Thread by @rubiconcapital_

Thread: SG&A/g of major Canadian cannabis LPs

(then CoGS/g & Total Cost/g; illuminates which LPs structurally unprofitable @ inevitable $6-7/g retail)

1/ Highest SG&A LPs:

: ~$650m
: ~$350m

SG&A/g (assuming market share of 100,000 kgs each):

CGC: $6.40/g
ACB: $3.50/g

2/ Mid-tier SG&A LPs:

: ~$160m
: ~$140m
: ~$123m
: ~$123m

SG&A/g (assuming market share of 80,000 kgs each):

TLRY: $1.96/g
HEXO: $1.74/g
APHA: $1.54/g
CRON: $1.54/g

3/ Lowest SG&A of major LPs

: ~$44m
: ~$35m

SG&A/g (assuming market share of 60,000 kgs each):

ZENA: $0.73/g
OGI: $0.59/g

4/ Summarizing SG&A/gram for above LPs at above assumed market shares:

: $6.40/g
: $3.50/g
: ~$1.96/g
: ~$1.74/g
: ~$1.54/g
: ~$1.54/g
: ~$0.73/g
: ~$0.59/g

5/ Adding SGA/g & CoGS/g:

: $6.40 + $7.91 = $14.32/g
: $3.50 + $1.46 = $4.95/g
: $1.96 + $2.28 = $4.24/g
: $1.74 + $2.14 = $3.87/g
: $1.54 + $2.20 = $3.74/g
: $1.54 + $2.37 = $3.90/g
: $0.73 + $1.85 = $2.28/g
: $0.59 + $2.08 = $2.43/g

6/

Inevitable retail pricing of ~$6-7/g nets LPs ~$3-4/g.

Above costs/g indicates largest LPs ( ) structurally unprofitable, mid-tier LPs ( ) structurally break-even (or worse), leaner LPs ( , ) best positioned for sustainable +EBITDA

7/ Note:

Assumed long-run market shares (100,000 kg for top, 80,000 kg for mid, 60,000 kg for smaller) sum to 640,000 kg, representing great majority of estimated total kg demand in Canada.

8/ End

If one prefers to not estimate/project market share, absolute dollars of annualized SG&A by above LP presented here without comment:

: ~$650m
: ~$350m
: ~$160m
: ~$140m
: ~$123m
: ~$123m
: ~$44m
: ~$35m