GLASF - Mindset Value Fund - Glass House Brands: My Best Investment On A Risk/Reward Basis

Summary

• This quarter we made a significant investment in Glass House Brands' most recent preferred offering.
• I think this is the best investment on a risk/reward basis that I’ve made as an investor.
• The asymmetric upside in GLASF stock is one of the best I’ve ever seen.
• Glass House is not only poised to see its cost of capital plunge but would also be allowed to sell into state markets where pricing can be 10 times higher than what GLASF is earning in California.

The following segment was excerpted from this fund letter .

Glass House Brands ( GLASF )

This quarter we made a significant investment in Glass House Brands' most recent preferred offering, which I think is the best investment on a risk/reward basis that I’ve made as an investor since standing on the courthouse steps in Atlanta in 2011 buying foreclosed homes. The preferred pays 20% interest and comes with warrants that convert into the stock at $5 per share.

Glass House is now the largest investment in our fund. I believe that investors do not understand the inflection the company is currently undergoing after turning on the largest and most state-of-the-art cannabis greenhouse in the world. But with no analysts covering the company and mostly retail investors in cannabis, few if any have run the numbers as to what the near-term future holds. The asymmetric upside in Glass House is one of the best I’ve ever seen.

Our overall portfolio now has close to a 4.5% yield thanks to the Glass House preferred offering, our senior secured investment in a private cannabis company and Consorcio Ara’s dividend. So, our portfolio now has significant equity upside and ongoing dividends and interest as well. This is all with no leverage being employed at all.

October Performance Strong Thanks to Biden’s Announcement on Cannabis

The tide may be turning with our portfolio. We have already recovered Q3’s losses and more and are seeing very strong performance in October. While you never you know if this will continue, the October performance is being driven by President Biden’s surprise announcement that he is not only pardoning people in jail for cannabis possession, but he also initiated a review of whether cannabis should be rescheduled from its schedule 1 classification or de-scheduled completely.

I believe President Biden will move aggressively on reform and that something material will happen by the end of 2023. His actions should lead to the investment world opening to cannabis, the removal of punitive 280e taxation and frenzy of activity in the space. I wrote a long post about it.

I think his action will also move forward interstate commerce and that is why most major MSOs (Multi-State Operators) have not significantly rallied on the news and remain stuck in the mud. If my analysis is correct, Glass House is not only poised to see its cost of capital plunge from its expensive 20% preferred interest rate but would also allow the company to sell into state markets where pricing can be 10 times higher than what Glass House is earning in California.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

For further details see: