Is High Times Going Up in Smoke?
In June of last year a group of 20 investors – including Damian Marley, son of the late reggae legend Bob Marley – acquired a 60% stake in High Times Magazine, its digital platforms, and the ongoing tour of Cannabis Cup events.
Their price tag was said to be somewhere around $42.0 million based on an overall valuation of $70 mill.
Adam Levine of Oreva Capital (not Maroon 5) specializes in scooping up what he deems to be undervalued media outlets. He was the lead investor and orchestrated the landmark deal and, at the time, said that he felt that the group had scored a gem. Levin became the CEO of the newly formed High Times Holding Corp.
Less than a month later, that 60% stake was sold again to a shell-company called Origo who, inexplicably, raised the media outlet’s valuation more than 3-fold up to $250 million with hopes that the transaction would allow High Times stock to be traded publicly on the NASDAQ by October of 2017.
Fast forward one year in the cannabis industry and laws are looser and opportunity is everywhere so how is that High Times stock holding up?
Simply put, it isn’t.
It never made it onto the NASDAQ.
In December of 2017, Origo filed to officially change its name to High Times Media and a preliminary prospectus of High Times stock was made available at $11/share in an attempt to raise at least $17.2 million in capital in order to qualify for a full NASDAQ listing.
Experts warn that listing might never happen. They also point out that just this year High Times Holdings sold 185,362 shares at approximately $6.87 each, a 37.5% discount from what they expected the public to pay.
For their part, NASDAQ has delisted the stock on more than one occasion further hamstringing High Times’ efforts.
So why the big push for Wall Street cash?
First of all the circulation and number of subscribers to the magazine itself has been in freefall for years. Generous estimates still have them mailing out over 200,000 magazines each month – not a bad number but a far cry from where it was in its heyday.
Fewer readers mean less interest from advertisers and in print journalism, the advertisers are where the money comes from.
In an attempt to capture a wider online audience, High Times stepped up its social media presence and bought a digital media company called Green Rush Daily to produce high-quality online content for them.
The company owns the incredibly valuable domain of 420.com, but it’s currently a parking page with zero content.
Their only other source of revenue is through the whirlwind tour of High Times Cannabis Cup events held in cities across the country pretty much year round.
They must make money off of those, right?
Well, though attendance remains strong, operating costs are skyhigh and the funds for those events must be fronted well in advance of the event itself. Once the money is in and counted, it’s not adding up to be enough to cover the company’s debts.
According to the investment site Seeking Alpha: “High Times owes $17.6 million in payments this year alone. $8.7 million in long-term debt obligations, $2.8 million in interest payments, $6 million in convertible note obligations and $72,000 in lease commitments.”
The site goes on to report: “For the nine months ending in September, the company reported total revenues of $12.4 million. Over 70% of the revenues come from events like the Cannabis Cup, which the company wants to increase. The magazine only brought in $2.6 million during this time for a decline of 20% and merchandising declined 58% to $138,000.”
So you can see that the income is not covering the nut at this point – it’s an operating loss of $1.2 million.
Looking further back, from 2014 to 2016, High Times swung from a $3.4 million profit to a $2.9 million loss so Levin, Marley and the rest of the new owners certainly knew they had a challenge ahead of them.
So will High Times survive? Probably.
They’ve been around since 1974 and much like the ways we enjoy cannabis, they have evolved over that time. They have a ton of money already buried in the venture and the name alone is still relatively valuable in terms of licensing and branding items like rolling papers, grinders, trays, etc. They will continue to add more live events – both in the form of more Cannabis Cups and live concerts as part of a deal to hype upcoming talent.
Whether or not High Times goes up in smoke, the moral of the story is that the cannabis industry is a unique one. On top of demanding integrity, most cannabis connoisseurs are more interested in the next big thing rather than what was cool in the 70’s and 80’s.
In your opinion, what could High Times do to rebrand itself and regain the cultural relevance it once had?