High Times, known for its iconic cannabis lifestyle magazine and brand, recently announced a deal with Lucy Scientific that has got the industry buzzing. The two companies have struck an agreement that would transfer High Times’ intellectual property assets in exchange for stock in Lucy Scientific, a Nasdaq-listed company with holdings and operations in various psychotropic businesses.
The agreement, which is structured as an all-stock deal with earnouts for specific milestone payments from future EBITDA (earnings before interest, taxes, depreciation, and amortization) generated by the acquired IP, the companies believe will open up new opportunities to expand the High Times brand. But of course, with anything related to the cannabis industry, the deal comes with its controversy, some believe.
High Times and Lucy Scientific
High Times, founded 46 years ago, has grown to become one of the most well-known cannabis lifestyle brands in the world. The company is known for championing the marijuana lifestyle and educating consumers on the benefits of this natural flower. In 2020, High Times began acquiring retail dispensaries, marking its first time directly interacting with the plant it had been promoting for over 40 years. High Times currently owns eight dispensaries and several cannabis-based brands, per the press release.
Meanwhile, Lucy Scientific Discovery Inc (NASDAQ: LSDI) is a Nasdaq-listed company with holdings and operations in a variety of psychotropic businesses. The company holds a Controlled Drugs and Substances Dealer’s License granted by Health Canada’s Office of Controlled Substances. Lucy Scientific operates under Part J of the Food and Drug Regulations promulgated under the Food and Drugs Act (Canada). Its mission is to pioneer innovative therapies for patients in need, advance understanding and applications of psychotropic medicines, improve mental health outcomes, and enhance the well-being of individuals worldwide, according to the press release from Lucy.
Overview of the Deal and Controversy
The deal between High Times and Lucy Scientific entails the transfer of all IP assets from Hightimes subsidiaries, including the company’s trademarks and the HighTimes.com, CannabisCup.com, and 420.com brands and domain names in exchange for stock in Lucy Scientific. At closing, Lucy will arrange to license back to Hightimes under a long-term license of up to 50 years, the acquired IP to enable the company and its subsidiaries to use the trademarks and brands in connection with its adult-use cannabis operations in the U.S. as well as franchise such rights to others engaged in production, sale, and distribution of adult-use cannabis in states where it is legal.
Furthermore, earnout payments may be made in the form of cash or in additional Lucy shares at Lucy’s option. All earnout payments—whether in cash or Lucy shares—will be distributed to more than 40,000 Hightimes stockholders.
The primary motivation for High Times engaging in the deal is to enable their stockholders to own equity in a Nasdaq-listed company. Per a press release, ” Lucy will issue 19.9% of its outstanding stock to High Times and make payments semi-annually for the next five years based on EBITDA generated from the acquired IP, which can be settled with either stock or cash at Lucy’s option. Additionally, Lucy will license the right to operate retail stores and manufacture and sell THC products in the United States back to High Times in return for a license fee of $1.0M per year, increasing to $2.0M per year upon Federal legalization. The transaction is subject to customary closing conditions and is expected to close within two weeks.”
Both companies are setting high expectations for the acquisition.
Richard Nanula, CEO and Executive Chairman at Lucy Scientific Discovery Inc., commented, “Lucy expects this acquisition to drive high margin revenue quickly and sustainably across the cannabis sector around the world. This is a great opportunity to grow the market presence of the nearly 50-year-old High Times brand globally through licensing and online distribution. We are confident that this opportunity can add significant value for our shareholders.”
Even the addition of Nanula is being called into question by some, in part because of his checkered past while in high level positions at several Hollywood-related companies like Disney, Miramax, and Starwood Resorts.
Adam Levin, Executive Chairman of High Times, added, “Over the past few years, we have been building the consumer products offerings for High Times, and there is no better partner than Lucy to drive our iconic brand forward. This transaction will open up tremendous new opportunities to grow and expand the High Times brand, led by Richard Nanula, who has decades of experience with some of the biggest consumer brands and companies in the world. We are delighted to become large Lucy shareholders.”
The news of the deal between the well-known cannabis brand High Times and Lucy Scientific has undoubtedly caused some stir in the industry due to reports of financial troubles and close family ties between the two companies, per a May article first reported by Green Market Report.
The deal between High Times and Lucy Scientific marks a new chapter in the cannabis industry for High Times. While both companies have high expectations for the acquisition, it remains to be seen what kind of impact it will make in the long run. With controversial reports of financial and close family ties between the two companies, many remain skeptical about their partnership. Only time will tell how this agreement will benefit both parties and what implications it may have on the industry as a whole.