Trulieve fights short-seller report as its dominance in Florida medical cannabis market continues

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Trulieve
Cannabis,
the
predominant
player
in
Florida’s
medical
marijuana
industry,
is
fending
off
attacks
raised
in
a
recent
negative
research
report
as
competitors
try
to
cut
into
the
company’s
nearly
50%
market
share
in
the
state.

Grizzly
Research
promotes
itself
as
doing
in-depth
research
of
publicly
held
companies,
but
its website doesn’t
list
a
headquarters
address
or
the
names
of
its
principals.
Grizzly
alleged
in
a
short-seller
report
in
mid-December
that
Trulieve:

  • Produces
    low-quality
    marijuana
    based
    on
    drone
    footage.
  • “Portrayed
    profitability”
    through
    suspicious
    accounting.
  • Has
    “extensive
    ties”
    with
    an
    ongoing
    FBI
    investigation
    of
    public
    corruption
    in
    north
    Florida.

Several
analysts
and
industry
officials
gave
little
credence
to
the
Grizzly
report,
which
benefited
short
sellers
when
Trulieve
shares
declined
sharply
after
the
report
circulated
on
Dec.
17.

Short
sellers
are
betting
prices
will
go
down.
They
borrow
shares
and
sell
them
at
the
current
market
price
and
then
make
money
when
they
repurchase
those
shares
at
a
lower
cost
in
the
future
and
return
those
borrowed
shares
to
the
lender.

“Overall
we
consider
the
Grizzly
short
report
as
largely
rehashing
old
information
and
misleading
less
sophisticated
investors
over
the
company’s
actually
very
strong
fundamentals,”
analyst
Rob
Fagan
of
the
investment
banking
firm
Stifel
GMP
wrote
shortly
after
the
Grizzly
report
was
published.

Fagan
called
Grizzly’s
take
on
Trulieve’s
accounting
a
“rookie
analysis.”


Litigation
ahead

The
report
already
has
spawned
lawsuits
against
Tallahassee-based
Trulieve
by
law
firms
trying
to
build
class
action
claims.

Trulieve

denied
the
allegations

in
a
news
release
and,
most
recently,
in
an

investor
Q&A
.

“We
see
this
as
an
opportunistic
and
cynical
attempt
to
capitalize
on
Trulieve’s
strong

financial
results

and
operational
success
by
making
untrue
statements
for
their
personal
gain,”
Trulieve
said
in
the
investor
Q&A.

Trulieve
sued
Grizzly
Research
in
Florida
state
court
on
Jan.
10,

alleging
defamation

for
publicly
disseminating
false
and
libelous
statements
to
manipulate
the
company’s
stock
price.

Grizzly
didn’t
immediately
respond
to

Marijuana
Business
Daily
‘s
request
for
a
response
to
Trulieve’s
allegations.


Effects
on
Trulieve?

Negative
research
reports
can
have
lingering
impacts
on
investor
and
customer
trust,
affecting
stock
prices
and
sales.

Trulieve
shares,
traded
as

TRUL

on
the
Canadian
Securities
Exchange
and
as TCNNF
on
the
U.S.
over-the-counter
markets,
declined
by
more
than
20%
from
$15.69
to
$12.06
in
intraday
trading
on
Dec.
17,
but
they
mostly
recovered
by
Dec.
31.

Prices
recently
have
slumped
since.

In
an
interview
with

MJBizDaily
,
Trulieve
CEO
Kim
Rivers
insisted
the
company
hasn’t
experienced
a
fallout
on
its
sales
or
from
investors.

Rivers
noted
that
Trulieve
recently
opened
its
43rd
dispensary
in
Florida
and
continues
to
command
a

dominant
share

in
the
state

one
of
the
country’s
most
lucrative
MMJ
markets.

The
company’s
market
share
of
smokable
flower
between
mid-December
and
Jan.
2
has
declined
slightly,
according
to
the
state’s
weekly
reports,
but
it’s
unclear
whether
that’s
due
to
the
adverse
Grizzly
report.

