AYRSF - AYR Strategies

[JRM]

What does the price/sales at the current price look like if they grow another 40% this year and another 40% the year after (which isn't an unreasonable assumption)?.  They are only in a handful of states right now and most of their competition is fairly amateurish.  The market is huge and the runway is long if they execute.

 

The MSOS ETF portfolio has an average P/S of 1.75.  Ayr's P/S of 4x doesn't include the recent acquisitions or organic expansion opportunities.

 

Again, not sure the best way to look at relative valuation.  They have a clean balance sheet, are profitable, and are growing quickly.

[Gregmal]

The peer group is unreliable as the profiles have changed drastically over the last couple years. You dont really have a clean comp in terms of companies with 1) clean balance sheet + robust profitability and expanding margins, 2) vertical integration, 3) proven ability to execute and allocate capital in a disciplined manner, 4)success on the regulatory end.

 

To put in perspective, as a pre close SPAC this traded to $17 or so. Granted the shares outstanding is a bit higher, but when you incorporate all of the above its hard not to argue that this should be the industry leader with the premium valuation that everyone talks about. We've gone through cannabis bubble phase 1. Consolidated. Post spac consolidation/settling as sellers and warrants get integrated and shaken out. These things can have quite a bit of velocity once the share distributions shake out and a true investor base forms. I did think for a quick minute the warrants may be an overhang, but nonetheless we've traded from $16-$28 in about a month, and there's still a pretty compelling case to be made that not only is this cheap on a relative basis, but it's cheap in absolute terms.

[JRM]

Thanks.  I'm trying to talk myself out of being too cute with this and just letting it run. 

 

There has been heavy volume the past few weeks, and the share price movement seems to be non-correlated with cannabis ETFs.

[rkbabang]

Thanks.  I'm trying to talk myself out of being too cute with this and just letting it run. 

 

There has been heavy volume the past few weeks, and the share price movement seems to be non-correlated with cannabis ETFs.

 

[spartansaver]

Thanks.  I'm trying to talk myself out of being too cute with this and just letting it run. 

 

There has been heavy volume the past few weeks, and the share price movement seems to be non-correlated with cannabis ETFs.

 

 

Don't follow in my footsteps.

[RichardGibbons]

My rough strategy with high growth stocks is, as long as growth continues, to only sell a bit when I think the valuation looks stretched. And sell all immediately if the moat looks to have collapsed or if there's a hiccup in growth (as opposed to saying, "well, it was one bad quarter, and there were good reasons for that, so let's hold and see whether weakness continues.")

 

I'm planning on using that strategy for AYR, and I don't think the valuation looks that stretched yet. (It's also worth noting that there's a chance that a bubble will form here again, and I want to benefit from that if it does. Selling purely on valuation eliminates that possibility.)

 

[JRM]

Am I reading this right?  12.5% interest per anum with a maturity in 48 MONTHS?  That is highway robbery.

 

I hope some regulatory changes come soon to allow cannabis companies to operate under more fair conditions.  Safe banking along with tax code changes should be worth a big multiple re-rating, I would think.

 

 

[Gregmal]

Yea, I dont really like the terms and prefer honestly that they just sell 2.5M shares if they need the cash. As a shareholder, you are taught to care about dilution, but the market has for awhile now been saying it won't penalize you for dilution. But a 12.5% interest rate has real consequences if they dont execute.

[rkbabang]

Anyone hold this in Fidelity?  I still don't see the new trading symbol in my account AYRWF.

 

It just says: "00249N100 AYR STRATEGIES INC SUB VOTING SHS ISIN #CA00249N1006"  but has no symbol, and I couldn't trade it if I wanted to, not that I planned to today, but still.

 

[JRM]

I'm having the same thing with TD Ameritrade.  I've sent them a message with no response. 

[rkbabang]

It seems like things like this take longer with OTC stocks.  WFCF is doing a reverse split today and that is blanked out in my account as well.  If that was a stock on a major exchange it would have just shown up correctly.  But these things usually only happen for 1 day.  AYR was not showing up correctly on Friday and then now not today either, so this is longer than usual.

 

[Gregmal]

LOL I have the AYR.A shares...but they're at IB, which has its own issues at the moment...who'd have thought I really did need to have a half dozen brokerage accounts....

[JRM]

I'm not too worried about it at this point.  I may call them later in the week if its not resolved.

 

TD Ameritrade seems to be having some issues lately.  This  past Saturday I had notice of a margin call on one of my accounts.  I have no idea where it came from.  Sunday morning it was gone.

