Simply Solventless Concentrates (TSXV: HASH) - Quick Caps

The cannabis industry has been no stranger to volatility, yet Simply Solventless Concentrates Ltd. (TSXV: HASH) stands out as a shining example of what disciplined growth and strategic execution can achieve. With eight consecutive profitable quarters, a projected $55M in annualized revenue for 2024, and strategic acquisitions fueling growth, HASH is positioned for a valuation re-rating. However, near-term market dynamics, including warrant exercises and trailing valuation multiples, have created what might just be a golden opportunity for savvy investors.

The Valuation Disconnect: Trailing vs. Pro Forma Multiples

One of the most compelling aspects of HASH’s current investment thesis is the disconnect between its trailing and forward valuation multiples, presenting a clear opportunity for a re-rating.

• Trailing Metrics: HASH’s current trailing P/E ratio of 49.17 and EV/EBITDA of 19.6 suggest the stock is priced for perfection, making it appear expensive when evaluated solely on historical performance. These numbers reflect HASH’s rapid growth phase but don’t fully account for the company’s current profitability or its scalable operations post-acquisition.

• Forward Metrics: The pro forma forward P/E ratio of 4.11 and EV/EBITDA of 5.43 paint a very different picture. These metrics highlight HASH as undervalued relative to its profitability and growth trajectory. For context, typical cannabis industry EV/EBITDA averages range from 10, depending on market positioning and growth potential. HASH’s forward multiple of 5.43 significantly undercuts these benchmarks, making it an outlier in terms of value.

Key Takeaway

The stark difference between trailing and forward multiples underscores a mispricing in the market, driven by backward-looking assessments. As HASH continues to demonstrate strong revenue growth and operational efficiency, a re-rating to align with industry averages could generate substantial upside. For instance, a move from its forward EV/EBITDA of 5.43 to the industry range of 10 would imply a significant appreciation in enterprise value—and, by extension, its stock price.

Capital Structure: A Well-Managed Cap Table

HASH’s financial discipline extends beyond its operations to its capital structure, which is relatively clean and demonstrates strong insider confidence.

Cap Table Summary (As of November 21, 2024):

1. Common Shares:

   • Current Outstanding: ~76.43M

   • Fully Diluted: ~91.73M

2. Warrants:

   • $0.20 Warrants (August 2026): Fully exercised, raising $2.968M.

   • $0.40 Warrants (July 2026, accelerated to Dec. 21, 2024): Outstanding ~8.00M, with expected proceeds of $3.2M.

3. Options:

   • ~7.3M outstanding, priced between $0.15 and $0.37, expiring starting in early 2026.

4. Insider Ownership:

   • Insiders exercised 4M warrants at $0.20, contributing ~$800,000.

   • Estimated insider ownership (shares + warrants): ~30%.

5. Fully Diluted Total: ~91.73M shares, with capital raised in 2024 totaling $5.168M.

Key Insights:

• The low dilution risk associated with the cap table is a standout feature. The $0.20 warrants are fully exercised, while the $0.40 warrants are nearing their accelerated expiry.
  

• Strong insider confidence is evident, with insiders contributing 27% of the proceeds from the $0.20 warrants. This insider alignment bodes well for long-term shareholder value.

Short-Term Selling Pressure: A Temporary Headwind

HASH has recently experienced selling pressure as holders of the $0.40 warrants, which expire on Dec. 21, 2024, liquidate shares to fund their exercises. While this has created a short-term overhang on the stock price, it also sets the stage for a healthier market dynamic once the warrant exercise period concludes.

When the $3.2M in warrant proceeds is fully raised, HASH will benefit from an improved balance sheet, reduced selling pressure, and increased financial flexibility to execute its growth strategy. For investors, this transitional phase could be an opportunity to accumulate shares at an attractive price.

Strategic Execution: ANC and CannMart Acquisitions

HASH’s recent acquisitions of ANC Inc. and CannMart are crucial pieces of its growth strategy.

• ANC Inc. Acquisition:

  • Payments include $1.25M due in early 2025, $4M by May 2025, and additional earn-outs tied to operational milestones.

  • Vertical integration from ANC strengthens HASH’s margins and supply chain efficiency.

• CannMart Acquisition:

  • HASH acquired CannMart with a mix of cash, equity, and a $1.7M VTB loan secured against CannMart’s assets. Payments include monthly installments of $100K–$400K through early 2025.

  • CannMart adds a B2B wholesale distribution arm, bolstering HASH’s reach into Canadian provincial markets

Both acquisitions complement HASH’s existing operations, setting the company up for sustainable growth while demonstrating financial discipline in managing acquisition payments.

Looking Ahead: The Path to a Rerate

HASH is at a critical inflection point. As warrant exercises conclude and selling pressure subsides, investors will likely turn their focus to the company’s pro forma metrics. The forward P/E of 4.11 and EV/EBITDA of 5.43 present a stark contrast to its trailing metrics and the cannabis industry’s averages of 10–15 for P/E and 10 for EV/EBITDA.

If HASH re-rates even partially to align with these industry benchmarks, the upside could be significant. Additionally, the completion of warrant exercises will bolster HASH’s balance sheet and reduce market overhang, setting the stage for a cleaner run in 2025.

With $55M in projected annualized revenue, strong insider confidence, and a disciplined capital structure, HASH offers a rare combination of profitability and growth in the cannabis sector. While challenges remain, particularly in managing acquisition payments and navigating sector volatility, HASH has proven it has the operational strength and financial discipline to deliver long-term value.

Final Thoughts

Simply Solventless Concentrates Ltd. isn’t just surviving in the cannabis industry—it’s thriving. The company’s ability to generate consistent profits, execute strategic acquisitions, and maintain a shareholder-aligned capital structure makes it a compelling investment case.

While short-term selling pressure from warrant exercises may weigh on the stock price, it could also be an opportunity for investors to get ahead of the rerate before the market catches on. As HASH executes on its strategy, the disconnect between its trailing and forward multiples could close, driving significant upside for long-term shareholders.

About Vested One Media:

Vested One Media Inc., owner and host of the TokStocks Podcast, is a financial media company that connects retail investors with market commentary, usually privy to institutions, such as CEO interviews and insights into the markets, sectors and deal flow that could deliver massive potential gains.

We aren’t just another financial media company producing long winded fluffy, always positive content for people who like to see themselves on camera. We are different - we get straight to the point and have a no BS policy. Don’t come on our show if you can’t speak the truth.

Interested in pitching your Company to our network of global investors? Reach out at keir@vested.one or visit us online at: https://www.tokstocks.com/

Disclaimer:

We are NOT licensed financial advisors. Instead, we operate as a media and technology entity. Our content serves informational purposes only and should NOT be construed as an endorsement or investment recommendation. Some companies featured in our YouTube content and events may compensate us. Additionally, we might hold stock in the companies we discuss. Our investment strategy may involve buying shares with the intention of selling them at a profit. We reserve the right to buy or sell shares in any featured company without prior notice or updates. It's imperative to consult with a qualified financial advisor before making any investment decisions.

We have NOT be paid or compensated for this interview and are not receiving compensation of any kind from Simply Solventless Solutions (TSXV: HASH) but we are shareholders and may look to increase or decrease our position without warning.

Other Quick Caps: McCoy Global (TSX: MCB)

See Other Interviews

Subscribe to Our Newsletter

Don't miss any of our episodes and microcap deep dives.

We care about your data in our privacy policy.