A
variety
of
multistate
operators
have
aggressively
expanded
operations
since
Florida

lifted
a
ban
on
smokable
marijuana

last
March.

“Certainly
everyone
(in
the
industry)
read
(the
report),”
said
Jeffrey
Sharkey,
president
of
the
Medical
Marijuana
Business
Association
of
Florida.

But
he
doesn’t
believe
it’s
something
consumers
will
pay
much
attention
to
overall.

“One
of
the
questions
is
whether
one
of
the
competitors
is
trying
to
undermine
them
(Trulieve)
by
mobilizing
Grizzly,”
Sharkey
said.

“I
don’t
hear
that’s
happening

But
it’s
clear
Trulieve
is
out
front
and
the
hounds
are
barking.
Everyone
is
trying
to
catch
up.”


Marijuana
quality
and
FBI
claims

One
of
the
most
dramatic
details
in
the
Grizzly
report
is
a
claim
that
drone
flyovers
showed
that
Trulieve
produces
low-quality
cannabis.

“I
don’t
know
how
a
drone
could
tell
whether
plants
are
tended
well,”
Sharkey
said.

Trulieve
said
in
its
investor
Q&A
that
the
plants
in
the
drone
footage
are
produced
for
oil
extraction,
and
that
process
removes
impurities.

All
smokable
flower
products,
Trulieve
said,
are
harvested
in
state-of-the-art
indoor
cultivation
facilities.

Stifel
GMP’s
Fagan
characterized
the
drone
claim
by
Grizzly
as
“irrelevant”
for
the
reasons
noted
by
Trulieve.

The
allegation
about
the
FBI
investigation
stems
from
the
fact
that
Rivers’
husband,
John
Thomas
“J.T.”
Burnette,
a
real
estate
developer,
faces
trial
in
April
on
bribery
charges
stemming
from
a
federal
investigation
of
public
corruption
that
started
in
2015.

Trulieve,
since
going
public
in
2018,
has
disclosed
in
Canadian
securities
filings
that
Rivers
was
one
of
many
individuals
subpoenaed
in
2017
for
information
related
to
her
involvement
with
the
Community
Redevelopment
Agency
in
Tallahassee
as
well
as
political
contributions
she
made
through
an
associated
business.
No
information
requested
related
to
Trulieve,
according
to
the
disclosure.

Trulieve’s
board,
according
to
the
disclosure,
retained
counsel
to
investigate
the
matter
and
concluded
that
Rivers
wasn’t
a
target
of
the
FBI
investigation
and
that
the
potential
liability
wasn’t
great
enough
to
prevent
her
from
continuing
as
CEO.

But
there
is
at
least
one
lingering
optic
of
concern:
Trulieve
has
a
contract
with
a
construction
firm
that
includes
Burnette
as
minority
owner.
The
construction
firm
has
been
involved
in
Trulieve’s
cultivation
projects.

Rivers
emphasized
to

MJBizDaily

that
Trulieve
has
been
“fully
transparent
and
had
full
disclosure”
on
the
matter.
She
said
there’s
no
current
conversation
to
change
policies.

Fagan
wrote
that
while
he
believes
Trulieve
has
followed
the
legal
disclosure
requirements,
the
transactions
involving
Rivers’
husband
“are
admittedly
not
our
favorite
company
attribute.”

Rivers
declined
to
say
what
kind
of
personal
toll
this
has
taken,
instead
directing
her
comments
to
her
commitment
to
see
the
controversy
through
as
Trulieve’s
CEO.

“I
feel
extremely
passionate
and
excited
to
get
up
and
do
what
I
do
every
day,”
Rivers
said.
“I
think
our
numbers
and
results
speak
for
themselves.

“We
continue
to
look
forward
to
2020.”

Then,
in
reference
to
the
short-seller
report,
she
added:
“There’s
not
even
an
author
on
the
report.
We
think
it’s
pretty
apparent
on
its
face
what
this
is
and
what
the
intent
was,
and
we’re
really
just
looking
forward
to
moving
past
it.”

Jeff
Smith
can
be
reached
at


[email protected]

Nick
Thomas
can
be
reached
at


[email protected]


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