Columbia Care buys EBITDA in Colorado with no cash to fund losses elsewhere

Columbia Care’s cashless acquisition of The Green Solution (TGS) will buy EBITDA and cash flow in Colorado that will offset losses elsewhere, as well as access a new market and brands.

The deal brings the total capital flowing into Colorado following the state’s recent legal change allowing out-of-state investment to $421 million at a 1.83X sales multiple. We expect even more capital to flow into Colorado, especially if more public companies view the positive cash flow as an alternative source of funding and more cash flow-positive operators in Colorado effectively go public by accepting acquirer shares.

Since consensus already expected Columbia Care (NEO: CCHW) to generate positive EBITDA in 2020 as a positive 2H20 offsets losses in 1H20, the question is whether the core Columbia Care expectations are too high and still need to be cut or if the addition of The Green Solution’s positive EBITDA will send estimates that much higher.

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