Visiting Sunniva's (CSE:SNN) operations in California
Recently, a subscriber to The Cannabis Report Model Portfolio visited the California operations of Sunniva and submitted a written update. With permission, I have published a slightly abbreviated version and added some information from a separate email he sent me regarding the extraction facility. The contributor is F.G., Marin County, California. What follows is his description of what he saw and heard, mostly in his own words:
“I went to visit Sunniva on October 26, 2018….It was a good day. I’ll make money on it and have learned more about pot than I ever thought possible and I used to grow it in college years ago….I return feeling positive but not quite as positive as I would have liked which is sort of the way this entire misadventure has been.
Let me explain….We all read Ted’s strong endorsement of Sunniva way back when, and all jumped on the bandwagon. I didn’t know Ted but so many people had positive experiences with him, and he eloquently laid out all the reasons why Sunniva would be a winner – so I jumped in and keep on jumping in as the price drops because I do believe in the company. We all did the same. And we all keep trying to average our price down. We were the “sages” and knew the best stock to buy – and it may end up that way – but anyone who wants to invest in Sunniva now gets in at half the price we all did. Hey – that’s my over enthusiasm…and I take full responsibility for my investments, but gee, did we all get carried away! So now we, collectively probably own over a million dollars worth of stock, maybe double that…I told people at the facility, I was an investor and represented a lot of people.
My average is low $6.00 US. I’m down 40%. I’ll bet some of you wish that’s all you were down! I just don’t have enough money to get it lower. When I read Ted’s model portfolio, I wish he used a more realistic figure, like $7-10.00 US as his entry point. At mid $4.50 as his starting point it’s a lot easier to show a more positive outcome than the rest of us who went in at $7-10. (I went into all the stocks including SNN at the market prices that prevailed when the Model Portfolio was started - Ted)…Many of his others have done ok THIS YEAR. I wasn’t here in 2017. Canopy, Organigram, Khiron, etc have been good (until lately) so no one’s perfect and my due diligence is my responsibility….But, I wish we’d hear more from him whether on Seeking Alpha or The Cannabis Report. That’s not his obligation. Someone said he taught us how to fly and now it’s up to us. But his words are re-assuring and we all would like to hear more from him….
Back to Sunniva… As I crept around…sneaking photos between the chain link fence, I saw the front which is all dirt with the big water tank in the center. I was saying “…where is the progress I wanted to see?” Finally after walking all around the walls, looking for a way in surreptitiously, I decided to walk up the driveway and see if anyone stopped me. No one did. I walked in on the right front side….There I saw the first two bays. One had the floors completely finished, concrete, all water pipes buried and much electrical also I assumed. The entire shell of the whole building is erected – all 400,000 square feet…. Walls separate about 8 bays, some smaller, some larger and the first one was most advanced. Hundreds of lights overhead.
Looks like more electrical work was underway. The next bay was having the concrete floor finished. It too has water and electrical buried and is the next one to be worked on. These first two will be where the mother plants begin their long profitable life. Then the seedlings will be moved to other bays and each bay takes about a month or so, that’s a guess based on talking to different people….But everyone’s opinion was that the planting would begin in January…..who knows, could it be late December or mid-January? It’s a two month grow so there you have it. I think that March will be a milestone month, others thought the same so no plants ready in the 4th quarter of 2018; earliest late first quarter 2019.
The other bays were in various states of preparation…from trenching…to some water installation to just dirt. Like I said 6-7 months for full operation….I didn’t feel it was understaffed. I was surprised that I was able to walk around so freely. All personnel were friendly, busy and involved, did not seem “desultory” and as much as I gently prodded some of the more experienced workers, they felt there had been no unforeseen delays (I was wondering money crunch). About 50 people or so, supplies all around, forklifts in action…. One electrical worker said he and his people work 12 hours a day and others 8. What can I say?
After 1-2 hours I left. Impressed at the size of the project, glad to know that D-Day is coming soon and positive that it’ll be a success. I just want it NOW! One guy said that anyone who buys or tries to reconfigure a vegetarian greenhouse is going to have a significantly inferior greenhouse in need of a lot of improvement.
I also visited the extraction facility. There are a number of them in a small, commercial mall and the whole area had the fragrance of you know what. They are moving along, trying to find good people, that’s the only thing that has been holding them back…they will be making a LOT of oil in the next few months was my conclusion which is good because that is our profit center now along with the Health Centers in Canada. (Natural Health Services – Ted) Strong stuff. Expensive on retail market and this was THC I believe. The oil extraction facility was busy but they have had trouble finding qualified people. I spoke to people…on the pretext that I needed some general info about CBD oil and how to take it. I didn't want him to know I had an ulterior motive. He said they now are fully staffed, busy as possible, white labeling oil and that most of it was THC. I didn't know that.
So my gut feeling….I’m positive on Sunniva. I think it is a steal at this price. I think that when I look at the quality, technology, worker’s attitudes, etc…we will be rocking in early 2019 – that’s my guess, first crop. I’ll have to check with Leith in his last interview and see if we’re on the same page. But, as I know and we all know, the success of this is not the greenhouse, the market and prices. It really is and will be all about execution by management. All! I believe in them for all the same reasons that we all do. Yes, they have missed some key benchmarks which happens - finances, Canada greenhouse, US/Canadian split, and so on. But they are taking steps to deal with these issues.
The only place where I would give them a C- is in communication. They have gone dark and only now have hired a PR firm – and Cannacord – to spread the word and look at options. They have the most loyal following in the world (I guess that’s us) and it is their corporate responsibility to keep us informed, good, bad, indifferent….or at least give us news that may not be what we want to hear but keep us in the loop. Call it investor relations or customer service…it is essential to keep the customer satisfied and they have been doing a lousy job. But, it will get better I’m sure.
Very interesting visit....moving along slowly but as people there are saying in the first quarter of 2019 there will be a harvest. Really glad I made the trip instead of hearing everyone’s guess and hearing corporate messengers send out smoke signals on windy days. Now I know what is happening. I may be a little wrong here and there but I think talking to the worker bees rather than the big execs gives me a better idea.”