective access to capital and limited planned capital expenditures, given the relatively suppressed valuations in the industry, I would expect to see those companies conduct share repurchases before issuing dividends,” Wilson said.

M&A opportunities abound

Before joining the cannabis industry, Mueller and his co-founder/brother, Jim, worked as consultants for banks on defaulting loans.

Sometimes, they would buy defaulting manufacturing or specialty construction companies, turn the businesses around and sell them.

“The more hair on the dog, the more we like it, and we’re not scared of much,” Mueller said.

So far, Greenlight’s growth strategy has been to win its licenses through lotteries rather than acquire them from other companies.

Now, with the high number of distressed M&A opportunities available, the company will likely announce some acquisitions in the near future, according to Mueller.

Rather than relying on equity or high-interest cannabis lenders as many public companies do, Greenlight will use cash and Federal Deposit Insurance Corp. (FDIC) debt from federally insured institutions such as Lead Bank or Focus Bank, both based in Missouri, to pay for those acquisitions.

Mueller said he’s glad Greenlight is privately held.

He also noted that executives at public companies likely wish they could go back to being private in the current economic environment through a leveraged buyout.

But Mueller also believes the current low valuations of public companies aren’t reflective of how well-run they are.

“They’re all making a significant amount of money today,” he said.

Chicago-based marijuana MSO Green Thumb Industries (Canadian Securities Exchange: GTII; over-the-counter markets: GTBIF), for example, is trading at four or five times its earnings, Mueller noted, while the average stock trades at 13 times its earnings.

“Everybody’s going to regret not coming in at the floor here,” he said.

Kate Robertson can be reached at kate.robertson@mjbizdaily.com.