C21 Investments: A Shining Example in the Cannabis Industry

By Todd Harrison via Cannabis Confidential (October 13)

Following my recent trip to the BZ Cannabis Capital Conference in Chicago, I traveled west to meet Sonny Newman, the founder and CEO of C21 Investments CXXIF. Founded in Nevada, C21 was the first licensed cannabis operator back in 2015.

When C21 first engaged us five years ago, the company was undergoing a change in leadership. The previous management had become too focused on promotion. Sonny, taking charge, made a significant move by loaning the company over $30 million.

Today, the results speak volumes: five consecutive years of positive free cash flow have allowed C21 to retire that $30 million in senior debt, pay $7.5 million in 280E taxes, and invest $3 million in expanding cultivation. Throughout this period, no new financing or shares have been issued, and C21 has even managed to decrease its fully diluted share count by 4%.

Remarkably, C21 stands out as the only public cannabis company that has paid off its senior debt using free cash flow, while maintaining the same number of shares outstanding as it had at its peak. Sonny’s financial acumen is clearly evident.

I was eager to meet this notable figure in the cannabis world. Previously, my interactions had primarily been with Bruce Macdonald (Chairman) and Sammy Armenia (VP), who were both set to meet me in northern Nevada.

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After a late change—the flu sidelined Sammy—I made my way from Chicago to Reno on Wednesday night to meet Bruce. Following a brief rest, I met Sonny for breakfast before touring their cultivation and dispensary locations.

The moment I entered the restaurant, my expectations were colored by pop culture. I half-expected someone like Ace Rothstein, but Sonny turned out to be calm and soft-spoken instead.

Though he spoke little, his words held significance.

The cultivation facility showcased their expansion, funded entirely through internal profits. They have doubled their capacity in response to a new retail dispensary acquisition, which they anticipate will lead to double-digit growth and potentially double their earnings.

The indoor cultivation facility measures 104,000 square feet.

Next was our visit to the first dispensary established in Nevada: the O.G Silver State. This location still evokes a sense of history as it retains elements from its past.

This 8,000 square foot dispensary boasts over 700 products.

The sales figures underline Silver State’s dominance, averaging $12.5 million in sales and $4 million in EBITDA per store, in comparison to the state average of $7 million per store.

Until recently, Silver State operated only two retail outlets—Sparks and a 6,000 square foot store in Fernley—serving over half a million returning customers annually.

“We know our customer and our customer knows us,” Sonny remarked, speaking to his roots as we traveled to the new shop, their third dispensary located in South Reno.

The new store’s location caught my attention. Situated in a busy strip mall, it was alive with people shopping for various items.

The inside of the dispensary was spotless, and a steady stream of local customers filled up their baskets with popular products.

In my pursuit of insight, I decided to try their signature White Widow pre-roll. Easily stashed away for later, it did not disappoint. Producing excellent cannabis at reasonable prices is certainly a valuable skill.

The cannabis industry features compelling stories, with both successes and failures. Few companies are debt-free and show clear growth trajectories, particularly without federal help.

All while being led by an adept entrepreneur…

C21 CEO Sonny Newman

…who is holding a strong position in what seems to be an overlooked market.

CXXIF one-year chart

However, my brief visit to the desert reinforced a lesson: betting against Sonny Newman, especially with a market cap of just $25 million, might not be wise.

Wishing everyone safe travels and please enjoy responsibly.

If you’d like to help Mission [Green] change federal cannabis policies, please click here.

CB1 Capital has a position in C21 and Todd Harrison sits on the Board. Nothing contained herein should be considered investment advice.

Photo by Nicholas Ceglia on Unsplash

This article comes from an external unpaid contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.