[rkbabang]

LOL I have the AYR.A shares...but they're at IB, which has its own issues at the moment...who'd have thought I really did need to have a half dozen brokerage accounts....

 

I used to have Ameritrade, First Trade, ETrade, accounts for various reasons I closed them all and migrated to Fidelity over the years.  Now I just deal with the quirks of one brokerage.

 

[RichardGibbons]

I've got the same issue at TD Waterhouse across the border to the north.

[Gregmal]

Significantly upsized the offering and also converted $25M worth of warrants. Over $150M cash currently on the balance sheet and M&A fully funded.

[JRM]

Looks like the transfer shares for AYRWF were put in my account around mid-day today.

[Gregmal]

Ayr Strategies Files Preliminary Base Shelf Prospectus

Toronto, Ontario, December 14, 2020 – Ayr Strategies Inc. (CSE: AYR.A, OTCQX: AYRWF) (“Ayr” or the “Company”), a leading vertically integrated cannabis multi-state operator, is pleased to announce that it has filed a preliminary short form base shelf prospectus (the “Prospectus”) to provide the Company with the flexibility to take advantage of financing opportunities and favourable market conditions, if and when needed, during the 25-month period that the Prospectus, once made final, remains effective (the “Effective Period”).

 

The Prospectus has been filed in each of the provinces and territories in Canada. The Prospectus, when final and effective, will enable the Company to offer, issue and sell, from time to time: subordinate voting shares; restricted voting shares; limited voting shares; warrants; subscription receipts; debt securities; convertible securities; units; or any combination of such securities (collectively, the “Securities”) for up to an aggregate offering price of C$500,000,000 (or its equivalent), in one or more transactions during the Effective Period.

 

The Company may also use the Prospectus in connection with an “at-the-market distribution” in accordance with applicable securities laws, which would permit securities to be sold on behalf of the Company through the Canadian Securities Exchange (or other existing trading markets) as further described in the applicable prospectus supplement. To date, no agreement has been entered into with respect to such a distribution.

 

The Company may use the net proceeds from the sale of Securities for general corporate purposes, capital projects, internal expansion, or for the acquisition of other businesses, assets or securities by the Company or one of its subsidiaries.

 

 

 

Weren't they just "fully funded"? Why start considering share issuance now? Seems a little contradictory.

[Gregmal]

To expand, and maybe play a bit of devils advocate here, is there a counter argument to there beginning to be a very feint smell of BS/inconsistency here? I'm not at the "sell down dramatically" point yet, but it is rearing its head a little bit.

[JRM]

I think we discussed earlier that share issuance is preferable to debt issuance under bad terms if they have a good acquisition queued up.

 

It wasn't that long ago they were talking up share buybacks.  I take it they're not buying back shares anymore. 

[Gregmal]

With the benefit of hind site I take the buyback as largely "confidence inspiring" rather than a planned and intended course of action. They had a lot of time to implement it and this even before the covid crash and the numbers really weren't anything material, IMO. They hadn't been buying for a while now.

 

I would prefer to issue shares vs expensive debt, but they just took down as much 12.5 coupon debt as they could. And in concert with this, stated one of the justifications was that it was non dilutive. They got an additional $30M I believe from warrant exercise. This in addition to supposedly producing robust FCF and having set in motion an integration strategy that should produce even more. So why the filing to basically run an ATM? My only guess is that should shares continue to rise they may look at start going that route. But if nothing else, the timing seems poor and contradicts a lot of what they've said and done the last couple quarters.

[villainx]

The rational from commenters on another post (for another company) for standing shelf registration was that it was standard practice.  Just something to have ready.  I don't remember if that other company ever went through with the issuance though.

 

In this case, maybe it's just just in case too.  Just like their buyback plans.

 

 

[movys]

Having an effective shelf registration is ordinary course for every opportunistic management team, particularly those for whom M&A is a core part of their growth strategy.  The shelf registration is broad (debt, stock, warrants, etc.), and while it could indicate something material coming down the pike, it is typically something just to have in order to be able to move quickly should an opportunity present itself.  I view this as a savvy move and am frankly surprised they haven't done this sooner.

[Gregmal]

Gotcha. Think that's probably the most reasonable and accurate interpretation. The timing is just coincidental. Perhaps they're just running through the entire playbook now that phase 1 of this "project" is largely behind them, and opening every possible door in terms of options for tapping capital.

[rkbabang]

I was thinking the same thing.  It may just be a prudent preparation in case it is needed.  I like a management that is willing to buy back stock when cheap and issue when expensive.  Issuing shares seems like a better way to finance growth than borrowing at 12+%.