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Trulieve Analyst Bullish On Pennsylvania Entry, Questions Timing Of Equity Offering

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Trulieve Analyst Bullish On Pennsylvania Entry, Questions Timing Of Equity Offering

Trulieve Cannabis Corp. (OTCQX: TCNNF) shares traded lower by 3% on Thursday after the company announced a roughly $75 million offering after the close on Wednesday. On Thursday, one Wall Street analyst said he is disappointed with the offering but bullish on Trulieve’s entry into the Pennsylvania market.

The Analyst: Cantor Fitzgerald analyst Pablo Zuanic reiterated his overweight rating for Trulieve and raised his price target from $59 to $60.

The Thesis: On Wednesday, Trulieve announced a pair of acquisitions to enter the Pennsylvania market, expanding the company’s footprint into a fifth state.Trulieve acquired cannabis cultivator and producer PurePenn and dispensary operator Keystone Relief Centers.

On Thursday, Zuanic said he sees the deals as a positive for Trulieve, but noted that “we do not like the timing” of the offering.

In addition to the offering price being 9% below Trulieve’s closing price on Wednesday, Zuanic said he’s puzzled by the fact the company didn’t wait to announce the offering after the market had reacted to the Pennsylvania deals.

“Given the heavy stock component of the PA deal, with only $29Mn of the potential $141Mn paid in cash (factoring in earnouts), we wonder why Trulieve would need to raise $70Mn in equity now,” Zuanic said.

One possible explanation is that the company is anticipating additional deals in the near future as it expands its presence in Pennsylvania or enters additional states.

Benzinga’s Take: Given all the uncertainty that remains in the cannabis space in the near-term, it may be wise for cannabis bulls to take a diversified approach to investing.

Consider buying a basket of Canadian legal producers as well as US multi-state operators like Trulieve that have high-quality balance sheets and leading market shares.

Related Links:
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Courtesy image; Trulieve CBD

Latest Ratings for TCNNF

DateFirmActionFromTo
Sep 2020Cantor FitzgeraldMaintainsOverweight
Aug 2020NeedhamMaintainsBuy
Jun 2020Cantor FitzgeraldMaintainsOverweight

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