The Dales Report – Editorial Team – January 27, 2021
It seems Canadian cannabis retailer High Tide Inc (TSXV: HITI) is making strategic moves to become a key player in the cannabis e-commerce scene.
Yesterday High Tide announced that they have entered into an agreement to acquire their third cannabis US-based e-commerce site, Smoke Cartel (OTCQB: SMKC). The company already owns online cannabidiol store CBDcity.com, as well as Grasscity.com, a cannabis accessory retailer.
The deal, totalling $8 million USD, grants High Tide access to Smoke Cartel’s proprietary drop-shipping technology – which the company will implement across their e-commerce platforms. The agreement also gives the company access to over a million email contacts and 550,000 customers across the United States, Canada, the United Kingdom, Australia, Germany and Mexico.
High Tide is set to acquire Smoke Cartel for $2 million in cash funds as well as $6 million in company shares. As a part of the deal Founder and CTO of Smoke Cartel Sean Geng will stay on as Closing as Chief Technology Officer.
“The acquisition of Smoke Cartel is a great way to further vertically integrate our accessories business and expand our footprint in the United States,” shares Raj Grover, President and Chief Executive Officer of High Tide in thepress release.
“We expect Smoke Cartel’s proprietary and licensable drop-shipping technology to enhance our e-commerce business right away, along with the cross-listing of inventories between its website and our Grasscity and CBDcity platforms.”
SmokeCartel.com had 7 million site visits and over 110,000 orders in 2019. In 2020, Smoke Cartel expects to report approximately $7.4 million in revenues and over 16% in EBITDA, with approximately $1.0 million in cash currently on hand.
According to Grover, acquiring Smoke Cartel is a part of High Tide’s larger strategy to grow the company’s presence in the US – especially as the country moves towards federal legalization.
Currently, High Tide is the largest Canadian retailer of recreational cannabis as measured by revenue, with 69 current locations spanning Ontario, Alberta, Manitoba and Saskatchewan. In December the company announced they were applying for a listing on the Nasdaq exchange, with plans to pursue mergers and acquisitions.
“We are very excited about the prospect of listing on Nasdaq. With our recent acquisition of Meta Growth, we are now the largest Canadian retailer as measured by revenue. Listing on Nasdaq would allow the Company to expand its shareholder base, enhance shareholder value and accelerate the Company’s M&A initiatives in pursuing strategic opportunities in the US,” said Grover.
Once closed, the deal securing Smoke Cartel will position High Tide as the largest operator of e-commerce platforms for consumption accessories in the world.